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Ohio's jelly and jam company is now officially the proud owner of a coffee brand.
J.M. Smucker Company announced on Wednesday that it has successfully aquired the majority of Sara Lee's coffee brand.
The J. M. Smucker Company (NYSE: SJM) today announced that it has completed the acquisition of a majority of the North American foodservice coffee and hot beverage business of Sara Lee Corporation ("Sara Lee") in an all cash transaction. The Company previously announced the agreement with Sara Lee on October 24, 2011.
The acquisition includes Sara Lee's market-leading liquid coffee concentrate business sold under the licensed Douwe Egberts® brand, along with a variety of roast and ground coffee, cappuccino, tea, and cocoa products, sold through foodservice channels in North America. In addition, the companies entered into a long-term innovation partnership to collaborate on liquid coffee technology for the foodservice market.
"We are pleased to complete this transaction which adds the market-leading liquid coffee concentrate business to the Smucker portfolio," said Richard Smucker, Chief Executive Officer. "The transaction further strengthens our position as a leading North American coffee company, provides new coffee technologies, and adds significant scale to our foodservice business. We are excited to welcome the nearly 475 new employees into the Smucker family."
Press release from J.M. Smucker Company:
Listen to what Mark Smucker, president of the U.S. retail coffee divison said about revised year-end expectations:
Smucker by Akron NewsNow
The J. M. Smucker Company (NYSE: SJM) today announced results for the second quarter ended October 31, 2011, of its 2012 fiscal year. Results for the quarter and six months ended October 31, 2011, include the operations of Rowland Coffee Roasters, Inc. ("Rowland Coffee") since the completion of the acquisition on May 16, 2011.
Three Months Ended October 31,
Six Months Ended October 31,
(Dollars in millions, except per share data)
% of net sales
Income per diluted share
"We delivered record sales growth in the quarter including robust contributions from product innovation such as our K-Cups® and seasonal offerings. As we head into the key holiday period, our strong leading brands are trusted and remain well positioned to meet the varying needs of our consumers, including helping to bring their families together to share memorable meals and moments," commented Richard Smucker, Chief Executive Officer. "Additionally, we are effectively managing this period of significant cost inflation, where our cost of goods sold increased approximately 30 percent for the quarter, yet, we posted gross profit growth. As always, our focus remains on effectively managing the balance between volume, market share, and profitability, while continuing to invest in our brands."
(Dollars in millions)
Adjust for certain noncomparable items:
Net sales excluding acquisition, divestiture, and foreign exchange
Amounts may not add due to rounding.
Net sales in the second quarter of 2012 increased $235.0 million, or 18 percent, compared to the second quarter of 2011, due primarily to net price realization across many of the Company's brands. The Rowland Coffee brands acquired earlier in the year contributed approximately 2 percent to net sales for the second quarter of 2012 and, combined with the favorable impact of foreign exchange rates, offset a 1 percent decline in volume, compared to the second quarter of 2011. Volume gains were realized in Pillsbury® baking mixes and Jif® peanut butter, but were more than offset by declines in nonbranded beverages, Crisco® oils, Folgers® coffee, and Pillsbury® flour. The overall impact of sales mix was favorable.
Three Months Ended
Six Months Ended
(% of net sales)
Selling, distribution, and administrative expenses:
General and administrative
Other restructuring and merger and integration costs
Loss on sale of business
Other operating expense -- net
Gross profit increased $4.0 million, or 1 percent, in the second quarter of 2012, compared to 2011, and increased $4.6 million, excluding special project costs. Price increases taken over the past year effectively offset higher commodity costs and contributed to gross profit, while margin contracted as expected. Gross margin declined from 39.6 percent in the second quarter of 2011 to 33.8 percent in the second quarter of 2012, excluding special project costs. Significantly higher costs were realized for green coffee in the second quarter of 2012, compared to 2011. Costs were also higher for edible oils, flour, milk, sweetener, peanuts, and other raw materials. The net unfavorable impact of a $4.3 million change in unrealized mark-to-market adjustments on derivative contracts in the second quarter of 2012, compared to 2011, also impacted gross profit.
While green coffee costs have moderated from earlier in the calendar year, the Company expects that it will continue to recognize considerably higher green coffee costs through the remainder of its fiscal year, compared to the prior year. Additionally, peanut costs are expected to escalate during the remainder of the year. Pricing actions to date take into account the Company's current cost expectations through the remainder of the fiscal year.
Selling, distribution, and administrative ("SD&A") expenses in the second quarter of 2012 increased 6 percent, compared to the second quarter of 2011, but decreased as a percentage of net sales from 17.4 percent to 15.6 percent. Marketing expenses in the second quarter of 2012, were comparable to the second quarter of 2011. Over the same period, selling and general and administrative expenses increased 17 percent and 10 percent, respectively, while distribution expenses decreased 1 percent. The addition of the Rowland Coffee business represented approximately one-half of the overall increase in SD&A expenses. In addition, higher amortization expense was recognized in the second quarter of 2012, compared to 2011, primarily related to the intangible assets associated with the Rowland Coffee acquisition.
Operating income decreased $28.4 million, or 12 percent, in the second quarter of 2012, compared to 2011. Excluding special project costs in both periods, operating income decreased $21.7 million, or 8 percent, and declined from 20.6 percent of net sales in 2011 to 16.0 percent in 2012. Both operating income measures include a loss of $11.3 million on the divestiture of the Europe's Best® business in 2012.
Interest and Income Taxes
Interest expense increased $0.9 million in the second quarter of 2012, compared to 2011, representing the costs of higher debt outstanding somewhat offset by the benefit of the Company's interest rate swap activities and higher capitalized interest associated with the Company's capital expenditures. During the second quarter of 2012, the Company terminated two interest rate swaps prior to maturity resulting in a net settlement gain of $17.7 million, to be recognized over the remaining life of the underlying debt instruments, including $0.6 million in the current quarter.
On October 18, 2011, the Company completed a public placement of $750.0 million of 3.5 percent, 10-year Notes. A portion of the proceeds from the Notes was used to repay borrowings under the Company's revolving credit agreement. Remaining proceeds will be used for general corporate purposes and for funding of acquisitions, including the anticipated acquisition of the majority of Sara Lee Corporation's North American foodservice coffee and hot beverage business, expected to close in early calendar 2012.
Income taxes decreased $6.0 million in the second quarter of 2012, reflecting a $28.5 million decrease in income before income taxes and the offsetting impact of an increase in the effective tax rate to 34.1 percent, compared to 32.5 percent in the second quarter of 2011. The increase in the effective tax rate in the second quarter of 2012 is primarily due to a higher Canadian effective tax rate and an increase in state income tax expense, compared to the second quarter of 2011.
Press Release from the J.M. Smucker Company:
The J. M. Smucker Company (NYSE: SJM) today announced the signing of a definitive agreement to acquire a majority of the North American foodservice coffee and hot beverage business of Sara Lee Corporation ("Sara Lee"), a leading international coffee and tea company.
The acquisition includes Sara Lee's market-leading liquid coffee concentrate business sold under the licensed Douwe Egberts® brand, along with a variety of roast and ground coffee, cappuccino, tea, and cocoa products, sold through foodservice channels in North America. Liquid coffee concentrate adds a unique, high quality, and technology driven form of coffee to the Company's existing foodservice product offering. In addition, the companies agreed to collaborate on liquid coffee technology by entering into a long-term foodservice innovation partnership. The acquisition is expected to add annual net sales of approximately $285 million to the Company.
"This transaction further strengthens our position as a leading North American coffee company," said Richard Smucker, Chief Executive Officer. "The addition of liquid coffee concentrate to the Smucker portfolio aligns with our desire to compete in all forms of coffee, adding to our roast and ground, single serve, instant, and ready-to-drink platforms. The innovation partnership further allows us to collaborate on new technologies in the liquid coffee category for the foodservice market."
"This enabling acquisition adds significant scale to our foodservice business," added Steven Oakland, President, International, Foodservice and Natural Foods. "The transaction nearly doubles the size of our foodservice business, provides new coffee technologies, and adds a foodservice coffee direct sales force to our team, ultimately allowing us to extend our reach and enhance our relevance within away-from-home channels."
The closing of the transaction will add approximately 450 employees to the Company, including sales, marketing, finance, customer service, and administrative functions located in the U.S., Canada, and Mexico; a state-of-the-art liquid coffee manufacturing facility in Suffolk, Virginia; a leased roast and ground coffee manufacturing facility in Harahan, Louisiana; and coffee equipment and service teams located throughout North America. In addition to licensing the Douwe Egberts®brand, the Company will also license the Cafitesse® and Pickwick® brands.
Terms of the deal call for $350 million to be paid at time of closing, with an additional $50 million paid in declining installments over the next ten years. The Company anticipates completing the all cash transaction near the beginning of calendar 2012.
Based on the anticipated closing date, the transaction is expected to contribute approximately $100 million to net sales in fiscal 2012, and is not expected to have a material impact on earnings per share, excluding one-time costs of the transaction. One-time costs are estimated to total approximately $25 million, nearly all of which are cash related. Approximately one-third of these one-time costs are expected to be incurred in fiscal 2012, with the remaining incurred through fiscal 2015.
On a full year basis, the transaction is expected to generate earnings before interest, taxes, depreciation, and amortization of approximately $70 million to $75 million, excluding one-time costs of the transaction. The business is expected to contribute approximately $0.10 of earnings per diluted common share, also excluding one-time costs. Annual amortization expense is estimated to be approximately $15 million to $20 million.
Source: J.M. Smucker Company
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