UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended January 31, 2011
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____ to ____
Commission file number 1-5111
THE J. M. SMUCKER COMPANY
(Exact name of registrant as specified in its charter)
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Ohio
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34-0538550
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(State or other jurisdiction of incorporation or
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(I.R.S. Employer Identification No.)
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organization)
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One Strawberry Lane
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Orrville, Ohio
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44667-0280
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(Address of principal executive offices)
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(Zip code)
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Registrants telephone number, including area code: (330) 682-3000
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for at least the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller Reporting Company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
The Company had 115,988,437 common shares outstanding on February 28, 2011.
The Exhibit Index is located at Page No. 34.
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
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Three Months Ended
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Nine Months Ended
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January 31,
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January 31,
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2011
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2010
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2011
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2010
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(Dollars in thousands, except per share data)
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Net sales
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$
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1,312,351
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$
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1,205,939
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$
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3,638,576
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$
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3,536,210
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Cost of products sold
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821,086
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747,635
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2,222,681
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2,179,627
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Cost of products sold restructuring
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16,851
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0
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38,376
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0
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Gross Profit
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474,414
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458,304
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1,377,519
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1,356,583
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Selling, distribution, and administrative expenses
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214,325
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214,411
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640,407
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648,573
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Amortization
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18,515
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18,570
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55,513
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55,259
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Impairment charges
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17,155
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9,807
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17,155
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9,807
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Merger and integration costs
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2,746
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4,672
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8,175
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29,296
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Other restructuring costs
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8,414
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0
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34,863
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0
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Other operating expense net
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297
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978
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3,241
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3,742
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Operating Income
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212,962
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209,866
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618,165
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609,906
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Interest income
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779
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310
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1,784
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2,367
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Interest expense
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(18,132
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)
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(14,236
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(53,176
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(50,660
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Other income net
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170
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1,221
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487
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1,784
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Income Before Income Taxes
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195,779
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197,161
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567,260
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563,397
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Income taxes
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63,784
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61,682
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182,658
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189,865
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Net Income
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$
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131,995
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$
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135,479
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$
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384,602
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$
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373,532
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Earnings per common share:
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Net Income
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$
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1.12
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$
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1.14
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$
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3.23
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$
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3.14
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Net Income Assuming Dilution
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$
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1.11
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$
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1.14
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$
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3.23
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$
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3.14
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Dividends declared per common share
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$
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0.44
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$
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0.35
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$
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1.24
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$
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1.05
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See notes to unaudited condensed consolidated financial statements.
2
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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January 31, 2011
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April 30, 2010
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(Dollars in thousands)
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ASSETS
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CURRENT ASSETS
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Cash and cash equivalents
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$
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549,583
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$
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283,570
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Marketable securities
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38,599
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0
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Trade receivables, less allowances
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289,548
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238,867
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Inventories:
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Finished products
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445,527
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413,269
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Raw materials
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289,748
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241,670
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735,275
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654,939
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Prepaid income taxes
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23,782
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1,663
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Other current assets
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52,273
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44,591
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Total Current Assets
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1,689,060
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1,223,630
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PROPERTY, PLANT, AND EQUIPMENT
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Land and land improvements
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72,200
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62,982
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Buildings and fixtures
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305,197
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308,358
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Machinery and equipment
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1,025,301
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997,374
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Construction in progress
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77,654
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31,426
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1,480,352
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1,400,140
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Accumulated depreciation
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(639,285
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(541,827
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)
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Total Property, Plant, and Equipment
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841,067
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858,313
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OTHER NONCURRENT ASSETS
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Goodwill
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2,808,684
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2,807,730
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Other intangible assets, net
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2,955,305
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3,026,515
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Other noncurrent assets
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64,632
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58,665
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Total Other Noncurrent Assets
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5,828,621
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5,892,910
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$
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8,358,748
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$
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7,974,853
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LIABILITIES AND SHAREHOLDERS EQUITY
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CURRENT LIABILITIES
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Accounts payable
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$
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174,882
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$
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179,509
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Accrued trade marketing and merchandising
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82,254
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52,536
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Income taxes payable
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0
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75,977
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Current portion of long-term debt
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0
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10,000
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Other current liabilities
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165,621
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160,875
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Total Current Liabilities
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422,757
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478,897
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NONCURRENT LIABILITIES
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Long-term debt
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1,300,000
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900,000
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Deferred income taxes
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1,104,498
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1,101,506
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Other noncurrent liabilities
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168,192
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168,130
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Total Noncurrent Liabilities
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2,572,690
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2,169,636
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SHAREHOLDERS EQUITY
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Common shares
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28,994
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29,780
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Additional capital
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4,460,703
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4,575,127
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Retained income
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887,844
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746,063
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Amount due from ESOP Trust
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(3,334
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(4,069
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Accumulated other comprehensive loss
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(10,906
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(20,581
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)
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Total Shareholders Equity
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5,363,301
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5,326,320
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$
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8,358,748
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$
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7,974,853
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See notes to unaudited condensed consolidated financial statements.
3
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
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Nine Months Ended January 31,
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2011
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2010
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(Dollars in thousands)
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OPERATING ACTIVITIES
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Net income
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$
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384,602
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$
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373,532
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation
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83,475
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78,889
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Depreciation restructuring
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38,263
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0
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Amortization
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55,513
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55,259
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Impairment charges
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17,155
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9,807
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Share-based compensation expense
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17,986
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18,796
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Other noncash restructuring charges
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6,986
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0
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Loss on sale of assets net
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1,811
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2,888
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Changes in assets and liabilities, net of effect from
businesses acquired:
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Trade receivables
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(50,183
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)
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(13,099
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)
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Inventories
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(78,598
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)
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(51,627
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Accounts payable and accrued items
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36,592
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(11,140
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)
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Defined benefit pension contributions
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(13,432
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)
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(1,103
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)
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Income taxes
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(96,973
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)
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38,166
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Other net
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(8,817
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)
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11,206
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Net cash provided by operating activities
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394,380
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511,574
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INVESTING ACTIVITIES
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Additions to property, plant, and equipment
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(111,133
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)
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(112,664
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)
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Sales and maturities of marketable securities
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37,100
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13,519
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Purchases of marketable securities
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(75,637
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)
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0
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Proceeds from disposal of property, plant, and equipment
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5,002
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|
|
12
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Other net
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(99
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)
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(832
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)
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Net cash used for investing activities
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|
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(144,767
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)
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|
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(99,965
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)
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FINANCING ACTIVITIES
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Repayments of bank note payable
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0
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|
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(350,000
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)
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Repayments of long-term debt
|
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(10,000
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)
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|
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(275,000
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)
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Proceeds from long-term debt
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|
|
400,000
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|
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0
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Dividends paid
|
|
|
(143,065
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)
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|
|
(124,586
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)
|
Purchase of treasury shares
|
|
|
(247,329
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)
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|
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(5,431
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)
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Proceeds from stock option exercises
|
|
|
9,969
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|
|
|
6,310
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Other net
|
|
|
4,993
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|
|
|
1,723
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|
|
|
|
|
|
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Net cash provided by (used for) financing activities
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|
|
14,568
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|
|
|
(746,984
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)
|
Effect of exchange rate changes
|
|
|
1,832
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|
|
|
4,243
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|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
266,013
|
|
|
|
(331,132
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)
|
Cash and cash equivalents at beginning of period
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|
|
283,570
|
|
|
|
456,693
|
|
|
|
|
|
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Cash and cash equivalents at end of period
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|
$
|
549,583
|
|
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$
|
125,561
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|
|
|
|
|
|
|
|
( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.
4
THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note A
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by U.S. generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments of a normal
recurring nature considered necessary for a fair presentation have been included.
Certain prior
year amounts have been reclassified to conform to current year classifications. For further information,
reference is made to the consolidated financial statements and notes included in the Companys
Annual Report on Form 10-K for the year ended April 30, 2010.
Note B
Recently Issued Accounting Standards
In January 2010, the Financial Accounting Standards Board issued Accounting Standards
Update (ASU) 2010-06,
Improving Disclosures about Fair Value Measurements,
which requires
additional disclosures about fair value measurements including transfers in and out of different
levels of the fair value hierarchy and a higher level of disaggregation for different types of
financial instruments. These disclosure requirements were effective in the current fiscal year for
the Company and are reflected in Note N Other Financial Instruments and Fair Value Measurements.
In addition, for the reconciliation of Level 3 fair value measurements, ASU 2010-06 requires
information about purchases, sales, issuances, and settlements to be presented separately. These
disclosure requirements will be effective in fiscal 2012 for the Company.
Note C
Restructuring
During fiscal 2010, the Company announced its plan to restructure certain operations as part of its
ongoing efforts to enhance the long-term strength and profitability of its leading brands. The
initiative is a long-term investment to optimize production capacity and lower the overall cost
structure and includes capital investments for a new state-of-the-art food manufacturing facility
in Orrville, Ohio, and consolidation of coffee production in New Orleans, Louisiana. The Company
expects to incur restructuring costs of approximately $190.0 million related to this plan.
Subsequently, on September 27, 2010, the Company expanded its restructuring plan and committed to
an initiative to improve the overall cost structure in its Canadian pickle and condiments
operations by transitioning production to third-party manufacturers in the U.S. The Company
expects to incur additional restructuring costs of approximately $45.0 million related to this
initiative.
Upon completion, the restructuring will result in a reduction of approximately 850 full-time
positions and the closing of six of the Companys facilities Memphis, Tennessee; Ste. Marie,
Quebec; Sherman, Texas; Kansas City, Missouri; Dunnville, Ontario; and Delhi Township, Ontario.
The Company expects to incur total restructuring costs of approximately $235.0 million, of which
$79.0 million has been incurred through January 31, 2011. The balance of the costs is anticipated
to be incurred over the next four fiscal years as the facilities are closed.
5
The following table summarizes the restructuring activity, including the reserves established and
the total amount expected to be incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site Preparation
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived
|
|
|
Employee
|
|
|
and Equipment
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Asset Charges
|
|
|
Separation
|
|
|
Relocation
|
|
|
Start-up
|
|
|
Other Costs
|
|
|
Total
|
|
|
Total expected
restructuring charge
|
|
$
|
118,000
|
|
|
$
|
60,000
|
|
|
$
|
23,500
|
|
|
$
|
23,000
|
|
|
$
|
10,500
|
|
|
$
|
235,000
|
|
|
Balance at May 1, 2009
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Charge to expense
|
|
|
3,870
|
|
|
|
1,139
|
|
|
|
407
|
|
|
|
16
|
|
|
|
279
|
|
|
|
5,711
|
|
Cash payments
|
|
|
0
|
|
|
|
(50
|
)
|
|
|
(407
|
)
|
|
|
(16
|
)
|
|
|
(279
|
)
|
|
|
(752
|
)
|
Noncash utilization
|
|
|
(3,870
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(3,870
|
)
|
|
Balance at April 30,
2010
|
|
$
|
0
|
|
|
$
|
1,089
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,089
|
|
Charge to expense
|
|
|
38,263
|
|
|
|
28,933
|
|
|
|
4,479
|
|
|
|
1,269
|
|
|
|
295
|
|
|
|
73,239
|
|
Cash payments
|
|
|
0
|
|
|
|
(11,936
|
)
|
|
|
(4,479
|
)
|
|
|
(1,269
|
)
|
|
|
(295
|
)
|
|
|
(17,979
|
)
|
Noncash utilization
|
|
|
(38,263
|
)
|
|
|
(6,986
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(45,249
|
)
|
|
Balance at January
31, 2011
|
|
$
|
0
|
|
|
$
|
11,100
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
11,100
|
|
|
Remaining expected
restructuring charge
|
|
$
|
75,867
|
|
|
$
|
29,928
|
|
|
$
|
18,614
|
|
|
$
|
21,715
|
|
|
$
|
9,926
|
|
|
$
|
156,050
|
|
|
Approximately $16,851 of the total restructuring charges of $25,265 in the three months ended
January 31, 2011, and $38,376 of the total restructuring charges of $73,239 in the nine months
ended January 31, 2011, were reported in cost of products sold in the accompanying Condensed
Statements of Consolidated Income, while the remaining charges were reported in other restructuring
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 will be
used at the affected production facilities until they are closed or sold.
Expected employee separation costs include severance, retention bonuses, and pension costs.
Severance costs and retention bonuses are being recognized over the estimated future service period
of the affected employees. The obligation related to employee separation costs is included in
other current liabilities in the Condensed Consolidated Balance Sheets. For additional information
on the impact of the restructuring plan on defined benefit pension and other postretirement benefit
plans, see Note J Pensions and Other Postretirement Benefits.
Other costs include professional fees, costs related to closing the facilities, and miscellaneous
expenditures associated with the Companys restructuring initiative and are expensed as incurred.
Note D
Share-Based Payments
The Company provides for equity-based incentives to be awarded to key employees and nonemployee
directors. These incentives are administered through various plans, and currently consist of
restricted shares, restricted stock units, deferred shares, deferred stock units, performance
units, and stock options.
The following table summarizes amounts related to share-based payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Compensation expense included
in selling, distribution, and
adminstrative expenses
|
|
$
|
4,495
|
|
|
$
|
4,631
|
|
|
$
|
14,803
|
|
|
$
|
14,452
|
|
Compensation expense included
in merger and integration costs
|
|
|
1,223
|
|
|
|
1,067
|
|
|
|
3,183
|
|
|
|
4,344
|
|
Compensation expense included
in other restructuring costs
|
|
|
16
|
|
|
|
0
|
|
|
|
190
|
|
|
|
0
|
|
|
Total compensation expense
|
|
$
|
5,734
|
|
|
$
|
5,698
|
|
|
$
|
18,176
|
|
|
$
|
18,796
|
|
|
Related income tax benefit
|
|
$
|
1,872
|
|
|
$
|
1,750
|
|
|
$
|
5,853
|
|
|
$
|
6,334
|
|
|
As of January 31, 2011, total compensation cost related to nonvested share-based awards not yet
recognized was approximately $38,830. The weighted-average period over which this amount is
expected to be recognized is approximately 3.0 years.
6
Note E
Impairment Charges
During the three months ended January 31, 2011, the Company became aware of a significant future
reduction in its
Europes Best
®
frozen vegetable business with a customer in Canada. This was
subsequent to declines in net sales and profit margins of the frozen fruit and vegetable business
during 2011. The Company determined that these events together constituted a potential indicator
of impairment and, thus, performed an other-than-annual impairment test of the
Europes Best
®
indefinite-lived and the finite-lived intangible assets recognized in its Special Markets segment
under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350,
Intangibles Goodwill and Other
and FASB ASC 360,
Property, Plant, and Equipment
, respectively.
The Company determined the estimated fair value of the
Europes Best
®
indefinite-lived trademark
based on an analysis of the projected cash flows for the brand, discounted at a rate developed
using a risk-adjusted, weighted-average cost of capital methodology. An impairment charge of
$3,621 was recognized during the three and nine months ended January 31, 2011, to reduce this trademark to
its estimated fair value. During the three and nine months ended January 31, 2010, an impairment charge of
$7,282 was recognized related to the
Europes Best
®
trademark after the Company became aware of a
significant reduction in the frozen fruit business.
The Company determined that the carrying value of the finite-lived customer relationship intangible
asset associated with the
Europes Best
®
business was not recoverable based on the undiscounted
projected net cash flows expected to be generated from the asset. The estimated fair value of the
customer relationship was then calculated based on a discounted cash flow model which utilized a
forecast of future revenues and expenses related to the intangible asset. An impairment charge of
$13,534 was recognized during the three and nine months ended January 31, 2011, to reduce the carrying value
of the customer relationship to its estimated fair value.
Based on the relative insignificance of the
Europes Best
®
business to the Canada reporting unit
and the substantial excess of the reporting units fair value over its carrying value when goodwill
was evaluated as of February 1, 2010, the Company determined it was not necessary to test for
impairment of goodwill at the reporting unit level. Testing of the reporting unit will be part of
the Companys annual assessment of goodwill as of February 1, 2011.
During the three and nine months ended January 31, 2010, impairment charges of $2,525 were
recognized related to other finite-lived trademarks.
Note F
Common Shares
The following table sets forth common share information.
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
Common shares authorized
|
|
|
150,000,000
|
|
|
|
150,000,000
|
|
Common shares outstanding
|
|
|
115,976,074
|
|
|
|
119,119,152
|
|
Treasury shares
|
|
|
12,628,091
|
|
|
|
9,485,013
|
|
Note G
Reportable Segments
The Company operates in one industry: the manufacturing and marketing of food products. The
Company has four reportable segments: U.S. Retail Coffee Market, U.S. Retail Consumer Market, U.S.
Retail Oils and Baking Market, and Special Markets. The U.S. Retail Coffee Market segment
represents the domestic sales of
Folgers
®
,
Dunkin Donuts
®
,
and
Millstone
®
branded coffee to retail
customers; the U.S. Retail Consumer Market segment primarily includes domestic sales of
Smuckers
®
,
Jif
®
, and
Hungry Jack
®
branded products; the U.S. Retail Oils and Baking Market segment includes
domestic sales of
Crisco
®
,
Pillsbury
®
,
Eagle Brand
®
, and
Martha White
®
branded products; and the
Special Markets segment is comprised of the Canada,
7
foodservice, natural foods, and international
strategic business areas. Special Markets segment products are distributed domestically and in
foreign countries through retail channels, foodservice distributors and operators
(e.g., restaurants, schools and universities, health care operations), and health and natural foods
stores and distributors.
While the Companys four reportable segments remain the same for 2011, the calculation of segment
profit was modified at the beginning of 2011 to include intangible asset amortization and
impairment charges related to segment assets, along with certain other items in each of the
segments. These items were previously considered corporate expenses and were not allocated to the
segments. This change more accurately aligns the segment financial results with the
responsibilities of segment management, most notably in the area of intangible assets. Fiscal 2010
segment profit has been presented to be consistent with the current methodology.
The following table sets forth reportable segment information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail Coffee Market
|
|
$
|
554,667
|
|
|
$
|
471,463
|
|
|
$
|
1,425,524
|
|
|
$
|
1,282,794
|
|
U.S. Retail Consumer Market
|
|
|
273,549
|
|
|
|
273,837
|
|
|
|
825,388
|
|
|
|
854,929
|
|
U.S. Retail Oils and Baking Market
|
|
|
253,335
|
|
|
|
244,175
|
|
|
|
706,729
|
|
|
|
742,487
|
|
Special Markets
|
|
|
230,800
|
|
|
|
216,464
|
|
|
|
680,935
|
|
|
|
656,000
|
|
|
Total net sales
|
|
$
|
1,312,351
|
|
|
$
|
1,205,939
|
|
|
$
|
3,638,576
|
|
|
$
|
3,536,210
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail Coffee Market
|
|
$
|
158,093
|
|
|
$
|
132,617
|
|
|
$
|
419,074
|
|
|
$
|
375,634
|
|
U.S. Retail Consumer Market
|
|
|
72,242
|
|
|
|
66,178
|
|
|
|
217,946
|
|
|
|
202,813
|
|
U.S. Retail Oils and Baking Market
|
|
|
31,515
|
|
|
|
35,919
|
|
|
|
94,956
|
|
|
|
106,997
|
|
Special Markets
|
|
|
28,293
|
|
|
|
30,686
|
|
|
|
112,571
|
|
|
|
97,383
|
|
|
Total segment profit
|
|
$
|
290,143
|
|
|
$
|
265,400
|
|
|
$
|
844,547
|
|
|
$
|
782,827
|
|
|
Interest income
|
|
|
779
|
|
|
|
310
|
|
|
|
1,784
|
|
|
|
2,367
|
|
Interest expense
|
|
|
(18,132
|
)
|
|
|
(14,236
|
)
|
|
|
(53,176
|
)
|
|
|
(50,660
|
)
|
Share-based compensation expense
|
|
|
(4,495
|
)
|
|
|
(4,631
|
)
|
|
|
(14,803
|
)
|
|
|
(14,452
|
)
|
Merger and integration costs
|
|
|
(2,746
|
)
|
|
|
(4,672
|
)
|
|
|
(8,175
|
)
|
|
|
(29,296
|
)
|
Cost of products sold restructuring
|
|
|
(16,851
|
)
|
|
|
0
|
|
|
|
(38,376
|
)
|
|
|
0
|
|
Other restructuring costs
|
|
|
(8,414
|
)
|
|
|
0
|
|
|
|
(34,863
|
)
|
|
|
0
|
|
Corporate administrative expenses
|
|
|
(44,675
|
)
|
|
|
(46,231
|
)
|
|
|
(130,165
|
)
|
|
|
(129,173
|
)
|
Other income net
|
|
|
170
|
|
|
|
1,221
|
|
|
|
487
|
|
|
|
1,784
|
|
|
Income before income taxes
|
|
$
|
195,779
|
|
|
$
|
197,161
|
|
|
$
|
567,260
|
|
|
$
|
563,397
|
|
|
The results of the U.S. Retail Oils and Baking Market segment have been impacted by a highly
competitive and promotional environment over the last several quarters. Should competitive
pressure in these categories be sustained, long-term assumptions relative to growth rates and
profitability of the segment or certain brands within it may not be attained which could result in
an impairment of goodwill or other indefinite-lived intangible assets. As of January 31, 2011,
approximately 13 percent of the Companys total goodwill and intangible assets are included in the
U.S. Retail Oils and Baking Market segment. Due to the increased risk of impairment resulting from
the competitive environment, the Company performed an assessment during the third quarter of 2011,
which indicated that the estimated fair value of goodwill and other indefinite-lived intangible
assets of the U.S. Retail Oils and Baking Market segment supported their carrying values. The
Company will update this assessment during its annual evaluation of goodwill and other
indefinite-lived intangible assets in the fourth quarter of 2011.
8
Note H
Debt and Financing Arrangements
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
7.94% Series C Senior Notes due September 1, 2010
|
|
$
|
0
|
|
|
$
|
10,000
|
|
4.78% Senior Notes due June 1, 2014
|
|
|
100,000
|
|
|
|
100,000
|
|
6.12% Senior Notes due November 1, 2015
|
|
|
24,000
|
|
|
|
24,000
|
|
6.63% Senior Notes due November 1, 2018
|
|
|
376,000
|
|
|
|
376,000
|
|
5.55% Senior Notes due April 1, 2022
|
|
|
400,000
|
|
|
|
400,000
|
|
4.50% Senior Notes due June 1, 2025
|
|
|
400,000
|
|
|
|
0
|
|
|
Total long-term debt
|
|
$
|
1,300,000
|
|
|
$
|
910,000
|
|
Current portion of long-term debt
|
|
|
0
|
|
|
|
10,000
|
|
|
Total long-term debt less current portion
|
|
$
|
1,300,000
|
|
|
$
|
900,000
|
|
|
On June 15, 2010, the Company issued $400.0 million of 4.50 percent Senior Notes with a final
maturity on June 1, 2025. The Senior Notes have a 12-year average maturity. Proceeds from the
Senior Notes issuance will be used for general corporate purposes. On September 1, 2010, the
Company repaid the $10.0 million of 7.94 percent Series C Senior Notes utilizing cash on hand.
All of the Companys Senior Notes are unsecured and interest is paid semiannually. Scheduled
payments are required on the 5.55 percent Senior Notes, the first of which is $50.0 million on
April 1, 2013, and on the 4.50 percent Senior Notes, the first of which is $100.0 million on June
1, 2020.
On January 31, 2011, the Company entered into an amended and restated credit agreement with a group
of six lenders. The credit facility, which amends and restates in its entirety the credit
agreement dated as of October 29, 2009, provides for an unsecured revolving credit line of $600.0
million and matures January 31, 2016. The Companys borrowings under the credit facility will bear
interest based on prevailing U.S. Prime Rate, Canadian Base Rate, London Interbank Offered Rate, or
Canadian Dealer Offered Rate, as determined by the Company. Interest is payable either on a
quarterly basis or at the end of the borrowing term. At January 31, 2011, the Company did not have
a balance outstanding under the revolving credit facility. The Companys $180.0 million revolving
credit facility matured on January 31, 2011.
The Companys debt instruments contain certain financial covenant restrictions including
consolidated net worth, a leverage ratio, and an interest coverage ratio. The Company is in
compliance with all covenants.
9
Note I
Earnings per Share
The following tables set forth the computation of net income per common share and net income per
common share assuming dilution.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Computation of net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
131,995
|
|
|
$
|
135,479
|
|
|
$
|
384,602
|
|
|
$
|
373,532
|
|
Net income allocated to participating securities
|
|
|
1,311
|
|
|
|
1,191
|
|
|
|
3,788
|
|
|
|
3,272
|
|
|
Net income allocated to common stockholders
|
|
$
|
130,684
|
|
|
$
|
134,288
|
|
|
$
|
380,814
|
|
|
$
|
370,260
|
|
|
Weighted-average common shares outstanding
|
|
|
117,155,509
|
|
|
|
118,022,195
|
|
|
|
117,875,340
|
|
|
|
117,855,028
|
|
|
Net income per common share
|
|
$
|
1.12
|
|
|
$
|
1.14
|
|
|
$
|
3.23
|
|
|
$
|
3.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Computation of net income per share assuming dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
131,995
|
|
|
$
|
135,479
|
|
|
$
|
384,602
|
|
|
$
|
373,532
|
|
Net income allocated to participating securities
|
|
|
1,311
|
|
|
|
1,190
|
|
|
|
3,786
|
|
|
|
3,270
|
|
|
Net income allocated to common stockholders
|
|
$
|
130,684
|
|
|
$
|
134,289
|
|
|
$
|
380,816
|
|
|
$
|
370,262
|
|
|
Weighted-average common shares outstanding
|
|
|
117,155,509
|
|
|
|
118,022,195
|
|
|
|
117,875,340
|
|
|
|
117,855,028
|
|
Dilutive effect of stock options
|
|
|
103,246
|
|
|
|
147,732
|
|
|
|
124,402
|
|
|
|
124,524
|
|
|
Weighted-average common shares outstanding assuming dilution
|
|
|
117,258,755
|
|
|
|
118,169,927
|
|
|
|
117,999,742
|
|
|
|
117,979,552
|
|
|
Net income per common share assuming dilution
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
|
$
|
3.23
|
|
|
$
|
3.14
|
|
|
The following table reconciles the weighted-average common shares used in the basic and
diluted earnings per share disclosures to the total weighted-average shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Weighted-average common shares outstanding
|
|
|
117,155,509
|
|
|
|
118,022,195
|
|
|
|
117,875,340
|
|
|
|
117,855,028
|
|
Weighted-average participating shares outstanding
|
|
|
1,175,525
|
|
|
|
1,046,988
|
|
|
|
1,172,646
|
|
|
|
1,041,644
|
|
|
Total weighted-average shares outstanding
|
|
|
118,331,034
|
|
|
|
119,069,183
|
|
|
|
119,047,986
|
|
|
|
118,896,672
|
|
Dilutive effect of stock options
|
|
|
103,246
|
|
|
|
147,732
|
|
|
|
124,402
|
|
|
|
124,524
|
|
|
Total weighted-average shares outstanding assuming dilution
|
|
|
118,434,280
|
|
|
|
119,216,915
|
|
|
|
119,172,388
|
|
|
|
119,021,196
|
|
|
10
Note J
Pensions and Other Postretirement Benefits
The components of the Companys net periodic benefit cost for defined benefit pension and other
postretirement benefit plans are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
|
Defined Benefit Pension Plans
|
|
|
Other Postretirement Benefits
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Service cost
|
|
$
|
1,884
|
|
|
$
|
1,430
|
|
|
$
|
405
|
|
|
$
|
495
|
|
Interest cost
|
|
|
6,373
|
|
|
|
6,196
|
|
|
|
695
|
|
|
|
655
|
|
Expected return on plan assets
|
|
|
(6,729
|
)
|
|
|
(5,750
|
)
|
|
|
0
|
|
|
|
0
|
|
Recognized net actuarial loss (gain)
|
|
|
3,160
|
|
|
|
1,585
|
|
|
|
(134
|
)
|
|
|
(261
|
)
|
Termination benefit cost
|
|
|
178
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Other
|
|
|
294
|
|
|
|
308
|
|
|
|
(122
|
)
|
|
|
(123
|
)
|
|
Net periodic benefit cost
|
|
$
|
5,160
|
|
|
$
|
3,769
|
|
|
$
|
844
|
|
|
$
|
766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31,
|
|
|
|
Defined Benefit Pension Plans
|
|
|
Other Postretirement Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Service cost
|
|
$
|
5,603
|
|
|
$
|
4,263
|
|
|
$
|
1,215
|
|
|
$
|
1,483
|
|
Interest cost
|
|
|
19,079
|
|
|
|
18,460
|
|
|
|
2,076
|
|
|
|
1,949
|
|
Expected return on plan assets
|
|
|
(20,060
|
)
|
|
|
(17,109
|
)
|
|
|
0
|
|
|
|
0
|
|
Recognized net actuarial loss (gain)
|
|
|
7,085
|
|
|
|
4,706
|
|
|
|
(402
|
)
|
|
|
(782
|
)
|
Termination benefit cost
|
|
|
8,375
|
|
|
|
0
|
|
|
|
2,413
|
|
|
|
0
|
|
Curtailment
|
|
|
4,091
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Other
|
|
|
871
|
|
|
|
925
|
|
|
|
(366
|
)
|
|
|
(367
|
)
|
|
Net periodic benefit cost
|
|
$
|
25,044
|
|
|
$
|
11,245
|
|
|
$
|
4,936
|
|
|
$
|
2,283
|
|
|
Upon completion of the restructuring plan discussed in Note C Restructuring, approximately
850 full-time positions will be reduced. The Company has included the estimated impact of the
planned reductions in measuring the net periodic benefit cost of the defined benefit pension and
other postretirement benefit plans. Included above are charges recognized for termination benefits
and curtailment as a result of the restructuring plan.
Note K
Comprehensive Income
The following table summarizes the components of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net income
|
|
$
|
131,995
|
|
|
$
|
135,479
|
|
|
$
|
384,602
|
|
|
$
|
373,532
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
6,387
|
|
|
|
3,184
|
|
|
|
5,321
|
|
|
|
26,852
|
|
Unrealized gain on available-for-sale securities
|
|
|
794
|
|
|
|
624
|
|
|
|
758
|
|
|
|
3,384
|
|
Unrealized (loss) gain on cash flow hedging derivatives, net
|
|
|
(885
|
)
|
|
|
(2,494
|
)
|
|
|
5,857
|
|
|
|
(3,364
|
)
|
Unrealized gain on pension and other postretirement liabilities
|
|
|
819
|
|
|
|
0
|
|
|
|
519
|
|
|
|
0
|
|
Income tax (expense) benefit
|
|
|
(234
|
)
|
|
|
678
|
|
|
|
(2,780
|
)
|
|
|
12
|
|
|
Comprehensive income
|
|
$
|
138,876
|
|
|
$
|
137,471
|
|
|
$
|
394,277
|
|
|
$
|
400,416
|
|
|
11
Note L
Commitments and Contingencies
The Company, like other food manufacturers, is from time to time subject to various administrative,
regulatory, and other legal proceedings arising in the ordinary course of business. The Company is
a defendant in a variety of legal proceedings, some of which involve claims for damages in
unspecified amounts. The Company cannot predict with certainty the results of these proceedings or
reasonably determine a range of potential loss. The Companys policy is to accrue costs for
contingent liabilities when such liabilities are probable and amounts can be reasonably estimated.
Based on information known to date, the Company does not believe the final outcome of these
proceedings will have a material adverse effect on the Companys financial position, results of
operations, or cash flows.
Note M
Derivative Financial Instruments
The Company is exposed to market risks, such as changes in commodity pricing and foreign currency
exchange rates. To manage the volatility relating to these exposures, the Company enters into
various derivative transactions. By policy, the Company historically has not entered into
derivative financial instruments for trading purposes or for speculation.
Commodity Price Management. The Company enters into commodity futures and options contracts to
manage the price volatility and reduce the variability of future cash flows related to anticipated
inventory purchases of green coffee, edible oils, flour, milk, corn, and corn sweetener. The
Company also enters into commodity futures and options to manage price risk for energy input costs,
including natural gas and diesel fuel. The derivative instruments generally have maturities of
less than one year.
Certain of the derivative instruments associated with the Companys U.S. Retail Oils and Baking
Market and U.S. Retail Coffee Market segments meet the hedge criteria within Financial Accounting
Standards Board Accounting Standards Codification 815,
Derivatives and Hedging
, and are accounted
for as cash flow hedges. The mark-to-market gains or losses on qualifying hedges are deferred and
included as a component of other comprehensive income to the extent effective, and reclassified to
cost of products sold in the period during which the hedged transaction affects earnings. In order
to qualify as a hedge of commodity price risk, it must be demonstrated that the changes in the fair
value of the commoditys futures contracts are highly effective in hedging price risks associated
with the commodity purchased. Hedge effectiveness is assessed at inception and on a monthly basis.
The mark-to-market gains or losses on nonqualifying and ineffective portions of commodity hedges
are recognized in cost of products sold immediately.
Foreign Currency Exchange Rate Hedging. The Company utilizes foreign currency forwards and options
contracts to manage the effect of foreign currency exchange fluctuations on future cash payments
primarily related to purchases of certain raw materials, finished goods, and fixed assets. The
contracts generally have maturities of less than one year. At the inception of the contract, the
derivative is evaluated and documented for hedge accounting treatment. If the contract qualifies
for hedge accounting treatment, to the extent the hedge is deemed effective, the associated
mark-to-market gains and losses are deferred and included as a component of other comprehensive
income. These gains or losses are reclassified to earnings in the period the contract is executed.
The ineffective portion of these contracts is immediately recognized in earnings. Instruments
currently used to manage foreign currency exchange exposures do not meet the requirements for hedge
accounting treatment and the change in value of these instruments is immediately recognized in cost
of products sold.
12
The following table sets forth the fair value of derivative instruments recognized in the Condensed
Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
|
Other
|
|
|
Other
|
|
|
Other
|
|
|
Other
|
|
|
|
Current Assets
|
|
|
Current Liabilities
|
|
|
Current Assets
|
|
|
Current Liabilities
|
|
|
Derivatives designated as hedging
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
1,465
|
|
|
$
|
0
|
|
|
$
|
1,874
|
|
|
$
|
9
|
|
Derivatives not designated as
hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
6,566
|
|
|
$
|
4,927
|
|
|
$
|
2,414
|
|
|
$
|
599
|
|
Foreign currency exchange contracts
|
|
|
109
|
|
|
|
919
|
|
|
|
0
|
|
|
|
830
|
|
|
Total derivatives not designated
as hedging instruments
|
|
$
|
6,675
|
|
|
$
|
5,846
|
|
|
$
|
2,414
|
|
|
$
|
1,429
|
|
|
Total derivative instruments
|
|
$
|
8,140
|
|
|
$
|
5,846
|
|
|
$
|
4,288
|
|
|
$
|
1,438
|
|
|
The Company has elected to not offset fair value amounts recognized for derivative instruments
and its cash margin accounts executed with the same counterparty. The Company maintained cash
margin accounts of $18,580 and $5,714 at January 31, 2011 and April 30, 2010, respectively, that
are included in other current assets in the Condensed Consolidated Balance Sheets.
The following table presents information on gains and losses recognized on derivatives designated
as cash flow hedging relationships, all of which hedge commodity price risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Gains recognized in other
comprehensive income
(effective portion)
|
|
$
|
4,788
|
|
|
$
|
130
|
|
|
$
|
17,822
|
|
|
$
|
1,055
|
|
Gains reclassified from
accumulated other
comprehensive loss
to cost of products sold (effective portion)
|
|
|
5,673
|
|
|
|
2,624
|
|
|
|
11,965
|
|
|
|
4,419
|
|
|
Change in accumulated
other comprehensive loss
|
|
$
|
(885
|
)
|
|
$
|
(2,494
|
)
|
|
$
|
5,857
|
|
|
$
|
(3,364
|
)
|
|
Gains (losses) recognized
in cost of products sold
(ineffective portion)
|
|
$
|
84
|
|
|
$
|
(495
|
)
|
|
$
|
458
|
|
|
$
|
108
|
|
|
Included as a component in accumulated other comprehensive loss at January 31, 2011 and April
30, 2010, were deferred pre-tax gains of $8,985 and $3,128, respectively. The related tax impact
recognized in accumulated other comprehensive loss was $3,263 and $1,134 at January 31, 2011 and
April 30, 2010, respectively. The entire amount of the deferred gain included in accumulated other
comprehensive loss at January 31, 2011, is expected to be recognized in earnings within one year as
the related commodity is sold.
The following table presents the realized and unrealized gains and losses recognized in cost of
products sold on derivatives not designated as qualified hedging instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
(Losses) gains on commodity contracts
|
|
$
|
(359
|
)
|
|
$
|
12
|
|
|
$
|
4,488
|
|
|
$
|
(2,818
|
)
|
Losses on foreign currency exchange contracts
|
|
|
(863
|
)
|
|
|
(156
|
)
|
|
|
(593
|
)
|
|
|
(5,649
|
)
|
|
(Losses) gains recognized in cost of
products sold (derivatives not designated as
hedging instruments)
|
|
$
|
(1,222
|
)
|
|
$
|
(144
|
)
|
|
$
|
3,895
|
|
|
$
|
(8,467
|
)
|
|
The following table presents the gross contract notional value of outstanding derivative contracts
at January 31, 2011 and April 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
Commodity contracts
|
|
$
|
548,889
|
|
|
$
|
323,351
|
|
Foreign currency exchange contracts
|
|
|
49,356
|
|
|
|
45,295
|
|
|
13
Note N
Other Financial Instruments and Fair Value Measurements
Financial instruments, other than derivatives, that potentially subject the Company to significant
concentrations of credit risk consist principally of commercial paper, municipal obligations, and
trade receivables. Under the Companys investment policy, it may invest in securities deemed to be
investment grade at the time of purchase. The Company determines the appropriate categorization of
debt securities at the time of purchase and reevaluates such designation at each balance sheet
date.
The fair value of the Companys financial instruments, other than certain of its fixed-rate
long-term debt, approximates their carrying amounts. The following table provides information on
the carrying amount and fair value of the Companys financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Marketable securities
|
|
$
|
38,599
|
|
|
$
|
38,599
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other investments and securities
|
|
|
39,467
|
|
|
|
39,467
|
|
|
|
34,895
|
|
|
|
34,895
|
|
Derivatives financial instruments, net
|
|
|
2,294
|
|
|
|
2,294
|
|
|
|
2,850
|
|
|
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate long-term debt
|
|
|
1,300,000
|
|
|
|
1,644,731
|
|
|
|
910,000
|
|
|
|
1,172,467
|
|
|
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 the Companys
market assumptions.
The following table is a summary of the fair values of the Companys financial assets (liabilities)
measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Fair Value at
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
January 31,
|
|
|
Fair Value at
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2011
|
|
|
April 30, 2010
|
|
|
Marketable securities
(A)
|
|
$
|
0
|
|
|
$
|
38,599
|
|
|
$
|
0
|
|
|
$
|
38,599
|
|
|
$
|
0
|
|
Other investments:
(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity mutual funds
|
|
|
14,692
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,692
|
|
|
|
11,626
|
|
Municipal obligations
|
|
|
0
|
|
|
|
17,495
|
|
|
|
0
|
|
|
|
17,495
|
|
|
|
16,753
|
|
Other investments
|
|
|
1,100
|
|
|
|
6,180
|
|
|
|
0
|
|
|
|
7,280
|
|
|
|
6,516
|
|
Derivatives:
(C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts, net
|
|
|
3,104
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,104
|
|
|
|
3,680
|
|
Foreign currency exchange contracts, net
|
|
|
(810
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(810
|
)
|
|
|
(830
|
)
|
|
Total financial assets measured at fair value
|
|
$
|
18,086
|
|
|
$
|
62,274
|
|
|
$
|
0
|
|
|
$
|
80,360
|
|
|
$
|
37,745
|
|
|
|
|
|
(A)
|
|
The Companys marketable securities consist of commercial paper valued by
a third party using an evaluated pricing methodology.
|
|
(B)
|
|
The Companys 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 and municipal obligations valued by a third party
using an evaluated pricing methodology.
|
|
(C)
|
|
The Companys derivatives are valued using quoted market prices. For
additional information, see Note M Derivative Financial Instruments.
|
14
During the three months ended January 31, 2011, the Company recognized fair value adjustments of
$17,155 related to the impairment of the
Europes Best
®
indefinite-lived trademark and finite-lived
customer relationship intangible asset. Other adjustments were recognized related to foreign
currency exchange and amortization during the nine months ended January 31, 2011. The following
table presents these nonfinancial assets adjusted to fair value as of January 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount at
|
|
|
Fair Value
|
|
|
Other
|
|
|
Carrying Amount at
|
|
|
|
April 30, 2010
|
|
|
Adjustment
|
|
|
Adjustments
|
|
|
January 31, 2011
|
|
|
Indefinite-lived trademark
(D)
|
|
$
|
9,452
|
|
|
$
|
(3,621
|
)
|
|
$
|
160
|
|
|
$
|
5,991
|
|
Finite-lived customer relationship
(D)
|
|
|
18,964
|
|
|
|
(13,534
|
)
|
|
|
(437
|
)
|
|
|
4,993
|
|
|
Total nonfinancial assets adjusted to fair value
|
|
$
|
28,416
|
|
|
$
|
(17,155
|
)
|
|
$
|
(277
|
)
|
|
$
|
10,984
|
|
|
|
|
|
(D)
|
|
The Company utilized Level 3 inputs to estimate the fair value of the
nonfinancial assets. For additional information, see Note E Impairment Charges.
|
Note O
Income Taxes
During the three-month period ended January 31, 2011, the Companys effective tax rate increased to
32.6 percent, compared to 31.3 percent in the three-month period ended January 31, 2010. This
reflects reduced tax benefits associated with Canadian operations and changes to uncertain tax
positions in the period ended January 31, 2011, as compared to the period ended January 31, 2010,
partially offset by an increased benefit related to the domestic manufacturing deduction in 2011 as
compared to 2010.
During the nine-month period ended January 31, 2011, the Companys effective tax rate decreased to
32.2 percent, compared to 33.7 percent in the nine-month period ended January 31, 2010, reflecting
the impact of increased benefits realized from the domestic manufacturing deduction and lower state
income taxes. At January 31, 2011, the effective income tax rate varied from the U.S. statutory
income tax rate primarily due to the domestic manufacturing deduction offset slightly by state
income taxes.
Within the next twelve months, it is reasonably possible that the Company could decrease its
unrecognized tax benefits by an additional $2.7 million, primarily as a result of expiring statute
of limitations periods and settlements with tax authorities.
15
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
This discussion and analysis deals with comparisons of material changes in the unaudited condensed
consolidated financial statements for the three-month and nine-month periods ended January 31, 2011
and 2010.
The
Company is the owner of all trademarks, except
Pillsbury
®
, the Barrelhead logo, and the Doughboy
character are trademarks of The Pillsbury Company LLC, used under license;
Carnation
®
is a
trademark of Société des Produits Nestlé S.A., used under license; and
Dunkin Donuts
®
is a
registered trademark of DD IP Holder LLC, used under license.
Borden
®
and Elsie are trademarks
used under license.
Dunkin Donuts
®
brand is licensed to the Company for packaged coffee products sold in retail
channels such as grocery stores, mass merchandisers, club stores, and drug stores. Information in
this document does not pertain to
Dunkin Donuts
®
coffee or other products for sale in
Dunkin
Donuts
®
restaurants.
K-Cup
®
and
K-Cups
®
are trademarks of Keurig, Incorporated.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in millions, except per share data)
|
|
Net sales
|
|
$
|
1,312.4
|
|
|
$
|
1,205.9
|
|
|
$
|
3,638.6
|
|
|
$
|
3,536.2
|
|
Gross profit
|
|
$
|
474.4
|
|
|
$
|
458.3
|
|
|
$
|
1,377.5
|
|
|
$
|
1,356.6
|
|
% of net sales
|
|
|
36.1
|
%
|
|
|
38.0
|
%
|
|
|
37.9
|
%
|
|
|
38.4
|
%
|
Operating income
|
|
$
|
213.0
|
|
|
$
|
209.9
|
|
|
$
|
618.2
|
|
|
$
|
609.9
|
|
% of net sales
|
|
|
16.2
|
%
|
|
|
17.4
|
%
|
|
|
17.0
|
%
|
|
|
17.2
|
%
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
132.0
|
|
|
$
|
135.5
|
|
|
$
|
384.6
|
|
|
$
|
373.5
|
|
Net income per common share assuming dilution
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
|
$
|
3.23
|
|
|
$
|
3.14
|
|
Gross profit before restructuring costs
(1)
|
|
$
|
491.3
|
|
|
$
|
458.3
|
|
|
$
|
1,415.9
|
|
|
$
|
1,356.6
|
|
% of net sales
|
|
|
37.4
|
%
|
|
|
38.0
|
%
|
|
|
38.9
|
%
|
|
|
38.4
|
%
|
Operating income before restructuring and merger and integration costs
(2)
|
|
$
|
241.0
|
|
|
$
|
214.5
|
|
|
$
|
699.6
|
|
|
$
|
639.2
|
|
% of net sales
|
|
|
18.4
|
%
|
|
|
17.8
|
%
|
|
|
19.2
|
%
|
|
|
18.1
|
%
|
Income before restructuring and merger and integration costs:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
150.9
|
|
|
$
|
138.9
|
|
|
$
|
439.8
|
|
|
$
|
393.0
|
|
Income per common share assuming dilution
|
|
$
|
1.27
|
|
|
$
|
1.17
|
|
|
$
|
3.69
|
|
|
$
|
3.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Reconciliation to gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
474.4
|
|
|
$
|
458.3
|
|
|
$
|
1,377.5
|
|
|
$
|
1,356.6
|
|
Cost of products sold restructuring
|
|
|
16.9
|
|
|
|
|
|
|
|
38.4
|
|
|
|
|
|
|
Gross profit before restructuring costs
|
|
$
|
491.3
|
|
|
$
|
458.3
|
|
|
$
|
1,415.9
|
|
|
$
|
1,356.6
|
|
|
(2)
Reconciliation to operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
213.0
|
|
|
$
|
209.9
|
|
|
$
|
618.2
|
|
|
$
|
609.9
|
|
Merger and integration costs
|
|
|
2.7
|
|
|
|
4.7
|
|
|
|
8.2
|
|
|
|
29.3
|
|
Cost of products sold restructuring
|
|
|
16.9
|
|
|
|
|
|
|
|
38.4
|
|
|
|
|
|
Other restructuring costs
|
|
|
8.4
|
|
|
|
|
|
|
|
34.9
|
|
|
|
|
|
|
Operating income before restructuring and merger and integration costs
|
|
$
|
241.0
|
|
|
$
|
214.5
|
|
|
$
|
699.6
|
|
|
$
|
639.2
|
|
|
(3)
Reconciliation to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
195.8
|
|
|
$
|
197.2
|
|
|
$
|
567.3
|
|
|
$
|
563.4
|
|
Merger and integration costs
|
|
|
2.7
|
|
|
|
4.7
|
|
|
|
8.2
|
|
|
|
29.3
|
|
Cost of products sold restructuring
|
|
|
16.9
|
|
|
|
|
|
|
|
38.4
|
|
|
|
|
|
Other restructuring costs
|
|
|
8.4
|
|
|
|
|
|
|
|
34.9
|
|
|
|
|
|
|
Income before income taxes, restructuring, and merger and integration costs
|
|
|
223.8
|
|
|
|
201.8
|
|
|
|
648.7
|
|
|
|
592.7
|
|
Income taxes, as adjusted
|
|
|
72.9
|
|
|
|
62.9
|
|
|
|
208.9
|
|
|
|
199.7
|
|
|
Income before restructuring and merger and integration costs
|
|
$
|
150.9
|
|
|
$
|
138.9
|
|
|
$
|
439.8
|
|
|
$
|
393.0
|
|
|
Amounts may not add due to rounding.
16
Net sales in the third quarter and first nine months of 2011 increased nine and three percent,
respectively, compared to the same periods in 2010, as the impact of pricing, sales mix, and
exchange rate more than offset the impact of potato products divested in March 2010. Volume gains
for the third quarter of 2011 also contributed to the net sales increase for the period, while
overall volume was down for the first nine months of 2011, compared to 2010. Operating income
increased one percent in both the third quarter and first nine months of 2011, compared to 2010, as
the net effect of price increases more than offset overall higher raw material costs, increased
restructuring and merger and integration costs (special project costs) and impairment charges.
Excluding special project costs, operating income increased 12 percent and nine percent for the
third quarter and first nine months of 2011, respectively, compared to the same periods in 2010.
The Companys net income per diluted share was $1.11 and $1.14 for the third quarters of 2011 and
2010, and $3.23 and $3.14 for the first nine months of 2011 and 2010, respectively. The Companys
income per diluted share, excluding special project costs, was $1.27 and $1.17 for the third
quarters of 2011 and 2010, and $3.69 and $3.30 for the first nine months of 2011 and 2010,
respectively, an increase of nine percent and 12 percent, respectively.
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
%
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
%
|
|
|
|
(Dollars in millions)
|
|
Net sales
|
|
$
|
1,312.4
|
|
|
$
|
1,205.9
|
|
|
$
|
106.5
|
|
|
|
9
|
%
|
|
$
|
3,638.6
|
|
|
$
|
3,536.2
|
|
|
$
|
102.4
|
|
|
|
3
|
%
|
Adjust
for certain noncomparable items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divestiture
|
|
|
|
|
|
|
(13.4
|
)
|
|
|
13.4
|
|
|
|
1
|
%
|
|
|
|
|
|
|
(35.4
|
)
|
|
|
35.4
|
|
|
|
1
|
%
|
Foreign currency exchange
|
|
|
(5.0
|
)
|
|
|
|
|
|
|
(5.0
|
)
|
|
|
(0
|
%)
|
|
|
(16.6
|
)
|
|
|
|
|
|
|
(16.6
|
)
|
|
|
(1
|
%)
|
|
Net sales without divestiture and foreign
currency exchange
|
|
$
|
1,307.4
|
|
|
$
|
1,192.5
|
|
|
$
|
114.9
|
|
|
|
10
|
%
|
|
$
|
3,622.0
|
|
|
$
|
3,500.8
|
|
|
$
|
121.2
|
|
|
|
3
|
%
|
|
Net sales in the third quarter of 2011 increased $106.5 million, or nine percent, compared to
the third quarter of 2010, and increased 10 percent, excluding the impact of the 2010 potato
products divestiture and foreign exchange. Overall volume increased three percent as solid gains
were realized in
Crisco
®
oils,
Jif
®
peanut butter,
Smuckers
®
fruit spreads,
Dunkin Donuts
®
packaged coffee, and natural foods beverages. The net impact of pricing contributed approximately
four percent to net sales and the overall impact of sales mix was favorable.
Net sales for the first nine months of 2011 increased three percent, compared to the first nine
months of 2010 and the net impact of the potato products divestiture and foreign exchange was not
significant. Volume declined two percent for the first nine months of 2011, compared to 2010. The
net impact of pricing contributed approximately three percent to net sales and the overall impact
of sales mix was favorable.
17
Operating Income
The following table presents components of operating income as a percentage of net sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Gross profit
|
|
|
36.1
|
%
|
|
|
38.0
|
%
|
|
|
37.9
|
%
|
|
|
38.4
|
%
|
Selling, distribution, and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
|
|
5.2
|
%
|
|
|
5.7
|
%
|
|
|
5.8
|
%
|
|
|
6.4
|
%
|
Selling
|
|
|
3.2
|
%
|
|
|
3.2
|
%
|
|
|
3.2
|
%
|
|
|
3.3
|
%
|
Distribution
|
|
|
3.0
|
%
|
|
|
3.3
|
%
|
|
|
3.2
|
%
|
|
|
3.3
|
%
|
General and administrative
|
|
|
4.9
|
%
|
|
|
5.6
|
%
|
|
|
5.4
|
%
|
|
|
5.3
|
%
|
|
Total selling, distribution, and administrative expenses
|
|
|
16.3
|
%
|
|
|
17.8
|
%
|
|
|
17.6
|
%
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
1.4
|
%
|
|
|
1.5
|
%
|
|
|
1.5
|
%
|
|
|
1.6
|
%
|
Impairment charges
|
|
|
1.3
|
%
|
|
|
0.8
|
%
|
|
|
0.5
|
%
|
|
|
0.3
|
%
|
Other restructuring and merger and integration costs
|
|
|
0.9
|
%
|
|
|
0.4
|
%
|
|
|
1.2
|
%
|
|
|
0.8
|
%
|
Other operating expense net
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
Operating income
|
|
|
16.2
|
%
|
|
|
17.4
|
%
|
|
|
17.0
|
%
|
|
|
17.2
|
%
|
|
Gross profit increased $16.1 million in the third quarter of 2011, compared to 2010, as the
increase in net sales offset the impact of overall higher raw material costs and $16.9 million of
special project costs included in cost of products sold, primarily accelerated depreciation.
Excluding special project costs, gross profit increased $33.0 million, or seven percent, yet
decreased as a percent of net sales from 38.0 percent in the third quarter of 2010, to 37.4 percent
in the third quarter of 2011. Raw material cost increases were most significant for green coffee,
milk, sugar, and soybean oil, and more than offset lower costs for peanuts. Coffee price increases
taken earlier in the year offset higher green coffee costs and contributed over one-half of the
gross profit increase in the third quarter of 2011, but did not result in an overall gross margin
gain. Gross margin was further impacted by price declines taken on oils during the second quarter
in response to competitive dynamics. Unrealized mark-to-market adjustments on commodity
instruments in the third quarter of 2011 were not material.
Selling, distribution, and administrative expenses in the third quarter of 2011, were flat compared
to 2010, and decreased as a percentage of net sales from 17.8 percent to 16.3 percent. Marketing
and distribution expenses for the third quarter of 2011 both decreased one percent, compared to
2010, while selling expenses increased approximately seven percent related to the increase in net
sales. General and administrative expenses decreased three percent over the same period and
reflect lower employee-related benefit costs.
Operating income increased $3.1 million, or one percent, in the third quarter of 2011, compared to
2010, despite an overall increase in special project costs of approximately $23.3 million.
Excluding the impact of special project costs in both periods, operating income increased $26.4
million, or 12 percent, and improved from 17.8 percent of net sales in 2010, to 18.4 percent in
2011. Additionally, noncash impairment charges of $17.2 million and $9.8 million, primarily
related to the
Europes Best
®
intangible assets in Canada, reduced the Companys overall operating
margin by 1.3 and 0.8 percentage points in the third quarters of 2011 and 2010, respectively. The
carrying value of the remaining intangible assets of the
Europes Best
®
business is approximately
$11.0 million after the 2011 impairment charge.
For the first nine months of 2011, gross profit increased $20.9 million but decreased to 37.9
percent of net sales, compared to 38.4 percent of net sales in the first nine months of 2010. The
first nine months of 2011 includes the impact of $38.4 million of special project costs in cost of
products sold, primarily accelerated depreciation. Excluding special project costs, gross profit
increased $59.3 million, or four percent, and increased as a percent of net sales from 38.4 percent
in the first nine months of 2010, to 38.9 percent in the first nine months of 2011. Gross profit
for the first nine months of 2011 included higher costs for green coffee, milk, sugar, and soybean
oil while costs for peanuts and flour were lower, compared to the first nine months of 2010.
Coffee price increases taken during the year more than offset higher green coffee costs and
contributed
18
to the gross profit increase in the first nine months of 2011, compared to the first nine months of
2010 which benefited from volume-related plant efficiencies.
Selling, distribution, and administrative expenses decreased one percent for the first nine months
of 2011, compared to 2010, and decreased as a percentage of net sales from 18.3 percent to 17.6
percent. Marketing expenses decreased six percent for the first nine months of 2011, compared to
2010 which included significant long-term investments in brand-equity initiatives and new
advertising. Selling expenses and general and administrative expenses both increased two percent
for the first nine months of 2011, compared to 2010, while distribution expenses in the first nine
months of 2011 were flat compared to 2010.
Operating income increased $8.3 million, or one percent, in the first nine months of 2011, compared
to 2010, despite an increase in special project costs of approximately $52.1 million. Excluding
the impact of special project costs in both periods, operating income increased $60.4 million, or
nine percent, and improved from 18.1 percent of net sales in 2010, to 19.2 percent in 2011.
Other
Interest expense increased $3.9 million during the third quarter and $2.5 million for the first
nine months of 2011, compared to 2010, due to higher average debt outstanding. Debt repayments
made during fiscal 2010 totaled $625.0 million, most of which were made in the third quarter, and
were offset by the issuance of $400.0 million in Senior Notes on June 15, 2010.
Income taxes increased $2.1 million in the third quarter of 2011, compared to 2010. The effective
tax rate was 32.6 percent in the third quarter of 2011 and 31.3 percent in the third quarter of
2010. The increase in the third quarter effective tax rate is primarily due to reduced tax
benefits associated with the Canadian operations and changes to uncertain tax positions, partially
offset by an increased benefit related to the domestic manufacturing deduction in 2011 compared to
2010.
Income taxes decreased $7.2 million during the first nine months of 2011, compared to the same
period in 2010. The effective tax rate for the first nine months of 2011 was 32.2 percent,
compared to 33.7 percent for the same period in 2010, reflecting the higher domestic manufacturing
deduction for 2011 compared to the prior year.
Restructuring
In calendar 2010, the Company announced its plan to restructure certain coffee, fruit spreads, and
its Canadian pickle and condiments operations as part of its ongoing efforts to enhance the
long-term strength and profitability of its leading brands. The initiative is a long-term
investment to optimize production capacity and lower the overall cost structure. It includes
estimated capital investments of approximately $220.0 million for a new state-of-the-art food
manufacturing facility in Orrville, Ohio, and consolidation of coffee production in New Orleans,
Louisiana. In addition, the Companys Canadian pickle and condiments production will be
transitioned to third-party manufacturers in the U.S.
The restructuring plan calls for the future closing of six of the Companys facilities Memphis,
Tennessee; Ste. Marie, Quebec; Sherman, Texas; Kansas City, Missouri; Dunnville, Ontario; and Delhi
Township, Ontario. Upon completion, the restructuring will result in the reduction of
approximately 850 full-time positions.
The Company expects to incur restructuring costs of approximately $235.0 million, of which $79.0
million has been incurred through January 31, 2011 including $25.3 million and $73.2 million in the
third quarter and first nine months of 2011, respectively. The restructuring is proceeding as
planned and the balance of the costs is anticipated to be incurred over the next four fiscal years
as the facilities are closed.
19
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
|
(Dollars in millions)
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail Coffee Market
|
|
$
|
554.7
|
|
|
$
|
471.5
|
|
|
|
18
|
%
|
|
$
|
1,425.5
|
|
|
$
|
1,282.8
|
|
|
|
11
|
%
|
U.S. Retail Consumer Market
(1)
|
|
|
273.5
|
|
|
|
273.8
|
|
|
|
(0
|
%)
|
|
|
825.4
|
|
|
|
854.9
|
|
|
|
(3
|
%)
|
U.S. Retail Oils and Baking Market
|
|
|
253.3
|
|
|
|
244.2
|
|
|
|
4
|
%
|
|
|
706.7
|
|
|
|
742.5
|
|
|
|
(5
|
%)
|
Special Markets
|
|
|
230.8
|
|
|
|
216.5
|
|
|
|
7
|
%
|
|
|
680.9
|
|
|
|
656.0
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail Coffee Market
|
|
$
|
158.1
|
|
|
$
|
132.6
|
|
|
|
19
|
%
|
|
$
|
419.1
|
|
|
$
|
375.6
|
|
|
|
12
|
%
|
U.S. Retail Consumer Market
|
|
|
72.2
|
|
|
|
66.2
|
|
|
|
9
|
%
|
|
|
217.9
|
|
|
|
202.8
|
|
|
|
7
|
%
|
U.S. Retail Oils and Baking Market
|
|
|
31.5
|
|
|
|
35.9
|
|
|
|
(12
|
%)
|
|
|
95.0
|
|
|
|
107.0
|
|
|
|
(11
|
%)
|
Special Markets
(2)
|
|
|
28.3
|
|
|
|
30.7
|
|
|
|
(8
|
%)
|
|
|
112.6
|
|
|
|
97.4
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail Coffee Market
|
|
|
28.5
|
%
|
|
|
28.1
|
%
|
|
|
|
|
|
|
29.4
|
%
|
|
|
29.3
|
%
|
|
|
|
|
U.S. Retail Consumer Market
|
|
|
26.4
|
%
|
|
|
24.2
|
%
|
|
|
|
|
|
|
26.4
|
%
|
|
|
23.7
|
%
|
|
|
|
|
U.S. Retail Oils and Baking Market
|
|
|
12.4
|
%
|
|
|
14.7
|
%
|
|
|
|
|
|
|
13.4
|
%
|
|
|
14.4
|
%
|
|
|
|
|
Special Markets
|
|
|
12.3
|
%
|
|
|
14.2
|
%
|
|
|
|
|
|
|
16.5
|
%
|
|
|
14.8
|
%
|
|
|
|
|
|
|
|
|
(1)
|
|
Net sales comparability for the U.S. Retail Consumer Market is impacted by the potato products divestiture in March 2010.
|
|
(2)
|
|
Segment profit for Special Markets includes impairment charges of $17.2 million for the three months and nine months ended
January 31, 2011, and $7.3 million for the three months and nine months ended January 31, 2010.
|
While the Companys four reportable segments remain the same for 2011, the calculation of
segment profit was modified in 2011 to include intangible asset amortization and impairment charges
related to segment assets, along with certain other items in each of the segments. These items
were previously considered corporate expenses and were not allocated to the segments. This change
more accurately aligns the segment financial results with the responsibilities of segment
management, most notably in the area of intangible assets. Fiscal 2010 segment profit has been
presented to be consistent with the current methodology.
U.S. Retail Coffee Market
The U.S. Retail Coffee Market segment net sales increased 18 percent in the third quarter of 2011,
compared to the third quarter of 2010. Through the third quarter, price increases totaling 13
percent were taken during 2011 to cover rising green coffee costs. The impact of these price
increases and sales mix more than offset a two percent volume decline. Favorable sales mix
includes the impact of the
Folgers Gourmet Selections
®
and
Millstone
®
K-Cups
®
offerings introduced
earlier in the fiscal year. While
K-Cups
®
added approximately four percent to U.S. Retail Coffee
Market segment net sales in the third quarter of 2011, their impact on segment volume was less than
one percent. Volume decreased three percent for the
Folgers
®
brand while
Dunkin Donuts
®
packaged
coffee volume increased eight percent in the third quarter of 2011, compared to 2010.
U.S. Retail Coffee Market segment profit increased 19 percent in the third quarter of 2011,
compared to the third quarter of 2010. Green coffee costs were significantly higher in the third
quarter of 2011, compared to the third quarter of 2010, but were offset by price increases taken
earlier in the year and favorable sales mix. Promotional spending, while up for the third quarter
of 2011 compared to 2010, was at an overall lower rate during the 2011 Fall Bake and Holiday
period. Marketing expenses decreased eight percent in the third quarter of 2011, compared to the
third quarter of 2010. As a result, segment profit margin was 28.5 percent in 2011, compared to
28.1 percent in 2010. The Company expects to recognize higher green coffee costs in the fourth
quarter and, as a result, announced a 10 percent price increase in early February for the majority
of coffee items, primarily items sold under the
Folgers
®
and
Dunkin Donuts
®
brand names.
20
For the first nine months of 2011, net sales for the U.S. Retail Coffee Market increased 11
percent, compared to the first nine months of 2010. Price increases taken during the first nine
months of the year more than offset a two percent volume decline, resulting in the net sales
increase. Driven by higher net sales, segment profit increased 12 percent for the first nine
months of 2011, compared to 2010, and segment profit margin was relatively flat at 29.4 percent in
2011, compared to 29.3 percent in 2010.
U.S. Retail Consumer Market
The U.S. Retail Consumer Market segment net sales increased five percent while volume increased
seven percent, excluding the effect of potato products divested in the fourth quarter of 2010. Net
sales include the impact of a peanut butter price reduction of five percent taken earlier in the
fiscal year. Volume gains were realized in
Jif
®
peanut butter,
Smuckers
®
fruit spreads, and
Hungry Jack
®
pancake mixes and syrup. Reported segment net sales were flat and volume increased
three percent, respectively, for the third quarter of 2011, compared to the third quarter of 2010,
reflecting the divested potato products.
The U.S. Retail Consumer Market segment profit increased nine percent for the third quarter of
2011, compared to the third quarter in 2010, due to a decrease in supply chain and certain raw
material costs, primarily peanuts. These more than offset a five percent increase in segment
marketing expense during the third quarter of 2011. Segment profit margin for the quarter improved
significantly from 24.2 percent in the third quarter of 2010, to 26.4 percent in 2011.
Net sales for the U.S. Retail Consumer Market increased one percent in the first nine months of
2011, compared to 2010, and volume increased three percent over the same period, excluding potato
products. On a reported basis, net sales and volume decreased three and one percent, respectively.
Segment profit increased seven percent for the first nine months of 2011, compared to 2010, and
segment profit margin improved from 23.7 percent to 26.4 percent, primarily due to a decrease in
supply chain costs.
U.S. Retail Oils and Baking Market
Net sales and volume in the U.S. Retail Oils and Baking Market segment increased four percent and
three percent, respectively, for the third quarter of 2011, compared to 2010. Net sales for the
Crisco
®
brand increased 14 percent, on volume gains of 27 percent in the third quarter of 2011,
compared to 2010, reflecting the impact of the price decline taken earlier in the fiscal year.
While net sales were flat reflecting favorable sales mix and price increases,
Pillsbury
®
baking
volume declined nine percent resulting from a combination of planned reductions in lower-margin
products, and a continuing competitive and promotional environment. Volume also declined in
branded canned milk in the third quarter of 2011, compared to 2010.
The U.S. Retail Oils and Baking Market segment profit decreased 12 percent for the third quarter of
2011, compared to the third quarter of 2010, reflecting the pricing actions taken in response to
competitive dynamics. Also, higher costs were realized for milk, sugar, and soybean oil. Segment
profit margin decreased from 14.7 percent in the third quarter of 2010, to 12.4 percent in 2011.
U.S. Retail Oils and Baking Market segment net sales and volume decreased five percent and six
percent in the first nine months of 2011, compared to 2010. Segment profit decreased 11 percent
for the first nine months of 2011, compared to 2010, and segment profit margin declined from 14.4
percent to 13.4 percent for the same period due to pricing declines taken in response to
competitive dynamics combined with higher raw material costs.
The results of the U.S. Retail Oils and Baking Market segment have been impacted by a highly
competitive and promotional environment over the last several quarters. As of January 31, 2011,
approximately 13 percent of the Companys total goodwill and intangible assets are included in the
U.S. Retail Oils and Baking Market segment. Due to the increased risk of impairment resulting from
the competitive environment, the Company performed an assessment during the third quarter of 2011,
which indicated that the estimated fair value of goodwill and other indefinite-lived intangible
assets of the U.S. Retail Oils and Baking Market segment
21
supported their carrying values. Should competitive pressure in these categories be sustained,
long-term assumptions relative to growth rates and profitability of the segment or certain brands
within it may not be attained which could result in an impairment of goodwill or other
indefinite-lived intangible assets of the segment. The Company will update this assessment during
its annual evaluation of goodwill and other indefinite-lived intangible assets in the fourth
quarter of 2011.
Special Markets
Net sales in the Special Markets segment increased seven percent in the third quarter of 2011,
compared to 2010. Excluding foreign exchange, net sales increased four percent over the same time
period. Volume increased seven percent in the third quarter of 2011, compared to 2010, driven by
gains in the natural foods, pickles, baking, and coffee categories. The Companys
Bicks
®
pickles
brand experienced above normal volume growth due to the temporary withdrawal of several competing
products that is not expected to be sustained.
Special Markets segment profit decreased eight percent and profit margin declined to 12.3 percent
from 14.2 percent for the third quarter of 2011, compared to 2010. Impairment charges of $17.2
million related to
Europes Best
®
intangible assets in Canada were recorded in the third quarter
of 2011, compared to $7.3 million in the third quarter of 2010. The incremental charge of $9.9
million reduced segment profit margin by 4.2 percentage points.
Net sales and volume in the Special Markets segment both increased four percent in the first nine
months of 2011, compared to 2010. Excluding foreign exchange, net sales increased one percent
compared to the same period last year. Special Markets segment profit increased 16 percent and
improved to 16.5 percent of net sales in the first nine months of 2011, from 14.8 percent of net
sales in the first nine months of 2010. Segment profit benefited from lower flour and supply chain
costs in Canada, and favorable sales mix which more than offset the impact of impairment charges.
Financial Condition Liquidity and Capital Resources
Liquidity
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in millions)
|
|
Net cash provided by operating activities
|
|
$
|
394.4
|
|
|
$
|
511.6
|
|
Net cash used for investing activities
|
|
|
(144.8
|
)
|
|
|
(100.0
|
)
|
Net cash provided by (used for) financing activities
|
|
|
14.6
|
|
|
|
(747.0
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
394.4
|
|
|
$
|
511.6
|
|
Additions to property, plant, and equipment
|
|
|
(111.1
|
)
|
|
|
(112.7
|
)
|
|
Free cash flow
|
|
$
|
283.2
|
|
|
$
|
398.9
|
|
|
Amounts may not add due to rounding.
On an annual basis, the Companys principal source of funds is cash generated from operations,
supplemented by borrowings against the Companys revolving credit facility. Total cash and cash
equivalents at January 31, 2011, were $549.6 million compared to $283.6 million at April 30, 2010.
Cash provided by operating activities in the first nine months of 2011 was $394.4 million compared
to $511.6 million in 2010. The decrease in cash provided by operating activities in the first nine
months of 2011, compared to 2010, was primarily related to an increase in cash used for income tax
payments of $135.1 million. Approximately $80.0 million of the increase in income tax payments
represents a change in the timing
22
of the payments. Increases in trade receivable and inventory balances, primarily related to higher
commodity costs and related price increases, also contributed to the decrease in cash provided by
operating activities.
The Company expects a significant use of cash during the first half of each fiscal year, primarily
due to the buildup of inventories to support the Fall Bake and Holiday period, and the additional
increase of coffee inventory in advance of the Atlantic hurricane season. The Company expects cash
provided by operations in the second half of the fiscal year to exceed the first half of the year,
upon completion of the Companys key promotional periods.
Cash used for investing activities was $144.8 million in the first nine months of 2011, compared to
$100.0 million in the same period of 2010. The increased cash used for investing activities in
2011, compared to 2010, was primarily the purchase of $75.6 million of marketable securities in
2011. Cash used for capital expenditures was $111.1 million in the first nine months of 2011,
compared to $112.7 million in 2010. The Company expects capital expenditures to total
approximately $175.0 million for the full fiscal year, as expenditures for the coffee and fruit
spreads restructuring project accelerate.
Cash provided by financing activities during the first nine months of 2011 was approximately $14.6
million. During the first nine months of 2011 the issuance of $400.0 million in Senior Notes more
than offset quarterly dividend payments of $143.1 million and the purchase of treasury shares for
$247.3 million, including the repurchase of 3.7 million common shares available under previous
Board of Directors authorizations. During the first nine months of 2010, total cash of $747.0
million was used for financing purposes consisting primarily of $625.0 million in debt repayments
and $124.6 million in quarterly dividend payments. The increased dividend payments in 2011,
compared to 2010, resulted primarily from an increase in the quarterly dividend rate during the
period.
Capital Resources
The following table presents the Companys capital structure:
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
|
(Dollars in millions)
|
|
Current portion of long-term debt
|
|
$
|
|
|
|
$
|
10.0
|
|
Long-term debt
|
|
|
1,300.0
|
|
|
|
900.0
|
|
|
Total debt
|
|
$
|
1,300.0
|
|
|
$
|
910.0
|
|
Shareholders equity
|
|
|
5,363.3
|
|
|
|
5,326.3
|
|
|
Total capital
|
|
$
|
6,663.3
|
|
|
$
|
6,236.3
|
|
|
On January 31, 2011, the Company entered into an amended and restated credit agreement with a
group of six lenders. The credit facility, which amends and restates in its entirety the credit
agreement dated as of October 29, 2009, provides for an unsecured revolving credit line of $600.0
million and matures January 31, 2016. At January 31, 2011, the Company did not have a balance
outstanding under the revolving credit facility. The Companys $180.0 million revolving credit
facility matured on January 31, 2011.
On June 15, 2010, the Company issued $400.0 million of 4.50 percent Senior Notes with a final
maturity on June 1, 2025. The Senior Notes have a 12-year average maturity with required
prepayments starting on June 1, 2020. Proceeds from the Senior Notes issuance will be used for
general corporate purposes. On September 1, 2010, the Company repaid the $10.0 million of 7.94
percent Series C Senior Notes utilizing cash on hand.
During the third quarter of 2011, the Company completed the repurchase of 3.7 million common shares
under its November 2010 Rule 10b5-1 trading plan utilizing $240.0 million of cash on hand. In
January 2011, the Board of Directors authorized up to an additional five million common shares for
repurchase, all of which
23
remain available as of February 28, 2011. There is no guarantee as to the timing or number of
shares that may be repurchased by the Company.
Absent any material acquisitions or other significant investments, the Company believes that cash
on hand, combined with cash provided by operations and borrowings
available under its credit facility,
will be sufficient to meet cash requirements for the next twelve months, including capital
expenditures, the payment of quarterly dividends, interest on debt outstanding, and share
repurchases.
Non-GAAP Measures
The Company uses non-GAAP measures including net sales, excluding divestitures and foreign currency
exchange rate impact; gross profit, operating income, income, and income per diluted share,
excluding restructuring and merger and integration costs; and free cash flow as key measures for
purposes of evaluating performance internally. The non-GAAP 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 measures supplements other metrics
used by management to internally evaluate its businesses, and facilitate the comparison of past and
present operations. These non-GAAP measures may not be comparable to similar measures used by
other companies and may exclude certain nondiscretionary expenses and cash payments.
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk related to changes in interest rates, foreign currency
exchange rates, and commodity prices.
Interest Rate Risk. The fair value of the Companys cash and short-term investment portfolio at
January 31, 2011, approximates carrying value. Exposure to interest rate risk on the Companys
long-term debt is mitigated since it is at a fixed rate until maturity. Based on the Companys
overall interest rate exposure as of and during the three-month and nine-month periods ended
January 31, 2011, including derivative and other instruments sensitive to interest rates, a
hypothetical 10 percent movement in interest rates would not materially affect the Companys
results of operations. Interest rate risk can also be measured by estimating the net amount by
which the fair value of the Companys financial liabilities would change as a result of movements
in interest rates. Based on a hypothetical, immediate one-percentage point decrease in interest
rates at January 31, 2011, the fair value of the Companys long-term debt would increase by
approximately $55 million.
Foreign Currency Exchange Risk. The Company has operations outside the U.S. with foreign currency
denominated assets and liabilities, primarily denominated in Canadian currency. Because the
Company has foreign currency denominated assets and liabilities, financial exposure may result,
primarily from the timing of transactions and the movement of exchange rates. The foreign currency
balance sheet exposures as of January 31, 2011, are not expected to result in a significant impact
on future earnings or cash flows.
The Company utilizes foreign currency exchange forwards and options contracts to manage the price
volatility of foreign currency exchange fluctuations on future cash transactions. The contracts
generally have maturities of less than one year. The mark-to-market gains and losses on qualifying
hedges are included as a component of other comprehensive income, and reclassified to earnings in
the period the contract is executed. The ineffective portion of these contracts is immediately
recognized in earnings. Instruments currently used to manage foreign currency exchange exposures
do not meet the requirements for hedge accounting treatment and the change in value of these
instruments is immediately recognized in cost of products sold. Based on the Companys hedged
foreign currency positions as of January 31, 2011, a hypothetical 10 percent change in exchange
rates would result in a loss of fair value of approximately $4.4 million.
Revenues from customers outside the U.S. represented approximately nine and 10 percent of net sales
during the three-month and nine-month periods ended January 31, 2011, respectively. 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. Raw materials and other commodities used by the Company 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, the Company uses futures and options with maturities generally
less than one year. Certain of these instruments are designated as cash flow hedges. The
mark-to-market gains or losses on qualifying hedges are included in other comprehensive income to
the extent effective, and reclassified into cost of products sold in the period during which the
hedged transaction affects earnings. The mark-to-market gains or losses on nonqualifying,
excluded, and ineffective portions of hedges are recognized in cost of products sold immediately.
25
The following sensitivity analysis presents the Companys potential loss of fair value resulting
from a hypothetical 10 percent change in market prices.
|
|
|
|
|
|
|
|
|
|
|
January 31, 2011
|
|
|
April 30, 2010
|
|
|
|
(Dollars in millions)
|
|
Raw material commodities:
|
|
|
|
|
|
|
|
|
High
|
|
$
|
25.0
|
|
|
$
|
21.2
|
|
Low
|
|
|
3.5
|
|
|
|
2.3
|
|
Average
|
|
|
13.2
|
|
|
|
11.6
|
|
|
Fair value was determined using quoted market prices and was based on the Companys net
derivative position by commodity for the previous four quarters. The calculations are not intended
to represent actual losses in fair value that the Company expects to incur. In practice, as
markets move, the Company actively manages its risk and adjusts hedging, derivative, and purchasing
strategies as appropriate. The commodities hedged have a high inverse correlation to price changes
of the derivative commodity instrument; thus, the Company would expect that any gain or loss in the
fair value of its derivatives would generally be offset by an increase or decrease in the fair
value of the underlying exposures.
26
Certain Forward-Looking Statements
Certain statements included in this Quarterly Report contain forward-looking statements within the
meaning of federal securities laws. The forward-looking statements may include statements
concerning the Companys 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 expects, anticipates, believes, will, plans, and similar
phrases.
Federal securities laws provide a safe harbor for forward-looking statements to encourage companies
to provide prospective information. The Company is 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 the Companys control and could cause actual
results to differ materially from such statements and from the Companys historical results and
experience. These risks and uncertainties include, but are not limited to, the following:
|
|
|
volatility of commodity markets from which raw materials, particularly green coffee
beans, wheat, soybean oil, milk, and peanuts, are procured and the related impact on costs;
|
|
|
|
|
risks associated with hedging, derivative, and purchasing strategies employed by the
Company to manage commodity pricing risks, including the risk that such strategies could
result in significant losses and adversely impact the Companys liquidity;
|
|
|
|
|
crude oil price trends and their impact on transportation, energy, and packaging costs;
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|
|
|
|
the ability to successfully implement price changes;
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|
|
|
the success and cost of introducing new products and the competitive response;
|
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|
|
the success and cost of marketing and sales programs and strategies intended to promote
growth in the Companys businesses;
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|
|
general competitive activity in the market, including competitors pricing practices and
promotional spending levels;
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|
|
the successful completion of the Companys restructuring programs, and the ability to
realize anticipated savings and other potential benefits within the time frames currently
contemplated;
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|
|
the impact of food safety concerns involving either the Company or its competitors
products;
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|
|
the impact of accidents and natural disasters, including crop failures and storm damage;
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|
|
the concentration of certain of the Companys businesses with key customers and
suppliers and the ability to manage and maintain key relationships;
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|
|
the loss of significant customers or a substantial reduction in orders from such
customers or the bankruptcy of any such customer;
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|
|
changes in consumer coffee preferences, and other factors affecting the coffee business,
which represents a substantial portion of the Companys business;
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|
|
the ability of the Company to obtain any required financing;
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|
|
the timing and amount of the Companys capital expenditures, share repurchases, and
restructuring costs;
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|
|
|
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 or their
application;
|
|
|
|
|
the impact of future legal, regulatory, or market measures regarding climate change;
|
|
|
|
|
the outcome of current and future tax examinations, changes in tax laws and other tax
matters, and their related impact on the Companys tax positions;
|
|
|
|
|
foreign currency and interest rate fluctuations;
|
|
|
|
|
political or economic disruption;
|
|
|
|
|
other factors affecting share prices and capital markets generally; and
|
|
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|
|
the other factors described under Risk Factors in registration statements filed by the
Company with the Securities and Exchange Commission and in the other reports and statements
filed by the
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27
|
|
|
Company with the Securities and Exchange Commission, including its most recent Annual
Report on Form 10-K and proxy materials.
|
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 Quarterly Report. The Company
does not undertake any obligation to update or revise these forward-looking statements to reflect
new events or circumstances.
28
Item 4.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
. The Companys management, including
the Companys principal executive officers and principal financial officer, evaluated the
effectiveness of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of January
31, 2011 (the Evaluation Date). Based on that evaluation, the Companys principal executive
officers and principal financial officer have concluded that as of the Evaluation Date, the
Companys disclosure controls and procedures were effective in ensuring that information required
to be disclosed by the Company in reports that it files or submits under the Exchange Act is (1)
recorded, processed, summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and (2) accumulated and communicated to the Companys
management, including the chief executive officers and chief financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Changes in Internal Controls
. There were no changes in the Companys internal control
over financial reporting that occurred during the quarter ended January 31, 2011, that have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting.
29
PART II. OTHER INFORMATION
Item 1A.
Risk Factors.
The Companys business, operations, and financial condition are subject to various risks and
uncertainties. The risk factors described in Part I, Item 1A. Risk Factors in the Companys
Annual Report on Form 10-K for the year ended April 30, 2010, as revised below and in the Companys
Quarterly Report on Form 10-Q for the quarters ended July 31, 2010 and October 31, 2010, should be
carefully considered, together with the other information contained or incorporated by reference in
this Quarterly Report on Form 10-Q and in the Companys other filings with the Securities and
Exchange Commission in connection with evaluating the Company, its business, and the
forward-looking statements contained in this Quarterly Report. Additional risks and uncertainties
not presently known to the Company or that the Company currently deems immaterial also may affect
the Company. The occurrence of any of these known or unknown risks could have a material adverse
impact on the Companys business, financial condition, and results of operations.
The risk factor described below updates the risk factors disclosed in Part 1, Item 1A. Risk
Factors in the Companys Annual Report on Form 10-K for the year ended April 30, 2010 as revised
in the Companys Quarterly Report on Form 10-Q for the quarters ended July 31, 2010 and October 31,
2010,.
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|
|
A material impairment in the carrying value of acquired goodwill or other intangible
assets could negatively affect the Companys consolidated operating results and net worth.
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|
|
|
|
A significant portion of the Companys assets is goodwill and other intangible assets, the
majority of which are not amortized but are reviewed at least annually for impairment. If
the carrying value of these assets exceeds the current fair value, the asset is considered
impaired and is reduced to fair value resulting in a noncash charge to earnings. Events and
conditions that could result in impairment include a sustained drop in the market price of
the Companys common shares, increased competition or loss of market share, product
innovation or obsolescence, or product claims that result in a significant loss of sales or
profitability over the product life. At January 31, 2011, the carrying value of goodwill and
other intangible assets totaled approximately $5.8 billion, compared to total assets of
approximately $8.4 billion and total shareholders equity of approximately $5.4 billion.
|
|
|
|
|
The results of the U.S. Retail Oils and Baking Market segment have been impacted by a highly
competitive and promotional environment over the last several quarters. Should competitive
pressure in these categories be sustained, long-term assumptions relative to growth rates and
profitability of the segment or certain brands within it may not be attained which could
result in a material impairment. As of January 31, 2011, approximately 13 percent of the
Companys total goodwill and intangible assets are assigned to the U.S. Retail Oils and
Baking Market segment.
|
|
|
|
|
The Companys business could be harmed by strikes or work stoppages.
|
|
|
|
|
As of January 31, 2011, approximately 32 percent of the Companys employees, located at 10
facilities, are covered by union contracts. These contracts vary in term depending on
location. The Company cannot assure that it will be able to negotiate these collective
bargaining agreements on the same or more favorable terms as the current agreements, or at
all, without production interruptions caused by labor stoppages. If a strike or work
stoppage were to occur in connection with negotiations of new collective bargaining
agreements, or as a result of disputes under collective bargaining agreements with labor
unions, the Companys business, financial condition, and results of operations could be
adversely affected.
|
30
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
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(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number (or
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Value) of Shares That
|
|
|
|
Total Number
|
|
|
|
|
|
|
as Part of Publicly
|
|
|
May Yet Be Purchased
|
|
|
|
of Shares
|
|
|
Average Price
|
|
|
Announced Plans
|
|
|
Under the Plans or
|
|
Period
|
|
Purchased
|
|
|
Paid Per Share
|
|
|
or Programs
|
|
|
Programs
|
|
|
November 1, 2010 - November 30, 2010
|
|
|
610,092
|
|
|
$
|
61.67
|
|
|
|
577,462
|
|
|
|
3,166,760
|
|
December 1, 2010 - December 31, 2010
|
|
|
1,435,812
|
|
|
|
65.24
|
|
|
|
1,435,581
|
|
|
|
1,731,179
|
|
January 1, 2011 - January 31, 2011
|
|
|
1,732,135
|
|
|
|
63.58
|
|
|
|
1,731,179
|
|
|
|
5,000,000
|
|
|
Total
|
|
|
3,778,039
|
|
|
$
|
63.90
|
|
|
|
3,744,222
|
|
|
|
5,000,000
|
|
|
Information set forth in the table above represents activity in the Companys third fiscal
quarter.
|
|
|
(a)
|
|
Shares in this column include shares repurchased as part of publicly announced plans as
well as shares repurchased from stock plan recipients in lieu of cash payments.
|
|
(c)
|
|
From November 22, 2010 until January 25, 2011, the Company repurchased the 3,744,222
common shares under the Companys November 2010 Rule 10b5-1 trading plan.
|
|
(d)
|
|
On January 27, 2011, the Board of Directors authorized management to repurchase up to
five million additional common shares at its discretion with no established expiration
date. At February 28, 2011, these five million shares remain available for future
repurchase.
|
31
Item 6.
Exhibits.
See the Index of Exhibits that appears on Page No. 34 of this report.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
March 11, 2011
|
THE J. M. SMUCKER COMPANY
|
|
|
/s/ Timothy P. Smucker
|
|
|
BY TIMOTHY P. SMUCKER
|
|
|
Chairman of the Board and Co-Chief Executive Officer
|
|
|
|
|
|
|
/s/ Richard K. Smucker
|
|
|
BY RICHARD K. SMUCKER
|
|
|
Executive Chairman and Co-Chief Executive Officer
|
|
|
|
|
|
|
/s/ Mark R. Belgya
|
|
|
BY MARK R. BELGYA
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
33
INDEX OF EXHIBITS
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
10.1
|
|
Omnibus Amendment to Restricted Stock Agreements for Folgers
Employees, dated as of November 4, 2010. *
|
|
|
|
10.2
|
|
Amended and Restated Consulting and Noncompete Agreement of
Timothy P. Smucker, dated as of December 31, 2010. *
|
|
|
|
10.3
|
|
Amended and Restated Consulting and Noncompete Agreement of
Richard K. Smucker, dated as of December 31, 2010. *
|
|
|
|
10.4
|
|
The J. M. Smucker Company Defined Contribution Supplemental
Executive Retirement Plan, restated as of May 1, 2008. *
|
|
|
|
10.5
|
|
The J. M. Smucker Company Top Management Supplemental Retirement
Benefit Plan, restated as of January 1, 2009. *
|
|
|
|
10.6
|
|
The J. M. Smucker Company Voluntary Deferred Compensation Plan,
amended and restated as of January 1, 2009. *
|
|
|
|
10.7
|
|
Amended and Restated Credit Agreement, dated as of January 31,
2011, between The J. M. Smucker Company, Smucker Foods of Canada
Corp., the Lenders, the Agent, the Syndication Agent and the
Documentation Agent, incorporated herein by reference to the
Companys Current Report on Form 8-K filed on February 2, 2011
(Commission File No. 001-5111).
|
|
|
|
31.1
|
|
Certifications of Timothy P. Smucker pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
|
31.2
|
|
Certifications of Richard K. Smucker pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
|
31.3
|
|
Certifications of Mark R. Belgya pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
|
|
32
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
*
Management contract or compensatory plan or agreement.
|
34
Exhibit 10.2
Since 1897
December 31, 2010
Mr. Timothy Smucker
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Dear Tim:
The purpose of this letter agreement (Agreement), together with the identical agreement that
your brother is signing separately, is to preserve the value of your familys historical
involvement in the business and affairs of the Company in the event of your Separation from Service
and this Agreement has been entered into with you in your capacity as an officer and employee of
the Company. This Agreement evidences your commitment to maintain your public representations of
the Company for at least three years after Separation from Service, in consideration for the
compensation described below, subject to the terms and conditions set forth in this Agreement.
This Agreement is a complete amendment and restatement, effective as of January 1, 2009, of the
letter agreement between you and the Company dated May 1, 2002, as amended and restated effective
January 1, 2005, in order to more fully assure that the Agreement is in compliance with the
provisions of Internal Revenue Code Section (IRC §) 409A. Terms not defined herein will have the
definitions set forth in
Appendix I
attached hereto and incorporated herein.
1.
General
. If you Separate from Service with the Company and under any circumstances
other than those described in Section 3, so long as you comply with Section 2, you will be entitled
to receive the following compensation during the Service Period as current compensation for the
services you will be rendering during the Service Period (and not as deferred compensation for
purposes of IRC §409A).
(a)
Salary
. Your salary will continue at the rate in effect on the date of your
Separation from Service, payable at the same times and in the same amounts as if you had not
Separated from Service, but in all events within two and one-half months after the end of
the calendar year in which the right to the salary vests.
(b)
Bonus
. Each time the Company pays annual bonuses to its executives during the
Service Period, you will receive a lump sum payment equal to one-half of the annual target
award most recently approved for you by the Executive Compensation Committee under the
Companys Management Incentive Plan, payable in all events
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Telephone (330) 682-3000
Fax (330) 684-3370
www.smuckers.com
within two and one-half months after the end of the calendar year in which the right to
the bonus vests.
(c)
Options and Restricted Shares
. All stock options you hold under any equity
incentive plan of the Company will immediately vest and all restricted shares you hold under
any equity incentive plan of the Company will continue to vest during the Service Period
pursuant to the vesting schedule set forth in the agreements
governing the restricted shares.
(d)
Benefits
. You and your eligible dependents will be entitled to receive those
benefits and perquisites under all welfare benefit plans of the Company, including, without
limitation, medical insurance and life insurance, but excluding stock options, restricted
shares or other equity-based benefits, for which substantially all of the executives of the
Company are from time to time generally eligible, as determined from time to time by the
Executive Compensation Committee (the Standard Executive Benefits Package).
2.
Public Representation
. During the Service Period, you will continue to represent
the Company publicly in accordance with the wishes of the Board of Directors, and you will take
such other actions as the Board or its designee may reasonably request in order to ensure the
continued identification of your family and its values with the
Smuckers
brand. Without limiting
the generality of the foregoing, during the Service Period you will:
(a) attend the Annual Meeting,
(b) participate in employee events,
(c) appear at promotional events,
(d) authorize the exclusive use of your name, persona and likeness throughout the
Service Period, and thereafter, insofar as your name, persona or likeness is embodied in
publicity, advertising or other marketing materials used by the Company at any time before
the end of the Service Period,
(e) participate in high-level meetings with customers and prospective customers of the
Company, and
(f) represent the Company to its other constituents and the communities in which the
Company operates, as appropriate.
3.
Other Distributable Events
. The time and form of your benefits under this
Agreement will be based on the earliest to occur of your Disability, death or Separation from
Service (each a Distributable Event), as set forth in Section 1 and this Section 3. (For this
purpose, if death or Disability causes a Separation from Service, the death or Disability will be
considered to occur earlier than the Separation from Service.) If such earliest event is your
Disability, death, or Separation from Service which is either a Retirement (as described in Section
3(c)), an Involuntary Separation from Service (as described in Section 3(d)), a Separation from
Service for Good Reason (as described in Section 3(e)), or a Separation from
2
Service for Cause (as described in Section 3(f)), your compensation hereunder, if any, will be
governed by this Section 3.
(a)
Disability
. If Disability is the earliest Distributable Event, (i) you will be
entitled to receive the benefits you would have received during the Service Period as
described in Sections 1(a), (b) and (d) for a period of three years beginning six months
after the date on which you become Disabled, (ii) all stock options and restricted shares
granted to you under any equity incentive plan of the Company will immediately vest, (iii)
you will commence receiving your Monthly Retirement Benefit (as defined in the Companys Top
Management Supplemental Retirement Benefit Plan (January 1, 2005 Restatement, as amended)
(the SERP)) under the SERP as of the third anniversary of your Disability, and the Monthly
Retirement Benefit will be calculated without regard to the early retirement reduction
factors described in Section 2.2 of the SERP, regardless of whether you have reached your
Normal Retirement Date (as defined in the SERP), (iv) you will be entitled to receive within
two and one-half months, any salary which has accrued but is unpaid and any reimbursable
expenses which have been incurred but are unpaid, and (v) you will be entitled to any option
rights, restricted stock or other equity awards or plan benefits which by their terms extend
beyond your Disability or termination (but only to the extent provided in any option
previously granted to you or any other benefit plan in which you participated as an employee
of the Company).
(b)
Death
. If death is the earliest Distributable Event, your beneficiaries, your
dependents or your estate, as the case may be, will be entitled to receive the benefits
described in Sections 3(a)(i) through 3(a)(v), except that the payments in Sections 3(a)(i)
and (ii) will begin within 90 days of the date of your death and the payments in Section
3(a)(iii) will commence on the third anniversary of the date of your death and the death
benefit payable with respect to your Monthly Retirement Benefit will be calculated without
regard to the early retirement reduction factors described in Section 2.2 of the SERP,
regardless of whether you have reached your Normal Retirement Date (as defined in the SERP).
(c)
Retirement
. If Separation from Service is the earliest Distributable Event and is
a voluntary Separation from Service other than for Good Reason after attainment of age
fifty-five (55) and ten (10) years of service (as determined under the SERP (Retirement),
(i) the Company will pay you, within two and one-half months, any salary which has accrued
but is unpaid and will reimburse you for any reimbursable expenses which have been incurred
but are unpaid, (ii) you will be entitled to any option rights, restricted stock or other
equity awards or plan benefits which by their terms extend beyond termination of employment
(but only to the extent provided in any option granted to you or any other benefit plan in
which you participated as an employee of the Company), (iii) you will be entitled to receive
any benefits to which you are entitled pursuant to the requirements of Part 6 of Subtitle B
of Title I of the Employee Retirement Income Security Act of 1974, as amended, and (iv) you
will commence receiving your Monthly Retirement Benefit under the SERP as of the third
anniversary of your Separation from Service, and the Monthly Retirement Benefit will be
calculated without regard to the early retirement reduction factors described in Section 2.2
of the SERP, regardless of whether you have reached your Normal Retirement Date (as defined
in the
3
SERP). In addition, you will provide the services described in Section 2 for the
Service Period, and receive as current compensation therefor (and not as deferred
compensation for purposes of IRC §409A) the benefits described in Sections 1(a), (b) and
(d). Moreover, in the event of your death or Disability after Retirement, then the benefits
described in Section 1(a), 1(b) and 1(d) shall continue for the remainder of the Service
Period, subject to the other terms hereof.
(d)
Involuntary Separation from Service
. If Separation from Service is the earliest
Distributable Event and is an Involuntary Separation from Service other than for Cause (and
excluding your Separation from Service for Good Reason) (Involuntary Separation from
Service), you will be entitled to receive the benefits described in Sections 3(a)(i)
through 3(a)(v) beginning six months after the date of your Separation from Service, except
that the payments in Section 3(a)(iii) will commence on the third anniversary of the date of
your Involuntary Separation from Service.
Notwithstanding the foregoing, in no event will you be deemed to have been terminated for
Cause unless prior to your termination the Company has delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of the directors
then in office at a meeting of the Board called and held for such purpose, after reasonable
notice to you and an opportunity for you, together with your counsel (if you choose to have
counsel present at such meeting), to be heard before the Board, finding that, in the good
faith opinion of the Board, you committed an act constituting Cause and specifying the
particulars of such act in detail. While such a determination will be a condition precedent
for the existence of Cause for purposes of this Agreement, such a determination will not
be determinative or create a presumption that Cause in fact exists, and nothing in this
Agreement will limit your right or the right of your beneficiaries to contest the validity
or propriety of any such determination.
(e)
Separation from Service for Good Reason
. If Separation from Service is the
earliest Distributable Event and is a Separation from Service for Good Reason by means of
advance written notice to the Company at least 90 days prior to the effective date of such
termination identifying such termination as a termination for Good Reason and identifying
the Good Reason and the Company fails to remedy the condition constituting the Good Reason
within 30 days of the receipt of such notice, you will be entitled to receive the benefits
described in Sections 3(a)(i) through 3(a)(v) beginning six months after the date of your
Separation from Service, except that the payments in Section 3(a)(iii) will commence on the
third anniversary of the date of your Separation from Service for Good Reason.
(f)
Termination by the Company for Cause
. If Separation from Service is the earliest
Distributable Event and occurs because the Company terminates your employment for Cause, you
will receive no payments or benefits under this Agreement, and you will be entitled only to
receive those payments and benefits to which you would otherwise be entitled under the other
plans of the Company as described in Sections 3(c)(i) through 3(c)(iii). Additionally, you
will commence receiving your Monthly Retirement Benefit under the SERP as of the third
anniversary of your Separation from Service.
4
(g)
Interest on Unpaid Amounts
. If the Company fails to make any payment or provide
any benefit required to be made or provided under this Agreement on a timely basis, the
Company will pay interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite prime rate as quoted from time to time during the
relevant period in the Midwest Edition of
The Wall Street Journal
. This interest will be
payable as it accrues. Any change in the prime rate will be effective on and as of the date
of such change.
(h)
No Mitigation
. You will not be required to mitigate the amount of any payment or
benefit provided for in this Agreement by seeking other employment or otherwise. It is
expressly understood that Companys payment obligations under this Agreement will cease in
the event you breach any of your obligations under Sections 4 or 5.
4.
Confidentiality
. You acknowledge that the information, observations and data
obtained by you while employed by the Company and during the continuance of the Service Period
pursuant to this Agreement, as well as those obtained by you while employed by the Company or any
of its subsidiaries or affiliates or any predecessor prior to the date of this Agreement,
concerning the business or affairs of the Company or any of its subsidiaries or affiliates or any
predecessor (unless and except to the extent the foregoing become generally known to and available
for use by the public other than as a result of your acts or omissions to act, Confidential
Information) are the property of the Company or such subsidiary or affiliate. Therefore, you
agree that, during your employment with the Company and after your Separation from Service, you
will not disclose any Confidential Information without the prior written consent of the Board
unless and except to the extent that such disclosure is (a) made in the ordinary course of your
performance of your duties under this Agreement or (b) required by any subpoena or other legal
process (in which event you will give the Company prompt notice of such subpoena or other legal
process in order to permit the Company to seek appropriate protective orders), and that you will
not use any Confidential Information for your own account or any other person or entitys benefit
without the prior written consent of the Board. You will deliver to the Company at the termination
of the later of (i) your Separation from Service or (ii) the Service Period, or at any other time
the Company may reasonably request, all memoranda, notes, plans, records, reports, computer tapes
and software and other documents and data (and copies thereof) relating to the Confidential
Information, or to the work product or the business of the Company or any of its subsidiaries or
affiliates which you may then possess or have under your control. Nothing in this Section 4 will
be deemed to limit or otherwise affect your confidentiality or other similar covenant or
obligations imposed on you under any agreement with, or plan or arrangement of, the Company.
5.
Noncompetition, Nonsolicitation
.
(a) You acknowledge that, in the course of your employment with the Company and during
the continuance of the Service Period: (i) you will become familiar, and during the course
of your employment by the Company or any of its subsidiaries or affiliates or any
predecessor prior to the date of this Agreement, you have become familiar, with trade
secrets and customer lists of and proprietary information regarding the business of the
Company and its subsidiaries and affiliates and predecessors; (ii) such
5
trade secrets and customer lists of and proprietary information regarding the business
of the Company and its subsidiaries and affiliates and predecessors are confidential and the
exclusive property of the Company; and (iii) your services have been and will be of special,
unique and extraordinary value to the Company. You agree that you will not disclose,
divulge, discuss, copy or otherwise use or cause to be used in any manner in competition
with, or contrary to the interests of, the Company, the trade secrets and customer lists of
and proprietary information regarding the business of the Company and its subsidiaries and
affiliates and predecessors.
(b) You agree that, during your employment with the Company and until the later of: (i)
three years after your Separation from Service with the Company or (ii) three years after
termination of the Service Period, you will not in any manner, directly or indirectly,
through any person, firm or corporation, alone or as a member of a partnership or as an
officer, director, shareholder, investor or employee of or in any other corporation or
enterprise or otherwise, engage or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business then actively being
conducted by the Company or any of its subsidiaries or affiliates or any business similar to
the businesses then conducted or contemplated to be conducted by the Company or any of its
subsidiaries or affiliates.
(c) You further agree that, during your employment with the Company and until the later
of (i) three years after your Separation from Service with the Company or (ii) three years
after termination of the Service Period, you will not in any manner, directly or indirectly,
induce or attempt to induce any employee of the Company or of any of its subsidiaries or
affiliates to quit or abandon his or her employ.
(d) Nothing in this Section 5 will prohibit you from being: (i) a shareholder in a
mutual fund or a diversified investment company or (ii) a passive owner of not more than 5%
of the outstanding equity securities of any class of a corporation or other entity which is
publicly traded, so long as you have no active participation in the business of such
corporation or other entity.
(e) In the event you violate any legally enforceable provision of this Agreement as to
which there is a specific time period during which you are prohibited from taking certain
actions or from engaging in certain activities, as set forth in this Agreement, then, in
such event, the violation shall toll the running of such time period from the date of such
violation until the violation ceases.
(f) You acknowledge that you have carefully considered the nature and extent of the
restrictions on you and the rights and remedies conferred on the Company under this
Agreement. You further acknowledge and agree that the same are reasonable in time and
territory, are designed to eliminate competition which would otherwise be unfair to the
Company, do not stifle your inherent skill and experience, would not operate as a bar to
your sole means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to your detriment.
6
(g) If, at the time of enforcement of this Section 5, a court holds that the
restrictions stated in this Section 5 are unreasonable under circumstances then existing,
you and the Company agree that the maximum period, scope or geographical area reasonable
under such circumstances will be substituted for the stated period, scope or area and that
the court will be allowed to revise the restrictions contained in this Section 5 to cover
the maximum period, scope and area permitted by law.
(h) Nothing in this Section 5 will be deemed to limit or otherwise affect any
noncompetition or nonsolicitation or other similar covenant or obligations imposed on you
under any other agreement with, or plan or arrangement of, the Company.
6.
Enforcement
. Because your services are unique and because you have access to
Confidential Information and work project, you agree that the Company would be damaged irreparably
in the event any of the provisions of Section 4 or 5 were not performed in accordance with their
specific terms or were otherwise breached and that money damages would be an inadequate remedy for
any such non-performance or breach. Therefore, the Company or its successors or assigns will be
entitled, in addition to other rights and remedies existing in their favor, to an injunction or
injunctions to prevent any non-performance, breach or threatened breach of any of such provisions
and to enforce such provisions specifically (without posting a bond or other security).
7.
Representations
. You represent and warrant to the Company that (a) the execution,
delivery and performance of this Agreement by you does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order, judgment or decree to
which you are a party or by which you are bound, (b) you are not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement any other person or entity
and (c) upon the execution and delivery of this Agreement by the Company, this Agreement will be
the valid and binding obligation of you, enforceable in accordance with its terms.
8.
Survival
. Subject to any limits on applicability, Sections 4 and 5 will survive
and continue in full force in accordance with their terms, notwithstanding any Separation from
Service with the Company or the termination of the Service Period.
9.
Notices
. Any notice provided for in this Agreement must be in writing and must be
either personally delivered, sent by reputable overnight carrier or mailed by first class mail,
return receipt requested. Any notice to you will be delivered to the last home address on file
with the Company, and any notice to the Company should be delivered to:
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Attention: General Counsel
or such other address or to the attention of such other person as the recipient party has specified
by prior written notice to the sending party. Any notice under this Agreement will be deemed to
have been given when so delivered, sent or mailed.
7
10.
Severability
. Whenever possible, each provision of this Agreement will be
interpreted in a manner as to be effective and valid under applicable law, but, if any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been
contained in this Agreement.
11.
Complete Agreement
. This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter in this Agreement and
effective as of its date supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may have related to the subject
matter in this Agreement in any way.
12.
Counterparts
. This Agreement may be executed in separate counterparts, each of
which will be deemed to be an original and both of which taken together will constitute one and the
same agreement.
13.
Successors and Assigns
. This Agreement will bind and inure to the benefit of and
be enforceable by you, the Company and your or its respective heirs, executors, personal
representatives, successors and assigns, except that neither you nor the Company may assign any of
your or its rights or delegate any of your or its obligations under this Agreement without the
prior written consent of the other party. You consent to the assignment by the Company of all of
its rights and obligations in this Agreement to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Companys assets, provided such
transferee or successor assumes the liabilities of the Company in this Agreement.
14.
Choice of Law
. This Agreement will be governed by the internal law, and not the
laws of conflicts, of the State of Ohio.
15.
Amendment and Waiver
. This Agreement may be amended only with the prior written
consent of the parties, and no course of conduct or failure or delay in enforcing the provisions of
this Agreement will affect the validity, binding effect or enforceability of this Agreement.
16.
Prohibition on Participation
. If under any provision of this Agreement you and
your dependents become entitled to receive the benefits provided under the Standard Executive
Benefits Package and you are not eligible to participate in any of the plans or programs set forth
in the Standard Executive Benefits Package, the Company will reimburse you, on a monthly basis, for
any premiums or other fees paid by you to obtain benefits (for you and your dependents) equivalent
to the Standard Executive Benefits Package.
17.
Right to Terminate Agreement Upon a Change in Control
. Notwithstanding any
provision in this Agreement to the contrary, in the event of a Change in Control (as defined from
time to time in the Companys 1998 Equity and Performance Incentive Plan, or any successor to that
plan), you will have the right to terminate this Agreement upon 30 days written notice to the
8
Company, and upon the Companys receipt of such notice this Agreement will immediately become
null and void and have no further force or effect.
18.
Claims and Administration
. The Claims and Administration procedures set out in
Appendix II
attached hereto are incorporated herein by reference.
19.
No Distributions in Excess of IRC §162(m)
. Notwithstanding the above provisions,
no amount may be distributed pursuant to this Agreement if such amount would not be deductible to
the Company under IRC §162(m), as determined by the Board of Directors in its sole discretion, and
in accordance with IRC §409A and the Treasury regulations promulgated thereunder.
20.
No Distributions in Violation of Securities Laws
. Notwithstanding the above
provisions, a payment under the Plan may be delayed if the Company reasonably anticipates that the
making of such payment will violate Federal securities laws or other applicable law, in the
Companys sole discretion, provided that the payment is made on the earliest at which the Company
reasonably anticipates that the making of the payment will not cause such violation.
21.
Six-Month Delay
.
Notwithstanding anything to the contrary in the foregoing, but
to the extent not specified previously above, if an amount hereunder is subject to, and not exempt
from, IRC §409A and you are a Specified Employee on the date of your Separation from Service, you
shall not receive a distribution due to Separation from Service before the date which is the later
of (i) eighteen (18) months following December 31, 2010 or (ii) six (6) months after the date of
your Separation from Service, or, if earlier, your death after Separation from Service. In the
event a distribution must be deferred, the first payment shall include an amount equal to the sum
of the payments which would have been paid to you but for the payment deferral mandated pursuant to
IRC §409A(a)(2)(B)(i) on the first day of the month following the mandated deferral period, and
shall include interest on such amount calculated in the same manner as under Section 3(g) above.
In no event will the mandatory deferral period extend beyond a death after Separation from Service.
22.
Reimbursements and In-Kind Benefits
. Any reimbursement of expenses or in-kind
benefits provided under this Agreement subject to, and not exempt from, IRC §409A shall be subject
to the following additional rules: (a) any reimbursement of eligible expenses shall be paid as
they are incurred (but not prior to the end of the six-month delay period set forth above if
applicable) and shall always be paid on or before the last day of your tax year following the tax
year in which the expenses were incurred; provided that you first provide documentation of such
expenses in reasonable detail not later than sixty (60) days following the end of the calendar year
in which the eligible expenses were incurred; (b) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during any calendar year shall not affect the amount
of expenses eligible for reimbursement, or in-kind benefits to be provided, during any other
calendar year; and (c) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit.
23.
IRC §409A
. To the extent applicable, it is intended that this Agreement and any
deferrals of compensation made hereunder comply with the provisions of IRC §409A. This Plan and
any deferrals or compensation made hereunder shall be administrated in a manner consistent
9
with this intent, and any provisions that would cause this Agreement or any benefit hereunder
to fail to satisfy IRC §409A shall have no force and effect until amended to comply with IRC §409A
(which amendment may be retroactive to the extent permitted by IRC §409A). Any reference in this
Agreement to IRC §409A will also include any proposed, temporary or final regulations, or any other
guidance, promulgated with respect to IRC §409A by the U.S. Department of the Treasury or the
Internal Revenue Service. In no event, however, shall this section or any other provisions of this
Agreement be construed to require the Company to provide any gross-up for the tax consequences of
any provisions of, or payments under, this Agreement and the Company shall have no responsibility
for tax or legal consequences to you (or your beneficiary) resulting from the terms or operation of
this Plan.
If you agree to the terms set forth above, please sign and date a copy of this Agreement below
and return it to the undersigned.
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Very truly yours,
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THE J.M. SMUCKER COMPANY
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By:
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/s/ Mark R. Belgya
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Name: Mark R. Belgya
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Title: Senior Vice President and Chief Financial Officer
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Accepted and agreed to:
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/s/ Timothy Smucker
Timothy Smucker
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Date
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: December 31, 2010
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10
Appendix I
The following definitions will apply for purposes of the Agreement:
Board of Directors or Board means the Board of Directors of the Company.
Cause means:
(i) your willful and continued failure to perform your duties;
(ii) gross negligence or willful misconduct by you with respect to the Company
or any of its subsidiaries or affiliates;
(iii) your breach of any of the agreements in Section 4 or 5 prior to the end
of your employment with the Company; or
(iv) your conviction of a felony or a crime involving moral turpitude.
Company means The J.M. Smucker Company.
Disabled or Disability means the first to occur of the following conditions:
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(a)
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You are unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in
death or can be expect to last for a continuous period of not less than 12 months, or
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(b)
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You are, by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a period
of not less than 3 months under any plan covering employees of the Company, or
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(c)
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You have been determined to be totally disabled by the Social Security
Administration.
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Good Reason means:
(v) any material diminution by the Board in your salary;
(vi) the relocation of the Companys principal executive offices or the
requirement by the Company that you change your principal place of employment to any
location that is in excess of 35 miles from your principal place of employment on
the date of this Agreement; or
(vii) any breach by the Company of this Agreement that is material and that is
not cured within 30 days after written notice to the Company from you.
11
Separation from Service or Separate(d) from Service means a separation from service as
defined in IRC §409A, which IRC §409A is incorporated herein by reference, and includes, without
limitation, your separation from service with the Company, and related companies, if you die,
retire or otherwise have a termination of employment with the Company. However, for purposes of
this paragraph, the employment relationship is treated as continuing intact while you are on
military leave, sick leave, or other bona fide leave of absence if the period of such leave does
not exceed six months, or if longer, so long as you retain a right to reemployment with the Company
under an applicable statute or by contract. Notwithstanding the foregoing, where a leave of absence
is due to any medically determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less than six months, where such
impairment causes you to be unable to perform the duties of your position of employment or any
substantially similar position of employment, a 29-month period of absence may be substituted for
such six-month period.
Service Period means the three-year period beginning on the date of your Separation from
Service (or, if earlier, your death or Disability) and ending on its third anniversary date.
Specified Employee refers to an individual defined in IRC §416(i) without regard to
paragraph (5) of that Section, as of the date of the individuals Separation from Service
determined as provided in Treasury Regulation §1.409A-1(i).
12
Appendix II
(a)
Plan Administrative Committee
. The Executive Compensation Committee of the Board
of Directors, or its designee, will be the Plan Administrator under this Agreement.
(b)
Definitions
. The following definitions apply for purposes of these Claims
Procedures:
(i) Adverse Benefit Determination is any of the following: a denial,
reduction or termination of, or a failure to provide or make payment (in whole or in
part) for a benefit.
(ii) Claimant is you or your beneficiary who files a claim under this
Agreement.
(c)
Filing Claims
. A Claimant must file a written claim for benefits under the
Agreement with the Plan Administrator in accordance with the terms of the applicable Plan
and federal law. The written claim will be made on such form(s) as may be prescribed from
time to time by the Plan Administrator and will include such information as requested on the
claims form.
(d)
Claim Notifications.
(i) Time for Providing Notification. The Plan Administrator will furnish
notice of its benefit determinations under the Agreement in accordance with the
following provisions. For purposes of determining the time periods specified below,
the period of time within which a benefit determination is required to be made will
begin at the time the claim is filed in accordance with the Agreements procedures,
without regard to whether all the information necessary to make a benefit
determination accompanies the filing. In the event a period of time to provide
notification is extended due to a Claimants failure to submit information necessary
to decide a claim, the period for making the benefit determination will be tolled
from the date on which the notification of the extension is sent to the Claimant
until the date on which the Claimant responds to the request for additional
information. A Claimant may also voluntarily agree to provide the Plan
Administrator additional time within which to make a decision on a claim beyond the
time limits specified below.
The Plan Administrator will notify the Claimant of its benefit determination within
a reasonable period of time, but not later than 90 days after receipt of the claim.
This period may be extended one time by the Plan Administrator for up to 90 days if
the Plan Administrator determines that the extension is necessary due to special
circumstances and notifies the Claimant, prior to the expiration of the initial
90-day period, of the circumstances requiring the extension of time and the date by
which the Plan Administrator expects to render a decision. This date will be not
later than 180 days after receipt of the claim.
13
(ii) Manner and Content of Notification of Benefit Determination. The Plan
Administrator will provide a Claimant with written or electronic notification of any
Adverse Benefit Determination. The notification will include the following:
(A) The specific reason(s) for the Adverse Benefit Determination;
(B) Reference to the specific Agreement provisions on which the
determination is based;
(C) A description of any additional material or information necessary
for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(D) A description of the Agreements review procedures in accordance
with the terms of this Agreement and the time limits applicable to such
procedures (including the address to which appeals should be mailed),
including a statement of the Claimants right to bring a civil action
following an Adverse Benefit Determination on review.
(e)
Appeal of Adverse Benefit Determination.
(i) Review Procedures. If a Claimant is notified of an Adverse Benefit
Determination, the Claimant or his authorized representative may make a written
request for review of the determination by submitting such request to the Plan
Administrator within 60 days after notification of the Adverse Benefit
Determination.
A Claimants written request for review will be forwarded by the Plan Administrator
to the Board of Directors of the Company (other than you and other than the members
of the Executive Compensation Committee of the Company) for a full and fair review.
No individual will review a claim who reviewed the Claimants initial claim for
benefits, or who is a subordinate of such individual. The Claimant will be provided
the opportunity to submit written comments, documents, records and other information
relating to the claim for benefits. The Claimant will also be provided, upon
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the Claimants claim for benefits. The
Board of Directors will conduct its review without deference to the initial benefit
determination and taking into account all comments, documents, records and other
information submitted by the Claimant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination.
(ii) Timing of Notification of Benefit Determination on Review. The Plan
Administrator, or its delegatee, will notify a Claimant of the Plans benefit
determination on review as follows: For purposes of determining the time periods
14
specified below, the period of time within which a benefit determination on
review is required to be made will begin at the time an appeal is filed in
accordance with the Agreements procedures, without regard to whether all the
information necessary to make a benefit determination on review accompanies the
filing.
The Plan Administrator will notify the Claimant of the Plans benefit determination on
review within a reasonable period of time, but not later than 60 days after receipt by the
Plan Administrator of the Claimants request for review of an Adverse Benefit Determination
or within 120 days if special circumstances require more time and the Plan Administrator, or
its delegatee, informs the Claimant within the initial 60 day period of the reason for the
delay and the date the Claimant can expect to receive notification of benefit determination
on review.
(f)
Authorized Representative
. A Claimant is permitted to designate an authorized
representative to act on behalf of a Claimant with respect to a benefit claim or appeal of
an Adverse Benefit Determination. Designation of an authorized representative must be made
in writing on such form as the Plan Administrator will provide from time to time and must be
signed by the Claimant. If a Claimant designates an authorized representative to act on his
behalf as provided above, the Plan Administrator will direct all information and
notifications to which the Claimant is otherwise entitled to the authorized representative
with respect to the aspect of the claim for which the representative is designated (for
example, initial determination, request for documents, appeal, etc.), unless the Claimant
directs otherwise.
(g)
Record Retention
. The Plan Administrator will maintain records and other relevant
documents adequate to demonstrate compliance with the Agreements Claims Procedures and
processes and to verify appropriately consistent decision-making with respect to initial
benefit determinations and review of Adverse Benefit Determinations.
15
Exhibit 10.3
Since 1897
December 31, 2010
Mr. Richard K. Smucker
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Dear Richard:
The purpose of this letter agreement (Agreement), together with the identical agreement that
your brother is signing separately, is to preserve the value of your familys historical
involvement in the business and affairs of the Company in the event of your Separation from Service
and this Agreement has been entered into with you in your capacity as an officer and employee of
the Company. This Agreement evidences your commitment to maintain your public representations of
the Company for at least three years after Separation from Service, in consideration for the
compensation described below, subject to the terms and conditions set forth in this Agreement.
This Agreement is a complete amendment and restatement, effective as of January 1, 2009, of the
letter agreement between you and the Company dated May 1, 2002, as amended and restated effective
January 1, 2005, in order to more fully assure that the Agreement is in compliance with the
provisions of Internal Revenue Code Section (IRC §) 409A. Terms not defined herein will have the
definitions set forth in
Appendix I
attached hereto and incorporated herein.
1.
General
. If you Separate from Service with the Company and under any circumstances
other than those described in Section 3, so long as you comply with Section 2, you will be entitled
to receive the following compensation during the Service Period as current compensation for the
services you will be rendering during the Service Period (and not as deferred compensation for
purposes of IRC §409A).
(a)
Salary
. Your salary will continue at the rate in effect on the date of your
Separation from Service, payable at the same times and in the same amounts as if you had not
Separated from Service, but in all events within two and one-half months after the end of
the calendar year in which the right to the salary vests.
(b)
Bonus
. Each time the Company pays annual bonuses to its executives during the
Service Period, you will receive a lump sum payment equal to one-half of the annual target
award most recently approved for you by the Executive Compensation Committee under the
Companys Management Incentive Plan, payable in all events
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Telephone (330) 682-3000
Fax (330) 684-3370
www.smuckers.com
within two and one-half months after the end of the calendar year in which the right to
the bonus vests.
(c)
Options and Restricted Shares
. All stock options you hold under any equity
incentive plan of the Company will immediately vest and all restricted shares you hold under
any equity incentive plan of the Company will continue to vest during the Service Period
pursuant to the vesting schedule set forth in the agreements
governing the restricted shares.
(d)
Benefits
. You and your eligible dependents will be entitled to receive those
benefits and perquisites under all welfare benefit plans of the Company, including, without
limitation, medical insurance and life insurance, but excluding stock
options, restricted shares or other equity-based benefits, for which substantially all of the executives of the
Company are from time to time generally eligible, as determined from time to time by the
Executive Compensation Committee (the Standard Executive Benefits Package).
2.
Public Representation
. During the Service Period, you will continue to represent
the Company publicly in accordance with the wishes of the Board of Directors, and you will take
such other actions as the Board or its designee may reasonably request in order to ensure the
continued identification of your family and its values with the
Smuckers
brand. Without limiting
the generality of the foregoing, during the Service Period you will:
(a) attend the Annual Meeting,
(b) participate in employee events,
(c) appear at promotional events,
(d) authorize the exclusive use of your name, persona and likeness throughout the
Service Period, and thereafter, insofar as your name, persona or likeness is embodied in
publicity, advertising or other marketing materials used by the Company at any time before
the end of the Service Period,
(e) participate in high-level meetings with customers and prospective customers of the
Company, and
(f) represent the Company to its other constituents and the communities in which the
Company operates, as appropriate.
3.
Other Distributable Events
. The time and form of your benefits under this
Agreement will be based on the earliest to occur of your Disability, death or Separation from
Service (each a Distributable Event), as set forth in Section 1 and this Section 3. (For this
purpose, if death or Disability causes a Separation from Service, the death or Disability will be
considered to occur earlier than the Separation from Service.) If such earliest event is your
Disability, death, or Separation from Service which is either a Retirement (as described in Section
3(c)), an Involuntary Separation from Service (as described in Section 3(d)), a Separation from
Service for Good Reason (as described in Section 3(e)), or a Separation from
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Service for Cause (as described in Section 3(f)), your compensation hereunder, if any, will be
governed by this Section 3.
(a)
Disability
. If Disability is the earliest Distributable Event, (i) you will be
entitled to receive the benefits you would have received during the Service Period as
described in Sections 1(a), (b) and (d) for a period of three years beginning six months
after the date on which you become Disabled, (ii) all stock options and restricted shares
granted to you under any equity incentive plan of the Company will immediately vest, (iii)
you will commence receiving your Monthly Retirement Benefit (as defined in the Companys Top
Management Supplemental Retirement Benefit Plan (January 1, 2005 Restatement, as amended)
(the SERP)) under the SERP as of the third anniversary of your Disability, and the Monthly
Retirement Benefit will be calculated without regard to the early retirement reduction
factors described in Section 2.2 of the SERP, regardless of whether you have reached your
Normal Retirement Date (as defined in the SERP), (iv) you will be entitled to receive within
two and one-half months, any salary which has accrued but is unpaid and any reimbursable
expenses which have been incurred but are unpaid, and (v) you will be entitled to any option
rights, restricted stock or other equity awards or plan benefits which by their terms extend
beyond your Disability or termination (but only to the extent provided in any option
previously granted to you or any other benefit plan in which you participated as an employee
of the Company).
(b)
Death
. If death is the earliest Distributable Event, your beneficiaries, your
dependents or your estate, as the case may be, will be entitled to receive the benefits
described in Sections 3(a)(i) through 3(a)(v), except that the payments in Sections 3(a)(i)
and (ii) will begin within 90 days of the date of your death and the payments in Section
3(a)(iii) will commence on the third anniversary of the date of your death and the death
benefit payable with respect to your Monthly Retirement Benefit will be calculated without
regard to the early retirement reduction factors described in Section 2.2 of the SERP,
regardless of whether you have reached your Normal Retirement Date (as defined in the SERP).
(c)
Retirement
. If Separation from Service is the earliest Distributable Event and is
a voluntary Separation from Service other than for Good Reason after attainment of age
fifty-five (55) and ten (10) years of service (as determined under the SERP (Retirement),
(i) the Company will pay you, within two and one-half months, any salary which has accrued
but is unpaid and will reimburse you for any reimbursable expenses which have been incurred
but are unpaid, (ii) you will be entitled to any option rights, restricted stock or other
equity awards or plan benefits which by their terms extend beyond termination of employment
(but only to the extent provided in any option granted to you or any other benefit plan in
which you participated as an employee of the Company), (iii) you will be entitled to receive
any benefits to which you are entitled pursuant to the requirements of Part 6 of Subtitle B
of Title I of the Employee Retirement Income Security Act of 1974, as amended, and (iv) you
will commence receiving your Monthly Retirement Benefit under the SERP as of the third
anniversary of your Separation from Service, and the Monthly Retirement Benefit will be
calculated without regard to the early retirement reduction factors described in Section 2.2
of the SERP, regardless of whether you have reached your Normal Retirement Date (as defined
in the
3
SERP). In addition, you will provide the services described in Section 2 for the
Service Period, and receive as current compensation therefor (and not as deferred
compensation for purposes of IRC §409A) the benefits described in Sections 1(a), (b) and
(d). Moreover, in the event of your death or Disability after Retirement, then the benefits
described in Section 1(a), 1(b) and 1(d) shall continue for the remainder of the Service
Period, subject to the other terms hereof.
(d)
Involuntary Separation from Service
. If Separation from Service is the earliest
Distributable Event and is an Involuntary Separation from Service other than for Cause (and
excluding your Separation from Service for Good Reason) (Involuntary Separation from
Service), you will be entitled to receive the benefits described in Sections 3(a)(i)
through 3(a)(v) beginning six months after the date of your Separation from Service, except
that the payments in Section 3(a)(iii) will commence on the third anniversary of the date of
your Involuntary Separation from Service.
Notwithstanding the foregoing, in no event will you be deemed to have been terminated for
Cause unless prior to your termination the Company has delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of the directors
then in office at a meeting of the Board called and held for such purpose, after reasonable
notice to you and an opportunity for you, together with your counsel (if you choose to have
counsel present at such meeting), to be heard before the Board, finding that, in the good
faith opinion of the Board, you committed an act constituting Cause and specifying the
particulars of such act in detail. While such a determination will be a condition precedent
for the existence of Cause for purposes of this Agreement, such a determination will not
be determinative or create a presumption that Cause in fact exists, and nothing in this
Agreement will limit your right or the right of your beneficiaries to contest the validity
or propriety of any such determination.
(e)
Separation from Service for Good Reason
. If Separation from Service is the
earliest Distributable Event and is a Separation from Service for Good Reason by means of
advance written notice to the Company at least 90 days prior to the effective date of such
termination identifying such termination as a termination for Good Reason and identifying
the Good Reason and the Company fails to remedy the condition constituting the Good Reason
within 30 days of the receipt of such notice, you will be entitled to receive the benefits
described in Sections 3(a)(i) through 3(a)(v) beginning six months after the date of your
Separation from Service, except that the payments in Section 3(a)(iii) will commence on the
third anniversary of the date of your Separation from Service for Good Reason.
(f)
Termination by the Company for Cause
. If Separation from Service is the earliest
Distributable Event and occurs because the Company terminates your employment for Cause, you
will receive no payments or benefits under this Agreement, and you will be entitled only to
receive those payments and benefits to which you would otherwise be entitled under the other
plans of the Company as described in Sections 3(c)(i) through 3(c)(iii). Additionally, you
will commence receiving your Monthly Retirement Benefit under the SERP as of the third
anniversary of your Separation from Service.
4
(g)
Interest on Unpaid Amounts
. If the Company fails to make any payment or provide
any benefit required to be made or provided under this Agreement on a timely basis, the
Company will pay interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite prime rate as quoted from time to time during the
relevant period in the Midwest Edition of
The Wall Street Journal
. This interest will be
payable as it accrues. Any change in the prime rate will be effective on and as of the date
of such change.
(h)
No Mitigation
. You will not be required to mitigate the amount of any payment or
benefit provided for in this Agreement by seeking other employment or otherwise. It is
expressly understood that Companys payment obligations under this Agreement will cease in
the event you breach any of your obligations under Sections 4 or 5.
4.
Confidentiality
. You acknowledge that the information, observations and data
obtained by you while employed by the Company and during the continuance of the Service Period
pursuant to this Agreement, as well as those obtained by you while employed by the Company or any
of its subsidiaries or affiliates or any predecessor prior to the date of this Agreement,
concerning the business or affairs of the Company or any of its subsidiaries or affiliates or any
predecessor (unless and except to the extent the foregoing become generally known to and available
for use by the public other than as a result of your acts or omissions to act, Confidential
Information) are the property of the Company or such subsidiary or affiliate. Therefore, you
agree that, during your employment with the Company and after your Separation from Service, you
will not disclose any Confidential Information without the prior written consent of the Board
unless and except to the extent that such disclosure is (a) made in the ordinary course of your
performance of your duties under this Agreement or (b) required by any subpoena or other legal
process (in which event you will give the Company prompt notice of such subpoena or other legal
process in order to permit the Company to seek appropriate protective orders), and that you will
not use any Confidential Information for your own account or any other person or entitys benefit
without the prior written consent of the Board. You will deliver to the Company at the termination
of the later of (i) your Separation from Service or (ii) the Service Period, or at any other time
the Company may reasonably request, all memoranda, notes, plans, records, reports, computer tapes
and software and other documents and data (and copies thereof) relating to the Confidential
Information, or to the work product or the business of the Company or any of its subsidiaries or
affiliates which you may then possess or have under your control. Nothing in this Section 4 will
be deemed to limit or otherwise affect your confidentiality or other similar covenant or
obligations imposed on you under any agreement with, or plan or arrangement of, the Company.
5.
Noncompetition, Nonsolicitation
.
(a) You acknowledge that, in the course of your employment with the Company and during
the continuance of the Service Period: (i) you will become familiar, and during the course
of your employment by the Company or any of its subsidiaries or affiliates or any
predecessor prior to the date of this Agreement, you have become familiar, with trade
secrets and customer lists of and proprietary information regarding the business of the
Company and its subsidiaries and affiliates and predecessors; (ii) such
5
trade secrets and customer lists of and proprietary information regarding the business
of the Company and its subsidiaries and affiliates and predecessors are confidential and the
exclusive property of the Company; and (iii) your services have been and will be of special,
unique and extraordinary value to the Company. You agree that you will not disclose,
divulge, discuss, copy or otherwise use or cause to be used in any manner in competition
with, or contrary to the interests of, the Company, the trade secrets and customer lists of
and proprietary information regarding the business of the Company and its subsidiaries and
affiliates and predecessors.
(b) You agree that, during your employment with the Company and until the later of: (i)
three years after your Separation from Service with the Company or (ii) three years after
termination of the Service Period, you will not in any manner, directly or indirectly,
through any person, firm or corporation, alone or as a member of a partnership or as an
officer, director, shareholder, investor or employee of or in any other corporation or
enterprise or otherwise, engage or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business then actively being
conducted by the Company or any of its subsidiaries or affiliates or any business similar to
the businesses then conducted or contemplated to be conducted by the Company or any of its
subsidiaries or affiliates.
(c) You further agree that, during your employment with the Company and until the later
of (i) three years after your Separation from Service with the Company or (ii) three years
after termination of the Service Period, you will not in any manner, directly or indirectly,
induce or attempt to induce any employee of the Company or of any of its subsidiaries or
affiliates to quit or abandon his or her employ.
(d) Nothing in this Section 5 will prohibit you from being: (i) a shareholder in a
mutual fund or a diversified investment company or (ii) a passive owner of not more than 5%
of the outstanding equity securities of any class of a corporation or other entity which is
publicly traded, so long as you have no active participation in the business of such
corporation or other entity.
(e) In the event you violate any legally enforceable provision of this Agreement as to
which there is a specific time period during which you are prohibited from taking certain
actions or from engaging in certain activities, as set forth in this Agreement, then, in
such event, the violation shall toll the running of such time period from the date of such
violation until the violation ceases.
(f) You acknowledge that you have carefully considered the nature and extent of the
restrictions on you and the rights and remedies conferred on the Company under this
Agreement. You further acknowledge and agree that the same are reasonable in time and
territory, are designed to eliminate competition which would otherwise be unfair to the
Company, do not stifle your inherent skill and experience, would not operate as a bar to
your sole means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to your detriment.
6
(g) If, at the time of enforcement of this Section 5, a court holds that the
restrictions stated in this Section 5 are unreasonable under circumstances then existing,
you and the Company agree that the maximum period, scope or geographical area reasonable
under such circumstances will be substituted for the stated period, scope or area and that
the court will be allowed to revise the restrictions contained in this Section 5 to cover
the maximum period, scope and area permitted by law.
(h) Nothing in this Section 5 will be deemed to limit or otherwise affect any
noncompetition or nonsolicitation or other similar covenant or obligations imposed on you
under any other agreement with, or plan or arrangement of, the Company.
6.
Enforcement
. Because your services are unique and because you have access to
Confidential Information and work project, you agree that the Company would be damaged irreparably
in the event any of the provisions of Section 4 or 5 were not performed in accordance with their
specific terms or were otherwise breached and that money damages would be an inadequate remedy for
any such non-performance or breach. Therefore, the Company or its successors or assigns will be
entitled, in addition to other rights and remedies existing in their favor, to an injunction or
injunctions to prevent any non-performance, breach or threatened breach of any of such provisions
and to enforce such provisions specifically (without posting a bond or other security).
7.
Representations
. You represent and warrant to the Company that (a) the execution,
delivery and performance of this Agreement by you does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order, judgment or decree to
which you are a party or by which you are bound, (b) you are not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement any other person or entity
and (c) upon the execution and delivery of this Agreement by the Company, this Agreement will be
the valid and binding obligation of you, enforceable in accordance with its terms.
8.
Survival
. Subject to any limits on applicability, Sections 4 and 5 will survive
and continue in full force in accordance with their terms, notwithstanding any Separation from
Service with the Company or the termination of the Service Period.
9.
Notices
. Any notice provided for in this Agreement must be in writing and must be
either personally delivered, sent by reputable overnight carrier or mailed by first class mail,
return receipt requested. Any notice to you will be delivered to the last home address on file
with the Company, and any notice to the Company should be delivered to:
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Attention: General Counsel
or such other address or to the attention of such other person as the recipient party has specified
by prior written notice to the sending party. Any notice under this Agreement will be deemed to
have been given when so delivered, sent or mailed.
7
10.
Severability
. Whenever possible, each provision of this Agreement will be
interpreted in a manner as to be effective and valid under applicable law, but, if any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been
contained in this Agreement.
11.
Complete Agreement
. This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter in this Agreement and
effective as of its date supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may have related to the subject
matter in this Agreement in any way.
12.
Counterparts
. This Agreement may be executed in separate counterparts, each of
which will be deemed to be an original and both of which taken together will constitute one and the
same agreement.
13.
Successors and Assigns
. This Agreement will bind and inure to the benefit of and
be enforceable by you, the Company and your or its respective heirs, executors, personal
representatives, successors and assigns, except that neither you nor the Company may assign any of
your or its rights or delegate any of your or its obligations under this Agreement without the
prior written consent of the other party. You consent to the assignment by the Company of all of
its rights and obligations in this Agreement to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Companys assets, provided such
transferee or successor assumes the liabilities of the Company in this Agreement.
14.
Choice of Law
. This Agreement will be governed by the internal law, and not the
laws of conflicts, of the State of Ohio.
15.
Amendment and Waiver
. This Agreement may be amended only with the prior written
consent of the parties, and no course of conduct or failure or delay in enforcing the provisions of
this Agreement will affect the validity, binding effect or enforceability of this Agreement.
16.
Prohibition on Participation
. If under any provision of this Agreement you and
your dependents become entitled to receive the benefits provided under the Standard Executive
Benefits Package and you are not eligible to participate in any of the plans or programs set forth
in the Standard Executive Benefits Package, the Company will reimburse you, on a monthly basis, for
any premiums or other fees paid by you to obtain benefits (for you and your dependents) equivalent
to the Standard Executive Benefits Package.
17.
Right to Terminate Agreement Upon a Change in Control
. Notwithstanding any
provision in this Agreement to the contrary, in the event of a Change in Control (as defined from
time to time in the Companys 1998 Equity and Performance Incentive Plan, or any successor to that
plan), you will have the right to terminate this Agreement upon 30 days written notice to the
8
Company, and upon the Companys receipt of such notice this Agreement will immediately become
null and void and have no further force or effect.
18.
Claims and Administration
. The Claims and Administration procedures set out in
Appendix II
attached hereto are incorporated herein by reference.
19.
No Distributions in Excess of IRC §162(m)
. Notwithstanding the above provisions,
no amount may be distributed pursuant to this Agreement if such amount would not be deductible to
the Company under IRC §162(m), as determined by the Board of Directors in its sole discretion, and
in accordance with IRC §409A and the Treasury regulations promulgated thereunder.
20.
No Distributions in Violation of Securities Laws
. Notwithstanding the above
provisions, a payment under the Plan may be delayed if the Company reasonably anticipates that the
making of such payment will violate Federal securities laws or other applicable law, in the
Companys sole discretion, provided that the payment is made on the earliest at which the Company
reasonably anticipates that the making of the payment will not cause such violation.
21.
Six-Month Delay
.
Notwithstanding anything to the contrary in the foregoing, but
to the extent not specified previously above, if an amount hereunder is subject to, and not exempt
from, IRC §409A and you are a Specified Employee on the date of your Separation from Service, you
shall not receive a distribution due to Separation from Service before the date which is the later
of (i) eighteen (18) months following December 31, 2010 or (ii) six (6) months after the date of
your Separation from Service, or, if earlier, your death after Separation from Service. In the
event a distribution must be deferred, the first payment shall include an amount equal to the sum
of the payments which would have been paid to you but for the payment deferral mandated pursuant to
IRC §409A(a)(2)(B)(i) on the first day of the month following the mandated deferral period, and
shall include interest on such amount calculated in the same manner as under Section 3(g) above.
In no event will the mandatory deferral period extend beyond a death after Separation from Service.
22.
Reimbursements and In-Kind Benefits
. Any reimbursement of expenses or in-kind
benefits provided under this Agreement subject to, and not exempt from, IRC §409A shall be subject
to the following additional rules: (a) any reimbursement of eligible expenses shall be paid as
they are incurred (but not prior to the end of the six-month delay period set forth above if
applicable) and shall always be paid on or before the last day of your tax year following the tax
year in which the expenses were incurred; provided that you first provide documentation of such
expenses in reasonable detail not later than sixty (60) days following the end of the calendar year
in which the eligible expenses were incurred; (b) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during any calendar year shall not affect the amount
of expenses eligible for reimbursement, or in-kind benefits to be provided, during any other
calendar year; and (c) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit.
23.
IRC §409A
. To the extent applicable, it is intended that this Agreement and any
deferrals of compensation made hereunder comply with the provisions of IRC §409A. This Plan and
any deferrals or compensation made hereunder shall be administrated in a manner consistent
9
with this intent, and any provisions that would cause this Agreement or any benefit hereunder
to fail to satisfy IRC §409A shall have no force and effect until amended to comply with IRC §409A
(which amendment may be retroactive to the extent permitted by IRC §409A). Any reference in this
Agreement to IRC §409A will also include any proposed, temporary or final regulations, or any other
guidance, promulgated with respect to IRC §409A by the U.S. Department of the Treasury or the
Internal Revenue Service. In no event, however, shall this section or any other provisions of this
Agreement be construed to require the Company to provide any gross-up for the tax consequences of
any provisions of, or payments under, this Agreement and the Company shall have no responsibility
for tax or legal consequences to you (or your beneficiary) resulting from the terms or operation of
this Plan.
If you agree to the terms set forth above, please sign and date a copy of this Agreement below
and return it to the undersigned.
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Very truly yours,
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THE J.M. SMUCKER COMPANY
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By:
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/s/ Mark R. Belgya
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Name: Mark R. Belgya
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Title: Senior Vice President and Chief Financial Officer
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Accepted and agreed to:
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/s/ R. K. Smucker
Richard K. Smucker
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Date:
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December 31, 2010
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Appendix I
The following definitions will apply for purposes of the Agreement:
Board of Directors or Board means the Board of Directors of the Company.
Cause means:
(i) your willful and continued failure to perform your duties;
(ii) gross negligence or willful misconduct by you with respect to the Company
or any of its subsidiaries or affiliates;
(iii) your breach of any of the agreements in Section 4 or 5 prior to the end
of your employment with the Company; or
(iv) your conviction of a felony or a crime involving moral turpitude.
Company means The J.M. Smucker Company.
Disabled or Disability means the first to occur of the following conditions:
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(a)
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You are unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in
death or can be expect to last for a continuous period of not less than 12 months, or
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(b)
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You are, by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a period
of not less than 3 months under any plan covering employees of the Company, or
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(c)
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You have been determined to be totally disabled by the Social Security
Administration.
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Good Reason means:
(v) any material diminution by the Board in your salary;
(vi) the relocation of the Companys principal executive offices or the
requirement by the Company that you change your principal place of employment to any
location that is in excess of 35 miles from your principal place of employment on
the date of this Agreement; or
(vii) any breach by the Company of this Agreement that is material and that is
not cured within 30 days after written notice to the Company from you.
11
Separation from Service or Separate(d) from Service means a separation from service as
defined in IRC §409A, which IRC §409A is incorporated herein by reference, and includes, without
limitation, your separation from service with the Company, and related companies, if you die,
retire or otherwise have a termination of employment with the Company. However, for purposes of
this paragraph, the employment relationship is treated as continuing intact while you are on
military leave, sick leave, or other bona fide leave of absence if the period of such leave does
not exceed six months, or if longer, so long as you retain a right to reemployment with the Company
under an applicable statute or by contract. Notwithstanding the foregoing, where a leave of absence
is due to any medically determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less than six months, where such
impairment causes you to be unable to perform the duties of your position of employment or any
substantially similar position of employment, a 29-month period of absence may be substituted for
such six-month period.
Service Period means the three-year period beginning on the date of your Separation from
Service (or, if earlier, your death or Disability) and ending on its third anniversary date.
Specified Employee refers to an individual defined in IRC §416(i) without regard to
paragraph (5) of that Section, as of the date of the individuals Separation from Service
determined as provided in Treasury Regulation §1.409A-1(i).
12
Appendix II
(a)
Plan Administrative Committee
. The Executive Compensation Committee of the Board
of Directors, or its designee, will be the Plan Administrator under this Agreement.
(b)
Definitions
. The following definitions apply for purposes of these Claims
Procedures:
(i) Adverse Benefit Determination is any of the following: a denial,
reduction or termination of, or a failure to provide or make payment (in whole or in
part) for a benefit.
(ii) Claimant is you or your beneficiary who files a claim under this
Agreement.
(c)
Filing Claims
. A Claimant must file a written claim for benefits under the
Agreement with the Plan Administrator in accordance with the terms of the applicable Plan
and federal law. The written claim will be made on such form(s) as may be prescribed from
time to time by the Plan Administrator and will include such information as requested on the
claims form.
(d)
Claim Notifications.
(i) Time for Providing Notification. The Plan Administrator will furnish
notice of its benefit determinations under the Agreement in accordance with the
following provisions. For purposes of determining the time periods specified below,
the period of time within which a benefit determination is required to be made will
begin at the time the claim is filed in accordance with the Agreements procedures,
without regard to whether all the information necessary to make a benefit
determination accompanies the filing. In the event a period of time to provide
notification is extended due to a Claimants failure to submit information necessary
to decide a claim, the period for making the benefit determination will be tolled
from the date on which the notification of the extension is sent to the Claimant
until the date on which the Claimant responds to the request for additional
information. A Claimant may also voluntarily agree to provide the Plan
Administrator additional time within which to make a decision on a claim beyond the
time limits specified below.
The Plan Administrator will notify the Claimant of its benefit determination within
a reasonable period of time, but not later than 90 days after receipt of the claim.
This period may be extended one time by the Plan Administrator for up to 90 days if
the Plan Administrator determines that the extension is necessary due to special
circumstances and notifies the Claimant, prior to the expiration of the initial
90-day period, of the circumstances requiring the extension of time and the date by
which the Plan Administrator expects to render a decision. This date will be not
later than 180 days after receipt of the claim.
13
(ii) Manner and Content of Notification of Benefit Determination. The Plan
Administrator will provide a Claimant with written or electronic notification of any
Adverse Benefit Determination. The notification will include the following:
(A) The specific reason(s) for the Adverse Benefit Determination;
(B) Reference to the specific Agreement provisions on which the
determination is based;
(C) A description of any additional material or information necessary
for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(D) A description of the Agreements review procedures in accordance
with the terms of this Agreement and the time limits applicable to such
procedures (including the address to which appeals should be mailed),
including a statement of the Claimants right to bring a civil action
following an Adverse Benefit Determination on review.
(e)
Appeal of Adverse Benefit Determination.
(i) Review Procedures. If a Claimant is notified of an Adverse Benefit
Determination, the Claimant or his authorized representative may make a written
request for review of the determination by submitting such request to the Plan
Administrator within 60 days after notification of the Adverse Benefit
Determination.
A Claimants written request for review will be forwarded by the Plan Administrator
to the Board of Directors of the Company (other than you and other than the members
of the Executive Compensation Committee of the Company) for a full and fair review.
No individual will review a claim who reviewed the Claimants initial claim for
benefits, or who is a subordinate of such individual. The Claimant will be provided
the opportunity to submit written comments, documents, records and other information
relating to the claim for benefits. The Claimant will also be provided, upon
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the Claimants claim for benefits. The
Board of Directors will conduct its review without deference to the initial benefit
determination and taking into account all comments, documents, records and other
information submitted by the Claimant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination.
(ii) Timing of Notification of Benefit Determination on Review. The Plan
Administrator, or its delegatee, will notify a Claimant of the Plans benefit
determination on review as follows: For purposes of determining the time periods
14
specified below, the period of time within which a benefit determination on
review is required to be made will begin at the time an appeal is filed in
accordance with the Agreements procedures, without regard to whether all the
information necessary to make a benefit determination on review accompanies the
filing.
The Plan Administrator will notify the Claimant of the Plans benefit determination on
review within a reasonable period of time, but not later than 60 days after receipt by the
Plan Administrator of the Claimants request for review of an Adverse Benefit Determination
or within 120 days if special circumstances require more time and the Plan Administrator, or
its delegatee, informs the Claimant within the initial 60 day period of the reason for the
delay and the date the Claimant can expect to receive notification of benefit determination
on review.
(f)
Authorized Representative
. A Claimant is permitted to designate an authorized
representative to act on behalf of a Claimant with respect to a benefit claim or appeal of
an Adverse Benefit Determination. Designation of an authorized representative must be made
in writing on such form as the Plan Administrator will provide from time to time and must be
signed by the Claimant. If a Claimant designates an authorized representative to act on his
behalf as provided above, the Plan Administrator will direct all information and
notifications to which the Claimant is otherwise entitled to the authorized representative
with respect to the aspect of the claim for which the representative is designated (for
example, initial determination, request for documents, appeal, etc.), unless the Claimant
directs otherwise.
(g)
Record Retention
. The Plan Administrator will maintain records and other relevant
documents adequate to demonstrate compliance with the Agreements Claims Procedures and
processes and to verify appropriately consistent decision-making with respect to initial
benefit determinations and review of Adverse Benefit Determinations.
15
Exhibit 10.4
THE J. M. SMUCKER COMPANY DEFINED CONTRIBUTION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
RESTATED EFFECTIVE MAY 1, 2008
THE J. M. SMUCKER COMPANY DEFINED CONTRIBUTION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The J. M. Smucker Company Defined Contribution Supplemental Executive Retirement Plan (the Plan)
effective as of May 1, 2008, is hereby established and will be maintained by The J. M. Smucker
Company (the Company) for the purpose of supplementing the retirement benefits of certain
officers and key management employees of The J. M. Smucker Company and its subsidiaries who are
selected to participate in the Plan. The Plan has been amended subsequently and is now further
amended and restated effective May 1, 2008, to clarify certain provisions of the Plan in order to
assure more fully that the Plan is compliant with Code Section 409A.
The Plan is intended to be an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated employees, and is
subject to, and intended to comply with Section 409A of the Code, and regulations thereunder, and
other applicable laws.
ARTICLE I
DEFINITIONS
Whenever used in the Plan, the following words and phrases shall have the meanings set forth below
unless the context plainly requires a different meaning, and when a defined meaning is intended,
the term is capitalized in this document.
1.1 Beneficiary means the person or persons selected by the Participant on a form provided by the
Company to receive the benefits provided under this Plan in the event of the Participants death.
1.2 Code means the Internal Revenue Code of 1986, as amended from time to time, and any lawful
regulations or other pronouncements relating thereto.
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1.3 Company means The J. M. Smucker Company and any of its subsidiaries or affiliated business
entities, as determined in accordance with the provisions contained in Section 414 of the Code.
1.4 Compensation means total compensation, including base salary, Holiday Bonus and annual
bonuses from the Management Incentive Plan, paid during the entire Plan Year without regard to any
limits imposed by the Code under ERISA.
1.5 Committee means the Executive Committee of the Company.
1.6 Disabled or Disability means the first to occur of the following conditions, all as
determined in accordance with Section 409A:
(a) The Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death
or can be expect to last for a continuous period of not less than 12 months, or
(b) The Participant is, by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a continuous period of
not less than 12 months, receiving income replacement benefits for a period of not less than
3 months under any plan covering employees of the Employer, or
(c) The Participant has been determined to be totally disabled by the Social Security
Administration.
1.7 Effective Date means May 1, 2008.
1.8 Eligibility Service means service completed to determine eligibility from date of hire to
date of termination, retirement, disability, or death.
1.9 ERISA means the Employee Retirement Income Security Act of 1974, as amended.
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1.10 Officer Service means service completed from the effective date of employment in an officer
position to the earlier of the date of termination, retirement, disability, or death, or date that
Participant ceases to serve as an officer.
1.11 Participant means any employee described in Article II of this Plan.
1.12 Plan means The J. M. Smucker Company Defined Contribution Supplemental Executive Retirement
Plan, as of its original effective date, and as further amended and restated herein effective
January 1, 2009, and including any subsequent amendments thereto.
1.13 Plan Year means the Companys fiscal year beginning May 1 and ending April 30.
1.14 Separation from Service means a separation from service as defined in Code section 409A,
with the Company and all other related employers of the Company (as determined under Code Section
414), which Code Section 409A is incorporated herein by reference, generally including the
severance of the Employees employment relationship for any reason, voluntarily or involuntarily,
and with or without cause, including without limitation, quit, discharge, retirement, death, leave
of absence or permanent decrease in service to the Company and all such other related employers to
a level that is no more than twenty percent (20%) of its prior level. However, for purposes
of this paragraph, the employment relationship is treated as continuing intact while the individual
is on military leave, sick leave, or other bona fide leave of absence if the period of such leave
does not exceed six months, or if longer, so long as the individual retains a right to reemployment
with the service recipient under an applicable statute or by contract. Notwithstanding the
foregoing, where a leave of absence is due to any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than six months, where such impairment causes the employee to be unable to
perform the duties of his or her position of employment or any substantially similar position of
employment, a 29-month period of absence may be substituted for such six-month period.
1.15 Specified Employee refers to an individual defined in Code Section 416(i) without
regard to paragraph (5) of that section as of the date of the individuals Separation from Service
determined as provided in Treasury Regulation §1.409A-1(i).
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1.16 Trust means a rabbi trust which may be established by the Company in connection with this
Plan to provide the benefits described in the Plan.
1.17 Trustee means the corporation or individual selected by the Company to serve as Trustee for
the Trust.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligible Participants
An employee who has been hired or promoted to serve as an officer or in an equivalent position and
has been designated by the Committee shall become a Participant in the Plan as of the date of
designation.
2.2 Designation of Beneficiary
A Participant shall file with the Committee a Beneficiary designation, on a form provided by the
Committee, on or before April 30th of the preceding Plan Year for which the designation shall take
effect. Such designation shall remain in effect until changed by the Participant.
ARTICLE III
SUPPLEMENTAL RETIREMENT ACCOUNT
3.1 Establishment of Accounts
The Company shall establish and maintain an account for each Participant, or designated Beneficiary
of the Participant upon the death of the Participant, and shall credit such accounts each Plan Year
with a Contribution Credit and Interest Credit, as applicable, in accordance with the provision of
this Article III.
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3.2 Contribution Credit
Contribution Credit means an amount equal to 7% of total Compensation paid in the full Plan Year
which shall be credited to a Participants account for each Plan Year the officer is a Participant,
including the Plan Year in which the designation by the Committee occurs. No Contribution shall be
based on Compensation paid after a participant ceases to be an officer.
3.3 Interest Credit
Interest Credit means the amount which shall be credited each Plan Year to the account maintained
for a Participant or Beneficiary by calculating interest at a rate to be determined by the
Committee. The interest rate for the Plan Year beginning in 2008 is 6%. This rate will be reviewed
and may be increased or decreased on an annual basis by the Committee.
3.4 Prior Service Credit
For each officer who became a Participant as of the Effective Date of the Plan, an amount
indicated in Appendix A will be credited to such Participants account on May 1, 2008, recognizing
years of Officer Service prior to the Effective Date of this Plan.
3.5 Crediting Date
Accounts will be credited with Contribution Credits on April 30 of each Plan Year to each
Participant who is employed, as an officer as of April 30 of the Plan Year, except that in the year
Separation from Service due to retirement, disability, or death, a partial year Contribution Credit
will be made to their account reflecting the Compensation through the date of Separation from
Service due to retirement, disability, or death.
Interest Credits will be made through the date of first payment.
ARTICLE IV
DISTRIBUTIONS
4.1 Vesting and Distribution Events
In order to be vested in amounts credited to a Participants account under this Plan, the
Participant
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must have completed 10 years of Eligibility Service (or in the event of a distribution due to
death, five (5) years of Eligibility Service).
All vested amounts credited to a Participants account in accordance with Article III, including
interest credited in accordance with Section 3.4 shall be distributed to, or with respect to, a
Participant, based on the earliest to occur of such Participants Separation from Service, death or
Total Disability, as set forth below:
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(a)
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In the event of Separation from Service, such vested amounts shall be
distributed or commence to be distributed after the later of attainment of age 55 and
six (6) months following Separation from Service;
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(b)
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In the event of Disability, such vested amounts shall be distributed or
commence to be distributed six (6) months following such Disability; or
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(c)
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In the event of death, such vested amounts shall be distributed or commence to
be distributed within ninety (90) days following such death.
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For purposes of this Section, if death causes a Separation from Service, death shall be deemed to
be the earliest event to occur under the Plan.
4.2 No Benefits Payable upon Certain Events
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(a)
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If the Participant has completed fewer than 10 years of Eligibility Service as
of the date of Separation from Service (or five years in the case of death), the
Participant shall receive no benefit under the Plan.
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(b)
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The right of any Participant or Beneficiary to a benefit will be terminated,
or, if payment thereof has begun, all future payments will be discontinued and
forfeited, in the event the Participant (i) at any time wrongly discloses any secret
process or trade secret of the Company, or (ii) engages, either directly or indirectly,
as an officer, trustee, employee, partner, or substantial shareholder, on his own
account or in any other capacity, in a business venture within a ten-year period
following his retirement or Separation from Service that the Companys board of
directors reasonably
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determines to be competitive with the Company to a degree materially contrary to the
Companys best interest.
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(c)
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Notwithstanding anything to the contrary contained in the Plan, if a
Participants employment is terminated because the Company determines the Participant
(i) engaged in dishonest or fraudulent acts against the Company, (ii) willfully injured
property of the Company, (iii) conspired against the Company, or (iv) disclosed
confidential information concerning the Company, then no benefit shall be payable to
the Participant or Beneficiary under the Plan.
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4.3 Forms of Distribution
Any vested benefit payable to or on behalf of a Participant under the Plan pursuant to Section 4.1
shall be payable pursuant to a fixed schedule in accordance with the provisions of Section 409A of
the Code. Each Participant must elect the payment schedule from one of the options below within 30
days of becoming designated to participate in the Plan. The possible payment options are as
follows:
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(a)
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One single lump sum payment;
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(b)
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Equal monthly installments payable over a five year period
determined based on the Participants vested account balance and the interest
crediting rate in effect at the later of the date of (i) Separation from
Service, Disability, or death, as applicable, or (ii) the date that payments
commence;
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(c)
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Equal monthly installments payable over a ten year period
determined based on the Participants account balance and the interest
crediting rate in effect at the later of the date of (i) Separation from
Service, Disability, or death, as applicable, or (ii) the date that payments
commence;
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(d)
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Equal monthly installments payable over a fifteen year period
determined based on the Participants account balance and the interest
crediting rate in effect at the later of the date of (i) Separation from
Service, Disability, or death, as applicable, or (ii) the date that payments
commence; or
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(e)
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Equal monthly installments payable over a twenty year period
determined based on the Participants account balance and the interest
crediting rate in effect at the
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later of the date of (i) Separation from Service, Disability, or death, as
applicable, or (ii) the date that payments commence.
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If no election is made by a Participant, the default form of payment shall be the method described
in (a) above.
4.4 Subsequent Election of Time or Form of Payment
During the month of April of each Plan Year (or at such other time as may be approved by the
Committee but no later than April 30 of each Plan Year), a Participant who is then still an
employee of the Company may change, on a form and in a manner approved by the Committee, a form of
payment election that he or she made pursuant to Section 4.2 or delay a commencement date that he
or she elected pursuant to Section 4.1; provided, however, a Participant may make only one change,
that applies to either form of payment or time of payment or both, and no further changes may be
made to the form of payment or time of payment of such deferred amounts; and provided, further,
that no change of election made under this Section 4.4 shall be effective unless it satisfies the
following requirements:
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(a)
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A change of election will not be effective until at least twelve (12) months
after the date on which it is filed by the Participant with the Committee.
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(b)
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A change of election with respect to a payment commencing on, or made on, a
specified date may not be filed with the Committee less than twelve (12) months prior
to such date.
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(c)
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A change of election with respect to a time of payment or a method of payment
must provide that the payment subject to the change be deferred for a period of not
less than five (5) years from the date such payment would otherwise have been made,
except in the event of a payment made on account of the Participants death or
Disability.
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The Company may impose such other restrictions and limitations on subsequent changes to
an election relating to the time or form of distribution as it determines appropriate.
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4.5 Death Following Separation from Service or Disability
If a Participant who has at least five (5) years of Eligibility Service should die after his
Separation from Service or Disability and before distribution of the full amount of his benefits
under this Plan have been distributed to him (whether before or after payments have commenced), any
remaining amounts shall be distributed to the Participants Beneficiary(ies) by the same method as
distributions were being made to the Participant or were scheduled to be made. If the Beneficiary
is no longer alive, or if a Participant has not designated a Beneficiary, then such amounts shall
be distributed to such Participants spouse, or if deceased or none, then to the Participants
children per stirpes, or if none, then to the Participants estate.
4.6 [Reserved]
4.7 Six-Month Delay on Distributions to Specified Employees
Under no circumstances, other than death as set forth above, will a Participant who is a
Specified Employee, as of the date of the Participants Separation from Service, receive a
distribution under the Plan earlier than six (6) months following such Participants Separation
from Service.
4.8 No Distributions In Excess of Code Section 162(m)
Notwithstanding the above provisions, no amount may be distributed from the Plan if the
Company reasonably anticipates that such amount would not be deductible under Code Section 162(m),
as determined by the Board of Directors in its sole discretion, and in accordance with Code Section
409A and the Treasury regulations promulgated thereunder.
4.9 Distribution of Small Amounts
If, at any time following Separation from Service, a Participants benefit under the Plan
is less than $10,000, the Company may elect to distribute such account balance in a lump
sum payment regardless of the Participants election.
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4.10 Distributions of Amounts Deemed Includable in Gross Income
Notwithstanding any provisions of the Plan to the contrary, if, at any time, a court or the
Internal Revenue Service determines that an amount of a Participants benefit under the
Plan is includable in the gross income of the Participant and subject to tax, the Board of
Directors of the Company may, in its sole discretion, and in accordance with Code Section
409A and the Treasury regulations promulgated thereunder, permit a lump sum distribution of
an amount equal to the amount determined to be includable in the Participants gross
income.
4.11 Distributions of Amounts in Violation of Securities Laws
Notwithstanding any provisions of the Plan to the contrary, a payment under the Plan may be
delayed if the Company reasonably anticipates that the making of such payment will violate
Federal securities laws or other applicable law, in the Companys sole discretion, and in
accordance with Code Section 409A and the Treasury regulations promulgated thereunder,
provided that the payment is made on the earliest at which the Company reasonably
anticipates that the making of the payment will not cause such violation.
ARTICLE V
ADMINISTRATION
5.1 Authority to Interpret Plan
The Plan shall be administered by the Company, which shall have the authority to interpret and
construe the terms of the Plan as it deems appropriate including the authority to determine
eligibility for benefits under the Plan. The Company shall have the duty and responsibility of
maintaining records, making the requisite calculations and disbursing the payments hereunder. The
Companys interpretations, determinations, regulations and calculations shall be final and binding
on all
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interested persons and parties. Any benefits payable under this Plan will be paid only if the Plan
Administrator decides in its discretion that the applicant is entitled to them.
5.2 Employment of Advisors
The Company may employ such attorneys, agents, and accountants as it may deem necessary or
advisable to assist in carrying out its duties hereunder. The Company by action of its Board of
Directors may designate a person or persons other than the Company to carry out any of such powers,
authority, or responsibility. Expenses of administration shall be paid by the Company. The Company
shall be entitled to rely on all tables, valuations, certifications, opinions, data and reports
furnished by any actuary, accountant, controller, counsel or other person employed or engaged by
the Company with respect to the Plan. Any act authorized, permitted, or required to be taken under
the Plan by the Company and which has not been delegated in accordance with this, may be taken by a
majority of the members of its Board of Directors, or a committee delegated to act by the Board of
Directors, or notices, advice, directions, certifications, approvals, and instructions required or
authorized to be a person authorized to act for the Company in accordance with this Section.
5.3 Annual Statements
The Company shall furnish individual annual statements of accrued benefits to each Participant, or
current Beneficiary, in such form as determined by the Company or as required by law.
5.4 Claims Procedures
Whenever the Company decides for whatever reason to deny, whether in whole or in part, a claim for
benefits under the Plan filed by any person (herein referred to as the Claimant), it shall
transmit a written notice of such decision to the Claimant, in most cases no later than 90 days
after the Plan receives the claim for benefits, or within 180 days after the Plan receives the
claim for benefits if there are special circumstances and if within 90 days the Company provides
notice of the reason for the delay and the date a decision can be expected, which notice shall be
written in a manner calculated to be understood by the Claimant and shall contain a statement of
the specific reasons for the denial of the claim and a statement advising the Claimant that, within
60 days of the date on which he receives such notice, he may obtain review of such decision in
accordance with the procedures hereinafter set forth. Within such 60-day period, the Claimant may
request that the claim
- 12 -
denial be reviewed by filing with the Committee a written request therefore, which request shall
contain the following information:
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(a)
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The date on which the Claimants request was filed with the Company; provided,
however, that the date on which the Claimants request for review was in fact filed
with the Company shall control in the event that the date of the actual filing is later
than the dates stated by the Claimant pursuant to this Subsection (a);
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(b)
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The specific portions of the denial of his claim which the Claimant requests
the Company to review;
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(c)
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A statement by the Claimant setting forth the basis upon which he believes the
Company should reverse the previous denial of his claim for benefits and accept his
claim as made; and
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(d)
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Any written material (offered as exhibits) which the Claimant desires the
Company to examine in its consideration of his position as stated pursuant to
Subsection (c) of this Section.
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Within 60 days of the date determined pursuant to Subsection (a) of this Section, the Committee
shall conduct a full and fair review of the initial claim for the benefits and the decisions
denying the Claimants claim for benefits, or within 120 days if special circumstances require more
time and if within 60 days the Committee provides notice of reason for the delay, and the date a
decision can be expected. Within 60 days (or 120 days if extended as provided herein) of the date
of such review, the Committee shall render its written decision on review, written in a manner
calculated to be understood by the Claimant, specifying the reasons and Plan provisions upon which
its decision was based.
- 13 -
ARTICLE VI
AMENDMENT OR TERMINATION
6.1 Company Reserves Right to Amend or Terminate
The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan
at any time, prospectively or retroactively, through an instrument executed by an officer pursuant
to authorization or ratification by the Board or by any committee designated by the Board.
6.2 Amendment or Termination
No amendment or termination of the Plan shall directly or indirectly reduce the balance of any
account described in Article III as of the later of the effective date of such amendment or
termination or the date such amendment or termination is adopted. In the event the Plan is
terminated, any amounts credited to Participants accounts shall remain subject to the other
provisions of the Plan regarding distribution, and distribution of such amounts shall not be
accelerated except as otherwise provided in an amendment to this Plan, and under the circumstances
permitted in accordance with Code §409A. No amounts will be credited to any account under the Plan
after termination of the Plan, but interest will continue to be credited to a Participants account
under the Plan until all amounts are distributed to the Participant or to his or her Beneficiary.
ARTICLE VII
MISCELLANEOUS
7.1 Trust Authorized
The Company may establish a Trust which may be used to pay benefits arising under this Plan and all
costs, charges and expenses relating thereto; except that, to the extent that the funds held in the
Trust are insufficient to pay such benefits, costs, charges and expenses, the Company shall pay
such benefits, costs, charges and expenses.
7.2 Restriction against Assignment
The benefits payable hereunder or the right to receive future benefits under the Plan may not be
anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any
charge or
- 14 -
legal process; no interest or right to receive a benefit may be taken, either voluntarily or
involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance and claims in
bankruptcy proceedings.
7.3 Grantor Trust
The Plan at all times shall be considered entirely unfunded both for tax purposes and for
purposes of ERISA and no provision shall at any time be made with respect to segregating any
assets of the Company for payment of any benefits hereunder. Funds invested hereunder shall
continue for all purposes to be part of the general assets of the Company. No Participant,
Beneficiary or any other person shall have any interest in any particular assets of the
Company by reason of the right to receive a benefit under the Plan and to the extent the
Participant, Beneficiary or any other person acquires a right to receive benefits under this
Plan, such right shall be no greater than the right of any unsecured general creditor of the
Company.
7.4 No Employment Rights
The sole rights of a Participant or Beneficiary under this Plan shall be to have this Plan
administered according to its provisions, to receive whatever benefits he or she may be entitled to
hereunder, and nothing in this Plan shall be interpreted as a guaranty that any funds in a Trust or
assets of the Company will be sufficient to pay any such benefit. Further, the adoption and
maintenance of this Plan shall not be construed as creating any contract of employment between the
Company and any Participant. The Plan shall not affect the right of the Company to deal with any
Participants in employment respects, including their hiring, discharge, compensation, and
conditions of employment.
7.5 Discharge of Liability
The Company may from time to time establish rules and procedures which it determines to be
necessary for the proper administration of the Plan and the benefits payable to an individual in
the event that individual is declared incompetent and a conservator or other person legally charged
with such individuals care is appointed. Except as otherwise provided herein, when the Company
- 15 -
determines that such individual is unable to manage his or her financial affairs, the Company may
pay such individuals benefits to such conservator, person legally charged with such individuals
care, or institution then contributing toward or providing for the care and maintenance of such
individual. Any such payment shall constitute a complete discharge of any liability of the Company
and the Plan for such individual.
7.6 Location of Participant
Each Participant shall keep the Company informed of his or her current address and the current
address of his or her Beneficiary. The Company shall not be obligated to search for any person.
7.7 Limitation of Liability
Notwithstanding any provision herein to the contrary, neither the Company nor any individual acting
as an employee or agent of the Company shall be liable to any Participant, former Participant,
Beneficiary, or any other person for any claim, loss, liability or expense incurred in
connection with the Plan, unless attributable to fraud or willful misconduct on the part of
the Company or any such employee or agent of the Company.
7.8 Plan Documents
Each Participant shall receive a copy of the Plan and the Company will make available for
inspection by any Participant or designated Beneficiary a copy of the rules and regulations used by
the Company in administering the Plan.
7.9 Construction
All questions pertaining to the construction, validity and effect of the Plan shall be determined
in accordance with the laws of the United States and to the extent not preempted by such laws, by
the laws of the State of Ohio.
- 16 -
7.10 Unsecured General Creditor
Any and all of the Companys assets shall be, and remain, the general unpledged, unrestricted
assets of the Company. The Companys obligation under this Plan shall be merely that of an
unfunded and unsecured promise of the Company to pay money in the future, and the rights of the
Participants and beneficiaries shall be no greater than those of unsecured general creditors. It
is the intention of the Company that this Plan be unfunded for purposes of the Code and for
purposes of Title I of ERISA.
7.11 Headings Not Part of Plan
Headings and subheadings in this Plan are inserted for convenience of reference only and are not to
be considered in the construction of the provisions hereof.
7.12 Terms Used in the Plan
Any term used in this Plan which is defined in the Plan shall have the meaning set forth in the
Plan for all purposes of this Plan. The singular form of any word shall include the plural and the
masculine gender shall include the feminine wherever necessary for the proper interpretation of
this Plan.
7.13 Compliance with Code Section 409A
To the extent applicable, it is intended that this Plan and any deferrals of compensation made
hereunder comply with the provisions of Code Section 409A. This Plan and any deferrals or
compensation made hereunder shall be administrated in a manner consistent with this intent, and any
provisions that would cause this Plan or any grant made hereunder to fail to satisfy Code Section
409A shall have no force and effect until amended to comply with Code Section 409A (which amendment
may be retroactive to the extent permitted by Code Section 409A and may be made by the Company
without the consent of Participants). Any reference in this Plan to Code Section 409A will also
include any proposed temporary or final regulations, or any other guidance, promulgated with
respect to Code Section 409A by the U.S. Department of the Treasury or the Internal Revenue
Service. In no event, however, shall this section or any other provisions of this Plan be
construed to require the Company to provide any gross-up for the tax consequences of, or payments
under, this Plan and the Company shall have no responsibility for tax or legal consequences to any
Participant (or Beneficiary) resulting from the terms or operation of this Plan.
- 17 -
The Company hereby adopts this restatement of the Plan as set forth above.
THE J. M. SMUCKER COMPANY
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By:
Name:
|
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/s/ Mark R. Belgya
Mark R. Belgya
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Title:
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Senior Vice President and Chief Financial Officer
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Dated:
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December 31, 2010
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- 18 -
Appendix A Initial Account Balances
|
|
|
|
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Dennis Armstrong:
|
|
$
|
37,208
|
|
John Denman
|
|
$
|
74,933
|
|
John Mayer
|
|
$
|
67,507
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Kenneth Miller
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$
|
34,522
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Andrew Platt
|
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$
|
97,352
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Christopher Resweber
|
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$
|
69,089
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|
Julia Sabin
|
|
$
|
42,721
|
|
Albert Yeagley
|
|
$
|
31,175
|
|
- 19 -
Exhibit 10.5
THE J. M. SMUCKER COMPANY
TOP MANAGEMENT SUPPLEMENTAL
RETIREMENT BENEFIT PLAN
(JANUARY 1, 2009 RESTATEMENT)
THE J. M. SMUCKER COMPANY
TOP MANAGEMENT SUPPLEMENTAL
RETIREMENT BENEFIT PLAN
(JANUARY 1, 2009 RESTATEMENT)
The J. M. Smucker Company Top Management Supplemental Retirement Benefit Plan was established
effective January 1, 1985, and amended and restated effective May 1, 1994, for the purpose of
supplementing the retirement benefits of certain officers and other key management employees of The
J. M. Smucker Company and its subsidiaries who are selected to participate in the Plan, and is
intended to provide benefits for career employees of an Employer. The Plan was again amended and
restated in its entirety, effective May 1, 1999, for individuals who retired, died or entered into
pay status on or after August 1, 1998 to reflect the benefit changes made by the May 1, 1999 plan
restatement beginning with the calendar month following the date on which the individual retired,
died or entered into pay status, and was further amended effective November 1, 2003, as to
individuals who retired, died or otherwise terminated employment as of that date. The Plan has
been operated in good faith compliance with the provisions of Code §409A and the regulations and
other guidance promulgated thereunder. The Company amended and restated the Plan in good faith,
effective January 1, 2005, in order to comply with Code §409A and the regulations and other
guidance promulgated thereunder, and now again amends and restates the Plan to clarify certain
provisions in order to more fully assure that the Plan is compliant with Code §409A.
1
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the meanings
indicated:
1.1 The Plan means the supplemental retirement benefit plan as set forth herein, together
with all amendments thereto, which Plan shall be called The J. M. Smucker Company Top Management
Supplemental Retirement Benefit Plan.
1.2 The Company means The J. M. Smucker Company, an Ohio corporation, its corporate
successors and assigns, or any corporation or any affiliated or related entity, partnership,
proprietorship, limited liability company, with or into which said corporation may be merged,
consolidated or reorganized, or to which substantially all of its assets may be sold.
1.3 A Subsidiary means any corporation 50% or more of the issued and outstanding stock of
which is owned or controlled by the Company, directly or indirectly, or any other related entity,
including a partnership, a limited liability company or a sole proprietorship, 50% or more of the
interests of which are owned by the Company either directly or indirectly.
1.4 An Employer means the Company and any Subsidiary.
1.5 A Participant means a key executive of the Company or of a Subsidiary who is selected
from time to time by the board of directors to participate in the Plan. A Participants selection
and approval to participate in the Plan shall be evidenced in writing in the form of a contract
between the Participant and the Company.
1.6 The Retirement Plan means The J. M. Smucker Company Employees Retirement Plan.
1.7 The Final Average Monthly Salary of a Participant means the Participants average
monthly base compensation as provided in the Retirement Plan but determined using
2
the highest aggregate base compensation, management bonuses and Christmas bonuses received by the
Participant during any 60 consecutive full calendar months of employment prior to the earlier of
his retirement or other termination of employment or the date of any termination of the Retirement
Plan. Except as provided below, for purposes of calculating Final Average Monthly Salary, any
bonus earned by a Participant during a fiscal year of the Company shall be treated as having been
paid to the Participant on the last day of the fiscal year to which such bonus relates, rather than
on the later date of actual payment to the Participant. Only five (5) consecutive years bonuses
will be taken into consideration in determining Final Average Monthly Salary. However, any bonus
paid to a Participant after his termination of employment will be included in determining Final
Average Monthly Salary only if such inclusion serves to increase his Final Average Monthly Salary;
if inclusion of such bonus would cause his Final Average Monthly Salary to decrease, then such
bonus shall be disregarded and an earlier years bonus used in selecting the five (5) consecutive
years bonuses to be taken into consideration.
1.8 A Participants Normal Retirement Date means the date on which he attains age 65.
1.9 The Social Security Offset Amount of a Participant means his estimated monthly Primary
Insurance Amount under the federal Social Security Act as in effect on the day immediately
preceding the earlier of his retirement or other termination of employment or any termination of
the Plan; moreover, if such event occurs before the Participant attains age 62, his estimated
monthly Primary Insurance Amount shall be equal to the amount he would receive at age 62 on the
assumption that from and after the date of his retirement or termination the Participant will
receive no further compensation which is treated as wages for purposes of the Act. Provided,
however, if an Employee previously had incurred a Total Disability and was entitled to receive
long-term disability benefits under any plan maintained by an Employer,
3
computation of his monthly Primary Insurance Amount upon subsequent retirement under the Plan shall
be based on the Act in effect on his date of disability retirement. All estimates hereunder shall
be made by the Company, upon the advice of an actuary, using standards of uniform and
non-discriminatory application.
1.10 A Participants Monthly Retirement Benefit means the amount of monthly benefit to which
he is entitled under the terms of this Plan, as determined in accordance with Article II hereof.
1.11 The Years of Service of a Participant means the Participants years of benefit
service under the Retirement Plan but determined including any periods of employment after his
Normal Retirement Date. Years of Service shall include fractional years to the nearest 1/10th year
based upon the number of days since the employment anniversary date.
1.12 Actuarial Equivalent for purposes of determining the single lump sum equivalent
optional form of payment provided in Section 2.6 of the Plan, means equality in value of the
aggregate amounts expected to be received under the single life annuity payable at the
Participants date of benefit commencement, and the single lump sum form of payment and shall be
determined using the following:
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(a)
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Mortality Rates shall be based on a 50% male and 50% female
unisex blend of the 1994 Group Annuity Reserve table projected to 2002 using
Projection Scale AA; and
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(b)
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The Interest Rate shall be the discount rate selected by the
Company for purposes of financial reporting under SFAS No. 87 for the fiscal
year ending on the April 30 prior to the first day of the Plan Year in which
the distribution occurs.
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Actuarial Equivalent for all other purposes under the Plan shall have the same meaning as
provided in the Retirement Plan for purposes other than a single lump sum equivalent form of
payment.
4
1.13 Code means the Internal Revenue Code of 1986, as amended from time to time, and any
lawful regulations or other pronouncements relating thereto.
1.14 The Committee means the Executive Committee of the Company.
1.15 Separation from Service means a separation from service as defined in Code §409A with
the Company and all other related employers of the Company (as determined under Code §414), which
Code §409A is incorporated herein by reference, generally including the severance of the Employees
employment relationship for any reason, voluntarily or involuntarily, and with or without cause,
including without limitation, quit, discharge, retirement, death, leave of absence (including
military leave, sick leave, or other bona fide leave of absence if the period of such leave exceeds
the greater of six (6) months, or the period for which the Employees right to reemployment is
provided either by statute or by contract) or permanent decrease in service to the Company and all
such other related employers to a level that is no more than twenty percent (20%) of its prior
level.
1.16 A Specified Employee refers to an individual defined in Code §416(i) without regard to
paragraph (5) of that Section as of the date of the individuals Separation from Service determined
as provided in Treasury Regulation §1.409A-1(i).
1.17 Totally Disabled or Total Disability means the first to occur of the following
conditions, all as determined in accordance with Code §409A:
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(a)
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The Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expect to last for a
continuous period of not less than 12 months; or
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(b)
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The Participant is, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under any
plan covering employees of the Employer; or
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5
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(c)
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The Participant has been determined to be totally disabled by
the Social Security Administration.
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Wherever used herein, the masculine pronoun shall include the feminine, the singular shall
include the plural, and the plural shall include the singular.
ARTICLE II
SUPPLEMENTAL RETIREMENT BENEFITS
2.1
Vesting and Distribution Events; Separation from Service
. In order to
be vested in his Monthly Retirement Benefit hereunder, a Participant must have ten (10) Years of
Service (five (5) Years of Service with respect to death benefits) or be employed by the Employer
on his Normal Retirement Date. Distribution of vested benefits with respect to a Participant under
the Plan, other than a Grandfathered Benefit, will be payable as set forth herein, based on the
earliest to occur of such Participants Separation from Service, death (to which Article III
applies), or Total Disability (to which Section 2.2 applies) or the April 1 following the calendar
year in which such Participant attains age 70-1/2, and provided that if death occurs prior to
benefit commencement, Article III shall also be applicable. (For this purpose, in the event death
or Total Disability causes a Separation from Service, such death or Total Disability, as
applicable, shall be deemed to occur earlier than the Separation from Service.)
If Separation from Service is the earliest such event for a Participant, then the vested
Monthly Retirement Benefit shall be paid to such eligible Participant in an amount determined
pursuant to Section 2.3, commencing as of the first day of the month following the later of his
attainment of age 55 or his Separation from Service, except as such payment may be restricted by
Section 8.15, and shall be payable monthly thereafter in accordance with the terms of Section
6
2.4, in the form of an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or
(E), or in a single lump sum payment if elected under Section 2.6, and provided that the
Participants election is made in accordance with Section 2.7.
If the April 1 following the calendar year in which such Participant attains age 70-1/2 is the
earliest such event for a Participant, then the vested Monthly Retirement Benefit shall be paid to
such eligible Participant in an amount determined pursuant to Section 2.3, commencing as of such
April 1, and shall be payable monthly thereafter in accordance with the terms of Section 2.4, in
the form of an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or (E), or in
a single lump sum payment if elected under Section 2.6, and provided that the Participants
election is made in accordance with Section 2.7.
2.2
Totally Disabled
. A Participant for whom Total Disability is the first
distribution event described in Section 2.1 shall be eligible for a Monthly Retirement at his
Normal Retirement Date. The Monthly Retirement Benefit shall be paid to such eligible Totally
Disabled Participant in an amount determined pursuant to Section 2.3, commencing as of the first
day of the month following his Normal Retirement Date, except as such payment may be restricted by
Section 8.15, and shall be payable monthly thereafter in accordance with the terms of Section 2.4,
in the form of an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or (E), or
in a single lump sum payment if elected under Section 2.6, and provided that the Participants
election is made in accordance with Section 2.7.
2.3
Amount of Monthly Retirement Benefit
. A Participant whose Monthly Retirement
Benefit commences on or after his Normal Retirement Date shall be eligible for a normal retirement
Monthly Retirement Benefit in an amount equal to:
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(a)
|
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two and one-half percent of his Final Average Monthly Salary
multiplied by his Years of Service, not to exceed 20 years, plus an additional
one percent
for each Year of Service after 20 years not to exceed an additional 5 years;
less
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7
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(b)
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100 percent of his Social Security Offset Amount; less
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(c)
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the amount of his monthly retirement benefit under the
Retirement Plan. In calculating the amount of the offset under this paragraph
(c), benefits attributable to Participant contributions under the supplemental
portion of the Retirement Plan shall be disregarded. However, benefits
attributable to Company contributions under the supplemental portion of the
Retirement Plan, which are subject to this offset, shall be calculated as those
benefits which the Participant would have been eligible to receive, assuming he
had contributed to the supplemental portion of the Retirement Plan for all
periods for which he was eligible to contribute, regardless of whether such
contributions were actually made or not, less amounts determined under Section
2.3(d); less
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(d)
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the annuitized amount based on a hypothetical account balance
as a result of the Company matching contribution added to the J.M. Smucker
Company Employee Savings Plan (the Savings Plan). The amount to be offset,
if applicable, is shown in Addendum II.
|
A Participant whose Monthly Retirement Benefit commences prior to his Normal Retirement Date
shall be eligible for an early retirement Monthly Retirement Benefit in an amount determined in the
same manner as provided for a normal retirement Monthly Retirement Benefit, except that the amount
determined in Section 2.3(a) above shall be reduced by one-third of one percent for each full month
by which commencement of payment of the benefit precedes the month following the date on which the
Participant attains age 62.
2.4
Normal Form of Payment
.
(A) A Participant who becomes eligible to receive a Monthly Retirement Benefit and who
is married at the time payment of his Monthly Retirement Benefit commences shall receive
payment of a reduced benefit in the form of a qualified joint and survivor annuity that in
the event of the Participants death would provide a benefit to the Participants surviving
spouse equal to 50 percent of the benefit the Participant was receiving at the time of his
death unless a Participant elects to receive such benefit in the
form of a single life annuity, or an optional form of payment is elected (as provided in
Section 2.7) under Section 2.5 or Section 2.6 of this Plan. To receive a benefit under the
8
qualified joint and survivor form of payment, a Participants surviving spouse must be the
same spouse to whom the Participant was married at the time payment of his Monthly
Retirement Benefit commenced.
The present value of the qualified joint and survivor annuity payable to a Participant
hereunder shall be the Actuarial Equivalent of the present value of the single life annuity
otherwise payable to him under the Plan.
(B) A Participant who becomes eligible to receive a Monthly Retirement Benefit and who
is unmarried at the time payment of his Monthly Retirement Benefit commences shall receive
payment of such benefit in the form of a single life annuity unless an optional form of
payment is elected (as provided in Section 2.7) under Section 2.5 or Section 2.6 of the
Plan. Such Participant shall receive an unreduced Monthly Retirement Benefit payable for
his lifetime, the last monthly payment being for the month in which his death occurs.
2.5
Optional Forms of Payment
.
A Participant may elect to receive his supplemental retirement benefit under one of the
following optional forms of payment or in the form of a single lump sum payment in accordance with
Section 2.6, provided that such Participants election is made at the time and in such form as
provided in Section 2.7:
(A)
Option A 100% Joint and Survivor Annuity
. The Participant shall receive
a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly payment
being for the month in which his death occurs. If the Participants beneficiary survives
him, then commencing with the month following the month in which his death occurs, his
beneficiary shall receive a continuing monthly benefit equal to such reduced
9
amount for such
beneficiarys lifetime, the last monthly payment being for the month in which the death of
the beneficiary occurs.
(B)
Option B 50% Joint and Survivor Annuity
. The Participant shall receive a
reduced Monthly Retirement Benefit payable for his lifetime, the last monthly payment being
for the month in which his death occurs. If the Participants beneficiary survives him,
then commencing with the month following the month in which his death occurs, his
beneficiary shall receive a continuing monthly benefit equal to one-half of such reduced
amount for such beneficiarys lifetime, the last monthly payment being for the month in
which the death of the beneficiary occurs.
(C)
Option C 66 2/3% Joint and Survivor Annuity
. The Participant shall
receive a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly
payment being for the month in which his death occurs. If the Participants beneficiary
survives him, then commencing with the month following the month in which his death occurs,
his beneficiary shall receive a continuing monthly benefit equal to two-thirds of such
reduced amount for such beneficiarys lifetime, the last monthly payment being for the month
in which the death of the beneficiary occurs.
(D)
Option D 75% Joint and Survivor Annuity
. The Participant shall receive
a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly payment
being for the month in which his death occurs. If the Participants beneficiary survives
him, then commencing with the month following the month in which his death occurs, his
beneficiary shall receive a continuing monthly benefit equal to three-quarters of such
reduced amount for such beneficiarys lifetime, the last monthly payment being for the month
in which the death of the beneficiary occurs.
10
(E)
Option E Ten-Year Certain and Life Annuity
. The Participant
shall receive a reduced Monthly Retirement Benefit payable for his lifetime, with the
continuance after his death to the beneficiary or beneficiaries designated by him of a
monthly benefit equal to such reduced amount for the remainder, if any, of the ten-year term
commencing with the Participants beginning payment date. If any monthly benefit payments
remain unpaid upon the death of the survivor of the Participant and his beneficiary, the
remaining payments shall be made to the estate of such survivor.
A Participants beneficiary may be any person or persons selected by such Participant with his
spouses consent. The reduced monthly payments to be made to a Participant under one of the
optional forms of payment provided in Section 2.5 (A) (E) shall be in an amount which, on the
date of commencement thereof, is the Actuarial Equivalent of the monthly benefit otherwise payable
to the Participant under the Plan in lieu of which the option was elected, taking into account the
age of the Participant and the age of his beneficiary.
2.6
Single Lump Sum Form of Payment
. A Participant may elect, in accordance with the
provisions of Section 2.7, to receive his supplemental retirement benefit in the form of a single
lump sum payment. The Participant shall receive a payment in a single lump sum in an amount equal
to the Actuarial Equivalent, determined in accordance with Section 1.12 of the Plan, of the benefit
payable to the Participant at the later of age 55 or the Participants actual age at his date of
benefit commencement.
2.7
Election of Form of Benefit
. Elections with respect to Grandfathered Benefits
shall be made in accordance with Addendum I. Each Participant shall make an election to receive
his (Non-Grandfathered Benefits) supplemental retirement benefit either (1) in the normal form of
payment under the Plan as provided in Section 2.4, or one of the optional forms of benefit provided
in Section 2.5, or (2) as a single lump sum form of benefit under Section 2.6.
11
A newly eligible Participant shall make an election within thirty days of first becoming eligible under the
Plan. If a Participant does not file an election under this Section 2.7, the payment of any
Benefit hereunder shall be made in a single lump sum distribution. Subsequent changes to an
election of an alternative form of distribution, or any election to defer the commencement of
distribution, shall not be effective unless the election satisfies the following requirements:
|
(a)
|
|
a change of election will not be effective until at least
twelve (12) months after the date on which it is filed by the Participant
with the Company;
|
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(b)
|
|
a change of election with respect to a payment commencing on,
or made on, a specified date may not be filed with the Company less than twelve
(12) months prior to such date;
|
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(c)
|
|
a change of election with respect to a time of payment or a
method of payment must provide that the payment subject to the change be
deferred for a period of not less than five (5) years from the date such
payment would otherwise have been made except in the event of a payment made on
account of the Participants death or Total Disability; and
|
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(d)
|
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if a Participant has made an election to receive his benefit in
the normal form of payment provided in Section 2.4 or one of the Actuarially
Equivalent optional forms of benefit provided in Section 2.5, then the election
between the normal form of benefit and among the optional forms of benefit
provided in Section 2.5 may be made at the time of distribution.
|
The Company may impose such other restrictions and limitations on subsequent changes to an
election of an alternative form of distribution or any election to defer the commencement of
distribution as it deems appropriate.
ARTICLE III
SURVIVOR BENEFITS
3.1 If a Participant should die prior to the commencement of benefit payments under
the Plan, no benefits shall be payable under this Plan except as provided pursuant to this Article
III.
12
3.2 If a Participant who has at least five (5) Years of Service should die prior to the
commencement of benefit payments under the Plan, and if the Participant had a surviving spouse as
defined in the Retirement Plan, the surviving spouse shall be eligible for payments as if the
Participant had effectively elected Option B 50% Joint and Survivor Annuity described under
Section 2.5 and designated his spouse as his beneficiary, commencing as set forth in Section 3.3.
3.3 If a Participant had ten (10) or more Years of Service on his date of death, his survivor
benefit under this Article III shall commence on or after the later of the month next following his
date of death or the month next following the date on which he would have attained age fifty-five
(55). If a Participant had at least five (5) but less than ten (10) Years of Service on
his date of death, his survivor benefit under this Article III shall commence on the later of the
month next following his date of death or the month next following the date on which he would have
attained age sixty-five (65).
ARTICLE IV
SPECIAL CREDITING
4.1 Employees who are Participants under the Plan as of its effective date of
January 1, 1985 automatically will be credited with twenty (20) Years of Service or their actual
number of Years of Service, whichever is greater, as of the date of their retirement or other
Separation from Service.
ARTICLE V
ADMINISTRATION
13
5.1 The Company shall be responsible for the administration of the Plan. The
Company shall have all such powers as may be necessary to carry out the Plan, including the
power to determine all questions relating to eligibility for and the amount of any benefit and all
questions pertaining to claims for benefits and procedures for claim review; to resolve all other
questions arising under the Plan, including any questions of construction; and to take such further
action as the Company shall deem advisable in the administration of the Plan. The actions taken
and the decisions made by the Company hereunder shall be final and binding upon all interested
parties. Claims for benefits and claims review procedures are provided in Appendix A as attached
hereto.
ARTICLE VI
FUNDING
6.1 Benefits under the Plan shall be paid out of the general assets of the Employers
including any trust or fund created for that purpose.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 The Company reserves the right to amend or terminate the Plan at any
time, prospectively or retroactively, through an instrument executed by an officer pursuant to
authorization or ratification by the Board or by any committee designated by the Board.
Notwithstanding any such action, the Company shall be obligated to pay to all Participants any
benefits under the Plan that are accrued and vested at the date of amendment or termination of the
Plan, and in furtherance thereof, the Company shall be obligated to continue making payments in
amounts determined to any Participant already in pay status or his beneficiary and to pay benefits
to
14
remaining vested Participants in amounts no less than the benefits to which any such Participant
or his beneficiary would be entitled hereunder upon Separation from Service at the time of such
amendment or
termination regardless of whether the Participant has attained age 55 at the time of such
Separation from Service. If a trust is being used to fund assets under the Plan and the Plan is
terminated, any excess assets remaining in the trust after the full value of benefits already
accrued to Participants under the Plan has been paid to such Participants or their beneficiaries
shall revert to the Company. Except with respect to Grandfathered Benefits as defined in Addendum
I, in the event the Plan is terminated, any benefits hereunder shall remain subject to the
other provisions of the Plan regarding distribution, and distribution of such amounts shall not be
accelerated except as otherwise provided in an amendment to this Plan, and under the circumstances
permitted in accordance with Code §409A.
ARTICLE VIII
MISCELLANEOUS
8.1
Non-Alienation of Retirement Rights or Benefits
. Neither the
Participant nor any beneficiary shall encumber or dispose of his right to receive any payments
hereunder, which payments or the right thereto are expressly declared to be non-assignable and
non-transferable. Any payment which the Company is required to make hereunder may be made, in the
discretion of the Company, directly to the Participant or beneficiary or to any other person for
the use or benefit of such Participant or beneficiary or that of his dependents, if any, including
any person furnishing goods or services to or for the use or benefit of such Participant or
beneficiary or that of his dependents, if any. Each such payment may be made without the
intervention of a guardian. Any receipt by the payee shall constitute a complete acquittance to
the Company with respect thereto, and the Company shall have no responsibility for the proper
application thereof.
15
8.2
No Employment Guaranteed
. Nothing herein contained shall be construed as a
commitment or agreement on the part of any person employed by the Company or any Subsidiary
to continue his employment with the Company or any Subsidiary, and nothing herein contained shall
be construed as a commitment on the part of the Company or any Subsidiary to continue the
employment or the annual salary rate of any such person for any period, and all Participants shall
remain subject to discharge to the same extent as if the Plan was never put into effect.
8.3
Interest of Participant
. The obligation of the Company under the Plan to provide
the Participant with benefits hereunder merely constitutes the unsecured promise of the Company to
make payments as provided herein, and the Participant shall have no interest in, and no lien or
prior claim upon, any property of the Company or of any Subsidiary.
8.4
Claims of Other Persons
. The provisions of the Plan shall in no event be
construed as giving any person, firm or corporation, any legal or equitable rights as against the
Company, its officers, employees, or directors, except any such rights as are specifically provided
for in the Plan or are hereafter created in accordance with the terms of the Plan.
8.5
No Competition
. The right of any Participant, surviving spouse, or other
beneficiary to a supplemental retirement benefit under the Plan will be terminated, or, if payment
thereof has begun, all further payments will be discontinued and forfeited, in the event the
Participant (i) at any time wrongfully discloses any secret process or trade secret of the Company
or any of its Subsidiaries, or (ii) engages, either directly or indirectly, as an officer, trustee,
employee, consultant, partner, or substantial shareholder, on his own account or in any other
capacity, in a business venture within the ten-year period following his retirement or termination
of employment that the Companys board of directors reasonably determines to be competitive with
the Company to a degree materially contrary to the Companys best interest.
16
8.6
Severability
. The invalidity or unenforceability of any particular provision of
the Plan shall not affect any other provision hereof, and the Plan shall be construed in all
respects as if such invalid or unenforceable provision were omitted herefrom.
8.7
Governing Law
. The Plan shall be governed by and construed in accordance with the
laws of the United States, and to the extent not preempted by such laws, the laws of the State of
Ohio.
8.8
Successors and Assigns
. The Plan and the obligations created hereunder shall be
binding upon the Company and its successors and assigns.
8.9
Dishonest Conduct of a Participant
. Notwithstanding anything to the contrary
contained in the Plan, if a Participants employment with an Employer is terminated because the
Company determines the Participant (i) engaged in dishonest or fraudulent acts against an Employer,
(ii) willfully injured property of an Employer, (iii) conspired against an Employer, or (iv)
disclosed confidential information concerning an Employer, then no supplemental retirement benefit
shall be payable to the Participant or his surviving spouse under the Plan.
8.10
Employment Agreements
. The terms of this Plan shall be superseded by the terms
of any Employment Agreement or other Agreement between a Participant and an Employer. In the event
of any conflict between the provisions of this Plan and any such Agreement, the Agreement shall
control.
8.11
Distribution of Small Amounts
. Notwithstanding any provision of the Plan to the
contrary, if, at any time following Separation from Service, the Actuarial Equivalent value of a
Participants Monthly Retirement Benefit is less than $10,000, the Company may elect to distribute
such Monthly Retirement Benefit in a single lump sum payment regardless of the Participants
election.
17
8.12
Distributions of Amounts in Excess of Code § 162(m)
. Notwithstanding any
provision of the Plan to the contrary, no amount may be distributed from the Plan if the Company
reasonably anticipates that such amount would not be deductible under Code §162(m), as
determined by the Board of Directors in its sole discretion, and in accordance with Code §409A and
the Treasury regulations promulgated thereunder.
8.13
Distributions of Amounts Deemed Includable in Gross Income
. Notwithstanding any
provisions of the Plan to the contrary, if, at any time, a court or the Internal Revenue Service
determines that an amount of a Participants benefit hereunder is includable in the gross income of
the Participant and subject to tax, the Board of Directors of the Company may, in its sole
discretion, and in accordance with Code § 409A and the Treasury regulations promulgated thereunder,
permit a lump sum distribution of an amount equal to the amount determined to be includable in the
Participants gross income.
8.14
Distributions of Amounts in Violation of Securities Laws
. Notwithstanding any
provisions of the Plan to the contrary, a payment under the Plan may be delayed if the Company
reasonably anticipates that the making of such payment will violate Federal securities laws or
other applicable law, in the Companys sole discretion, and in accordance with Code §409A and the
Treasury regulations promulgated thereunder, provided that the payment is made on the earliest at
which the Company reasonably anticipates that the making of the payment will not cause such
violation.
8.15
Six-Month Delay of Distributions to Specified Employees
. Under no circumstances,
other than death, will a Participant who is a Specified Employee, as of the date of the
Participants Separation from Service, receive a distribution under the Plan earlier than six (6)
months following such Participants Separation from Service; provided that this provision shall
not apply to only distribution of a Grandfathered Benefit.
18
8.16
Compliance with Code §409A
. To the extent applicable, it is intended that this
Plan and any accrual of compensation made hereunder comply with the provisions of Code §409A. This
Plan and any accrual of compensation made hereunder shall be administrated in a
manner consistent with this intent, and any provisions that would cause this Plan or any grant made
hereunder to fail to satisfy Code §409A shall have no force and effect until amended to comply with
Code §409A (which amendment may be retroactive to the extent permitted by Code §409A and may be
made by the Company without the consent of Participants). Any reference in this Plan to Code §409A
will also include any proposed temporary or final regulations, or any other guidance, promulgated
with respect to Code §409A by the U.S. Department of the Treasury or the Internal Revenue Service.
In no event, however, shall this section or any other provisions of this Plan be construed to
require the Company to provide any gross-up for the tax consequences of, or payments under, this
Plan and the Company shall have no responsibility for tax or legal consequences to any Participant
(or Beneficiary) resulting from the terms or operation of this Plan.
The Company hereby adopts this Amendment and Restatement of the Plan effective as of January
1, 2009.
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THE J. M. SMUCKER COMPANY
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/s/ Mark R. Belgya
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Name: Mark R. Belgya
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Title: Senior Vice President and Chief Financial Officer
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DATED: December 31, 2010
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19
APPENDIX A
CLAIMS PROCEDURE
Section 1.1
Claims Reviewer
. For purposes of handling claims with
respect to this Plan, the Claims Reviewer shall be the benefits committee, unless another person
or organizational unit is designated by the Company as Claims Reviewer.
Section 1.2
Claims for Benefits
. An initial claim for benefits under the Plan
must be made by the Participant or his or her beneficiary in accordance with the terms of the Plan
through which the benefits are provided. Not later than 90 days after receipt of such a claim, the
Claims Reviewer will render a written decision on the claim to the claimant, unless special
circumstances require the extension of such 90-day period. If such extension is necessary, the
Claims Reviewer shall provide the Participant or the Participants beneficiary with written
notification of such extension before the expiration of the initial 90-day period. Such notice
shall specify the reason or reasons for such extension and the date by which a final decision can
be expected. In no event shall such extension exceed a period of 90 days from the end of the
initial 90-day period.
In the event the Claims Reviewer denies the claim of a Participant or the beneficiary in whole
or in part, the Claims Reviewers written notification shall specify, in a manner calculated to be
understood by the claimant, the reason for the denial; a reference to the Plan or other document or
form that is the basis for the denial; a description of any additional material or information
necessary for the claimant to perfect the claim; an explanation as to why such information or
material is necessary; and an explanation of the applicable claims procedure.
Should the claim be denied in whole or in part and should the claimant be dissatisfied with
the Claims Reviewers disposition of the claimants claim, the claimant may have a full and fair
review of the claim by the Company (but not the same person who reviewed the initial
20
claim, or
subordinate of such person) upon written request therefore submitted by the claimant or the
claimants duly authorized representative and received by the Company within 60 days after the
claimant receives written notification that the claimants claim has been denied In connection with
such review, the claimant or the claimants duly authorized representative shall be entitled to
review pertinent documents and submit the claimants views as to the issues, in writing. The
Company shall act to deny or accept the claim within 60 days after receipt of the claimants
written request for review unless special circumstances require the extension of such 60-day
period. If such extension is necessary, the Company shall provide the claimant with written
notification of such extension before the expiration of such initial 60-day period. In all events,
the Company shat act to deny or accept the claim within 120 days of the receipt of the claimants
written request for review. The action of the Company shall be in the form of a written notice to
the claimant and its contents shall include all of the requirements for action on the original
claim.
In no event may a claimant commence legal action for benefits the claimant believes are due to
the claimant until the claimant has exhausted all of the remedies and procedures afforded the
claimant by this Appendix A.
21
ADDENDUM I
PROVISIONS WITH RESPECT TO
GRANDFATHERED BENEFITS
ARTICLE I
DEFINITION
1.1
Grandfathered Benefits Defined
. Grandfathered Benefits or
Grandfathered Portion of a Benefit means amounts of Compensation deferred by a Participant before
January 1, 2005 under the Plan to which the Participant had a legally binding right to be paid, and
that right was earned and vested prior to January 1, 2005. Grandfathered Benefits shall be subject
to the rules and provisions of the Plan in effect on December 31, 2004, as provided in this
Addendum I. The amount of a Participants Grandfather Benefit shall be determined in accordance
with the provisions of Code §409A and Treasury regulation §1.409A- 6 and any additional guidance
that may be issued by the Department of Treasury or the Internal Revenue Service and the provisions
of the Plan and this Addendum I. Section references in this Addendum I are references to sections
of this Addendum I unless otherwise specified.
ARTICLE II
GRANDFATHERED RETIREMENT BENEFITS
2.1
Grandfathered Benefits Upon Normal Retirement.
A Participant who
retires from employment with his Employer on or after his Normal Retirement Date, or who has left
active employment prior to his Normal Retirement Date under conditions of eligibility for a
long-term disability benefit under any plan maintained by an Employer and is receiving long-term
disability benefits on his Normal Retirement Date, shall be eligible for a normal retirement
Monthly Retirement Benefit as determined under Section 2.3 of the Plan.
22
A Grandfathered Benefit consisting of a normal retirement Monthly Retirement Benefit shall be
paid to an eligible Participant commencing as of the first day of the month following the month in
which he retires, and shall be payable monthly thereafter in accordance with the terms of Section
2.4, in the form of an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or
(E), or in a single lump sum payment elected under Section 2.6, provided that the Participants
election is made in accordance with Section 2.7 of this Addendum I.
Notwithstanding the foregoing, a Participant who is still employed by an Employer on the April
1 following the calendar year in which he attains age 70-1/2 shall commence receiving the
Grandfathered Portion of his Monthly Retirement Benefit provided under this Section 2.1 as of April
1 following the calendar year in which he attains age 70-1/2.
2.2
Grandfathered Benefits Upon Early Retirement
. A Participant who retires from
employment with his Employer at or after age 55, but prior to his Normal Retirement Date, who has
at least ten (10) Years of Service, and who is not eligible for a short or long term disability
benefit under any plan maintained by an Employer, shall be eligible for an early retirement Monthly
Retirement Benefit as determined under Section 2.3 of the Plan.
A Grandfathered Benefit consisting of an early retirement Monthly Retirement Benefit shall be
paid to an eligible Participant commencing as of the first day of the month following the month in
which he retires and shall be payable monthly thereafter in accordance with the terms of Section
2.4, an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or (E), or in a
single lump sum payment elected under Section 2.6, provided that the Participants election is made
in accordance with Section 2.7 of this Addendum I.
2.3
Grandfathered Benefits Upon Termination of Employment
. The Plan is intended to
provide benefits for career employees of an Employer. Therefore, a Participant who terminates his
employment with his Employer for any reason other than death and who is not
23
eligible for any
retirement benefit under the Plan or a short or long term disability benefit under any plan
maintained by an Employer, shall not be eligible for any Monthly Retirement Benefit under the Plan,
except that such a Participant, who has at least ten (10) Years of Service, is eligible for a
deferred Monthly Retirement Benefit in an amount determined after his termination of employment in
the same manner as provided for an early retirement Monthly Retirement Benefit and as determined
under Section 2.3 of the Plan.
A Grandfathered Benefit consisting of a deferred Monthly Retirement Benefit shall be paid to
an eligible Participant commencing as of the first day of the month following the month in which he
attains age 55 and shall be payable monthly thereafter in accordance with the terms of Section 2.4,
an optional form of benefit elected under Section 2.5 (A), (B), (C), (D) or (E), or in a single
lump sum payment elected under Section 2.6, provided that the Participants election is made in
accordance with Section 2.7 of this Addendum I.
2.4
Normal Form of Payment of Grandfathered Benefits
. A Participant who becomes
eligible to receive a Grandfathered Monthly Retirement Benefit and who is married at the time
payment of his Monthly Retirement Benefit commences shall receive payment of his Grandfathered
Benefit in accordance with the provisions of Section 2.4 of the Plan, provided that a Participants
election of forms of optional distribution or of a lump sum distribution as to Grandfathered
Benefits shall be made in accordance with the provisions of the Plan in effect on December 31, 2004
and this Addendum I.
2.5
Optional Forms of Payment with Respect to a Grandfathered Benefit
. A
Participant may elect to receive his Grandfathered Benefit under one of the following optional
forms of payment or in the form of a single lump sum payment in accordance with Section 2.6,
provided that such Participants election is made at the time and in such form as provided in
Section 2.7:
24
(A)
Option A 100% Joint and Survivor Annuity
. The retired Participant
shall receive a reduced Monthly Retirement Benefit payable for his lifetime, the last
monthly payment being for the month in which his death occurs. If the Participants
beneficiary survives him, then commencing with the month following the month in which his
death occurs, his beneficiary shall receive a continuing monthly benefit equal to such
reduced amount for such beneficiarys lifetime, the last monthly payment being for the
month in which the death of the beneficiary occurs.
(B)
Option B 50% Joint and Survivor Annuity
. The retired Participant shall
receive a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly
payment being for the month in which his death occurs. If the Participants beneficiary
survives him, then commencing with the month following the month in which his death
occurs, his beneficiary shall receive a continuing monthly benefit equal to one-half of
such reduced amount for such beneficiarys lifetime, the last monthly payment being for
the month in which the death of the beneficiary occurs.
(C)
Option C 66 2/3% Joint and Survivor Annuity
. The retired Participant
shall receive a reduced Monthly Retirement Benefit payable for his lifetime, the last
monthly payment being for the month in which his death occurs. If the Participants
beneficiary survives him, then commencing with the month following the month in which his
death occurs, his beneficiary shall receive a continuing monthly benefit equal to
two-thirds of such reduced amount for such beneficiarys lifetime, the last monthly
payment being for the month in which the death of the beneficiary occurs.
(D)
Option D 75% Joint and Survivor Annuity
. The retired Participant shall
receive a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly
payment being for the month in which his death occurs. If the Participants
25
beneficiary survives him, then commencing with the month following the month in which his death
occurs, his beneficiary shall receive a continuing monthly benefit equal to three-quarters
of such reduced amount for such beneficiarys lifetime, the last monthly payment being for
the month in which the death of the beneficiary occurs.
(E)
Option E Ten-Year Certain and Life Annuity
. The retired Participant
shall receive a reduced Monthly Retirement Benefit payable for his lifetime, with the
continuance after his death to the beneficiary or beneficiaries designated by him of a
monthly benefit equal to such reduced amount for the remainder, if any, of the ten-year
term commencing with the retired Participants beginning payment date. If any monthly
benefit payments remain unpaid upon the death of the survivor of the Participant and his
beneficiary, the remaining payments shall be made to the estate of such survivor.
A Participants beneficiary may be any person or persons selected by such Participant with his
spouses consent. The reduced monthly payments to be made to a retired Participant under one of
the optional form of payment provided in Section 2.5 (A) (E) shall be in an amount which, on the
date of commencement thereof, is the Actuarial Equivalent of the monthly benefit otherwise payable
to the Participant under the Plan in lieu of which the option was elected, taking into account the
age of the Participant and the age of his beneficiary.
2.6
Single Lump Sum Form of Payment of Grandfathered Benefit.
A Participant may
elect, in accordance with the provisions of Section 2.7, to receive his Grandfathered Benefit in
the form of a single lump sum payment. The retired Participant shall receive a payment in a single
lump sum in an amount equal to the Actuarial Equivalent, determined in accordance with Section 1.12
of the Plan payable to the Participant at the later of age 55 or the Participants actual age at
his date of employment termination or retirement.
26
2.7
Election of Form of Grandfathered Benefit
.
(a) Each Participant shall make an election to receive his Grandfathered Benefit either (l) in
the normal form of payment under the Plan as provided in Section 2.4, of the Plan or one of the
optional forms of benefit provided in Section 2.5, or (2) as a single lump sum form of benefit
under Section 2.6. Each Participant may, but shall not be required to change his distribution
election prior to the beginning of each Plan Year, provided that a Participant s election to
receive a single lump sum form of benefit pursuant to Section 2.6, or to change his or her prior
election from an election to receive a single lump sum form of benefit to an election to receive an
annuity form of benefit shall not be valid unless the election is made at least one (1) year prior
to such Participants earliest date of distribution of benefits under the Plan. If a Participant
does not file an election under this Section 2.7, the payment of any Grandfathered Benefit
hereunder shall be made in a single lump sum distribution.
(b) If a Participant has made an election to receive his benefit in the normal form of payment
provided in Section 2.4 or one of the Actuarially Equivalent optional forms of benefit provided in
Section 2.5, then the election between the normal form of benefit and among the optional forms of
benefit provided in Section 2.5 may be made at the time of distribution.
ARTICLE III
SURVIVOR BENEFITS WITH RESPECT TO GRANDFATHERED BENEFITS
Grandfathered Survivor Benefits shall be determined and distributed in accordance
with Article III of the Plan, except that retirement or termination of employment shall be
substituted for Separation from Service in Article III.
27
ADDENDUM II
In January 1, 2008 the Company froze benefit accruals under the Retirement Plan for participants
age 40 and under, and amended the Savings Plan to provide an enhanced Company matching
contribution.
The table below represents the amount to be offset as provided in Section 2.3 (d) of the Plan for
Mark Smucker and Paul Wagstaff. The offset represents the annuitized benefit provided by the
enhanced Company match contribution established January 1, 2008.
The table is based on a hypothetical balance created by a 3% Company match paid starting January 1,
2008 and made each year until the executive reaches the retirement ages listed below. This amount
assumes yearly increases in CPI of 3.0% and investment earnings of 7.5%. The balance is annuitized
using the RP2000 Mortality Table to reflect benefits accruing under the enhanced matching
contribution provided under the Savings Plan without any adjustment projected to 2020 using Scale
AA and a 7.5% discount rate.
The assumptions used to determine the hypothetical balances and annuitized benefits are intended to
be long term assumptions. The Company may review these assumptions and modify them in the future
if appropriate. New annuitized benefit amounts will be determined based on any revised
assumptions, replacing the amounts below.
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Annuitized Value of Additional 3% Savings Plan Match
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Age
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Annuitized Benefit
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Age
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Annuitized Benefit
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55
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$23,491.42
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60
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$42,614.89
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56
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$26,564.16
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61
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$47,806.26
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57
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$29,970.19
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62
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$53,580.59
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58
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$33,750.02
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63
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$60,010.02
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59
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$37,947.97
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64
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$67,166.35
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65
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$75,149.53
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28
Exhibit 10.6
THE J. M. SMUCKER COMPANY
VOLUNTARY DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2009)
The J. M. Smucker Company Deferred Compensation Plan (hereinafter referred to as the Plan),
established effective as of May 1, 2003, by The J. M. Smucker Company, (hereinafter referred to as
the Company) and will be maintained by the Company for the purpose of providing benefits for
certain employees as provided herein. The Plan was amended and restated in good faith, effective
January 1, 2005, in order to comply with Code §409A and the regulations and other guidance
promulgated thereunder, and is now further amended to clarify certain provisions of the Plan in
order to assure more fully that the Plan is compliant with Code §409A.
ARTICLE I
ELIGIBILITY AND PARTICIPATION
Section 1.1
Participants
. The Companys Board of Directors has identified
certain members of management who are highly compensated employees eligible to participate in the
Plan and has provided such individuals with written notice of eligibility (each a Participant).
Section 1.2
Elections to Defer
. The individuals described in Section 1.1
shall be eligible to participate in the Plan and may do so by filing a written election with the
Company in such form as approved by the Company. In the first year in which a Participant becomes
eligible to participate in the Plan, in order to participate in the Plan, the newly eligible
Participant must
make an election to defer compensation for services to be performed for the Company within 30 days
after he or she becomes eligible. Subsequent elections to defer payment of compensation that would
otherwise be paid as annual base salary must be made before the beginning of the calendar year for
which the compensation is earned. Subsequent elections to defer payment of compensation that would
otherwise be paid as an annual bonus award must be made before the beginning of the fiscal year
(May 1) for which the bonus compensation is earned.
Section 1.3
Participant Accounts
. For each Participant, the Company shall
establish and maintain a separate deferred compensation account (the Voluntary Deferral Account).
The amount of each Participants compensation which is deferred pursuant to the deferral election
form shall be credited to the Voluntary Deferral Account as of the date such compensation otherwise
would be payable. Participants shall always be 100% percent vested in the balance in their
Voluntary Deferral Account and any earnings and losses on such amounts. In addition, for each
Participant who has a Grandfathered Benefit, as defined in this Section 1.3, the Company shall
determine the portion of the Participants Voluntary Deferral Account that is a Grandfathered
Benefit (as defined in this Section 1.3) (the Grandfathered Portion) which shall consist of all
amounts to which a Participant has a legally binding right to be paid and to which the right to be
paid was earned and vested prior to January 1, 2005, and any earnings or losses on such amounts
(the Grandfathered Benefit). Determination of the Grandfathered Benefit shall be made in
accordance with the provisions of Code § 409A and Treasury Regulation §1.409A-6(a)(3)(ii) and (iv).
No amount shall actually be set aside for payment under the Plan, and the Voluntary Deferral
Account shall be maintained for record keeping purposes only. Any Participant to whom an amount is
credited under the Plan shall be deemed a
general, unsecured creditor of the Company.
Section 1.4
Elections to Defer Compansation
. Any Participant may defer all or
any portion (up to the limits specified in Section 2.1 of this Plan) of his or her compensation
otherwise earned by him or her for the calendar year or fiscal year, as applicable, beginning after
the date of such election. Any amounts deferred shall be paid to the Participant only as provided
in this Plan. Any Participant may change the amount of, or suspend, future deferrals with respect
to compensation otherwise payable to him or her for calendar or fiscal years, as applicable,
beginning after the date of change or suspension. The election to defer shall be irrevocable as to
the deferred compensation for the period for which the election is made.
ARTICLE II
DEFERRED COMPENSATION
Section 2.1
Deferred Compensation
. Each Participant will have the right to
defer up to fifty percent (50%) of his/her respective annual base salary and up to one hundred
percent (100%) of his/her respective annual bonus award, and such amounts will be deemed
contributed to the Participants Voluntary Deferral Account. Annually, the Company will provide to
each Participant an election to defer form, either as a paper form or electronically, which must be
completed before: (i) December 31, in order to be effective for the subsequent calendar years
compensation that would otherwise have been paid as annual base salary, and (ii) April 30, in order
to be effective for the subsequent fiscal years compensation that would otherwise have been paid
as an annual bonus award.
Section 2.2
Deemed Investment Earnings
. All amounts credited under the terms
of the Plan to the Voluntary Deferral Account maintained in the name of a Participant by the
Company shall be credited with earnings or losses based upon the Participants deemed investments
made pursuant to an investment election form provided by the Company either as a paper form or
electronically. The investment vehicles available pursuant to this Plan are listed in
Exhibit
A
attached to the Plan. Such earnings or losses shall continue to be credited to the
Participants balance in the Voluntary Deferral Account until the entire amount credited to the
account has been distributed to the Participant or to the Participants beneficiary in accordance
with a beneficiary designation form delivered to the Company. The Company retains the right to
change the available investment vehicles at its sole discretion. Participants will have the right
to change deemed investment vehicles in accordance with administrative procedures adopted by the
Company by completing new investment elections in the paper or electronic form provided by the
Company.
ARTICLE III
DISTRIBUTION
Section 3.1
Distribution of Grandfathered Benefit
. Notwithstanding any
provisions of the Plan to the contrary, distribution of a Grandfathered Benefit shall be determined
in accordance with the provisions of the Plan in effect on December 31, 2004, and as provided on
Addendum I
to the Plan.
Section 3.2
Distribution of Nongrandfathered Benefit
. Distribution
of amounts deferred with respect to a Participant under the Plan, other than a Grandfathered
Benefit, will be payable as set forth below or in Section 3.3, as applicable, based on the earliest
to occur of such Participants Separation from Service, death (to which Section 3.3(a) applies) or
Total Disability (to which Section 3.3(b) applies). In the event death causes a Separation from
Service, death shall be deemed to be the earliest event to occur under the Plan.
If Separation from Service is the earliest such event for a Participant (and such Separation
from Service does not occur within the two years following a Change in Control, in which case
Section 3.3(c) applies) then payment shall be made or commence on the first anniversary of the date
on which such Participant has a Separation from Service. Such distributions will be made in ten
annual installments on the first through the tenth anniversaries of the date the Participant has
such a Separation from Service, and shall reflect any gains or losses in the Participants
Voluntary Deferral Account in such manner as the Company shall determine. In the alternative, the
Participant may select one of the distribution alternatives set forth below:
(a) a lump sum payment made within 60 days of such Separation from Service; or
(b) substantially equal annual installments for not less than two (2) and not greater than ten
(10) years. Distribution shall commence on the first anniversary of the date on which the
Participant has such Separation from Service, with subsequent installments made on each anniversary
date following the date of the first installment. The final installment will be the balance of the
Participants Voluntary Deferral Account.
Selection of an alternative form of distribution must be made prior to the calendar year or
fiscal year, as applicable, in which the compensation would be otherwise paid, as provided in
Section 1.2 of the Plan. Subsequent changes to an election of an alternative form of distribution
or any
election to defer the commencement of distribution, with respect to amounts deferred in any
calendar year or fiscal year, as applicable, shall not be effective unless the election satisfies
the following requirements:
(1) A change of election will not be effective until at least twelve (12) months after the
date on which it is filed by the Participant with the Company.
(2) A change of election with respect to a payment commencing on, or made on, a specified date
may not be filed with the Company less than twelve (12) months prior to such date.
(3) A change of election with respect to a time of payment or a method of payment must provide
that the payment subject to the change be deferred for a period of not less than five (5) years
from the date such payment would otherwise have been made except in the event of a payment made on
account of the Participants death or Total Disability.
The Company may impose such other restrictions and limitations on subsequent changes to an election
relating to the time or form of distribution as it determines appropriate.
Section 3.3
Distribution of Nongrandfathered Benefit in Event of Death, Total Disability
or Separation after a Change in Control
. To the extent applicable pursuant to Section 3.2:
(a) Within 30 days following the date on which a Participant dies, the Company will distribute
to the Participants primary beneficiary in a single lump sum the amount credited to the
Participants Voluntary Deferral Account. If the primary beneficiary is no longer alive, then such
amounts shall be distributed to the Participants secondary beneficiary. If a Participant has not
designated a beneficiary, or if no designated beneficiary is living on the date of distribution,
then such amounts shall be distributed to such Participants spouse, or if deceased, or none, then
to the Participants children, per stirpes, or if none, then to the Participants estate.
(b) Within 30 days following the date on which a Participant incurs a Total Disability,
the Company will distribute to the Participant in a single lump sum the amount credited to his
Voluntary Deferral Account.
(c) If a Participant incurs a Separation from Service for any reason (whether by reason of his
voluntary or involuntary termination of employment) within the two years following a Change in
Control, the Company will distribute to the Participant in a single lump sum within 30 days
following the date of such Separation from Service the amount credited to the Participants
Voluntary Deferral Account.
Section 3.4
Distribution of Nongrandfathered Benefit upon Death following
Separation from Service
. If a Participant should die after Separation from Service and before
distribution of the full amount of the Voluntary Deferral Account has been made to the Participant
(whether before or after payments have commenced), any remaining amounts shall be distributed to
the Participants primary beneficiary by the same method as distributions were being made to the
Participant or were scheduled to be made. If the primary beneficiary is no longer alive, then such
amounts shall be distributed to the Participants secondary beneficiary. If a Participant has not
designated a beneficiary, or if no designated beneficiary is living on the date of distribution,
then, such amounts shall be distributed to such Participants spouse, or if deceased or none, then
to the Participants children per stirpes, or if none, then to the Participants estate.
Section 3.5
Distribution of Small Amounts
. If, at any time following
Separation from Service, the value of a Participants Voluntary Deferral Account is less than
$10,000, the Company may elect to distribute such account balance in a lump sum payment regardless
of the Participants election.
Section 3.6
Distributions of Amounts in Excess of Code § 162(m)
.
Notwithstanding
the above provisions, no amount may be distributed from the Plan if the Company reasonably
anticipates that such amount would not be deductible under Code §162(m), as determined by the Board
of Directors in its sole discretion, and in accordance with Code §409A and the Treasury regulations
promulgated thereunder.
Section 3.7
Distributions of Amounts Deemed Includable in Gross Income
.
Notwithstanding any provisions of the Plan to the contrary, if, at any time, a court or the
Internal Revenue Service determines that an amount in a Participants Voluntary Deferral Account is
includable in the gross income of the Participant and subject to tax, the Board of Directors of the
Company may, in its sole discretion, and in accordance with Code § 409A and the Treasury
regulations promulgated thereunder, permit a lump sum distribution of an amount equal to the amount
determined to be includable in the Participants gross income.
Section 3.8
Distributions of Amounts in Violation of Securities Laws
.
Notwithstanding any provisions of the Plan to the contrary, a payment under the Plan may be delayed
if the Company reasonably anticipates that the making of such payment will violate Federal
securities laws or other applicable law, in the Companys sole discretion, and in accordance with
Code §409A and the Treasury regulations promulgated thereunder, provided that the payment is made
on the earliest at which the Company reasonably anticipates that the making of the payment will not
cause such violation.
Section 3.9
Six-Month Delay of Distributions to Specified Employees
. Under no
circumstances, other than death as set forth above, will a Participant who is a Specified Employee,
as of the date of the Participants Separation from Service, receive a distribution under the Plan
earlier than six (6) months following such Participants Separation from Service.
ARTICLE IV
AMENDMENT AND TERMINATION OF PLAN
The Company reserves the right to amend or terminate the Plan at any time,
prospectively or retroactively, through an instrument executed by an officer pursuant to
authorization or ratification by the Board or by any committee designated by the Board. Any
termination shall be in writing and shall be effective when made. In the event the Company elects
to terminate the Plan, any amounts credited to the Voluntary Deferral Account of any Participant
shall remain subject to the provisions of the Plan (including Article III and
Addendum I
,
as applicable) and distribution will not be accelerated because of the termination of the Plan,
except as otherwise provided in an amendment to this Plan, and under the circumstances permitted in
accordance with Code §409A. Notification to Participants of any amendment or termination shall be
in writing and delivered by first class mail, addressed to each Participant at the Participants
last known address, or by such other method as the Company may determine. No amendment or
termination shall directly or indirectly reduce the balance of any Voluntary Deferral Account
described in this Plan as of the later of the date of such amendment or termination, or the
effective date of such amendment or termination. No additional credits or contributions will be
made to the Voluntary Deferral Accounts of the Participants under the Plan after termination of the
Plan, but Voluntary Deferral Accounts of the Participants under the Plan will continue to fluctuate
with investment gains and losses until all benefits are distributed to the participants or to their
beneficiaries.
ARTICLE V
CLAIMS PROCEDURE
Section 5.1
Claims Reviewer
. For purposes of handling claims with respect to
this Plan, the Claims Reviewer shall be the benefits committee, unless another person or
organizational unit is designated by the Company as Claims Reviewer.
Section 5.2
Claims for Benefits
. An initial claim for benefits under the Plan
must be made by the Participant or his or her beneficiary in accordance with the terms of the Plan
through which the benefits are provided. Not later than 90 days after receipt of such a claim, the
Claims Reviewer will render a written decision on the claim to the claimant, unless special
circumstances require the extension of such 90-day period. If such extension is necessary, the
Claims Reviewer shall provide the Participant or the Participants beneficiary with written
notification of such extension before the expiration of the initial 90-day period. Such notice
shall specify the reason or reasons for such extension and the date by which a final decision can
be expected.. In no event shall such extension exceed a period of 90 days from the end of the
initial 90-day period.
In the event the Claims Reviewer denies the claim of a Participant or the beneficiary in whole
or in part, the Claims Reviewers written notification shall specify, in a manner calculated to be
understood by the claimant, the reason for the denial; a reference to the Plan or other document or
form that is the basis for the denial; a description of any additional material or information
necessary for the claimant to perfect the claim; an explanation as to why such information or
material is necessary; and an explanation of the applicable claims procedure.
Should the claim be denied in whole or in part and should the claimant be dissatisfied with
the
Claims Reviewers disposition of the claimants claim, the claimant may have a full and fair review
of the claim by the Company (but not the same person who reviewed the initial claim, or subordinate
of such person) upon written request therefore submitted by the claimant or the claimants duly
authorized representative and received by the Company within 60 days after the claimant receives
written notification that the claimants claim has been denied In connection with such review, the
claimant or the claimants duly authorized representative shall be entitled to review pertinent
documents and submit the claimants views as to the issues, in writing. The Company shall act to
deny or accept the claim within 60 days after receipt of the claimants written request for review
unless special circumstances require the extension of such 60-day period. If such extension is
necessary, the Company shall provide the claimant with written notification of such extension
before the expiration of such initial 60-day period. In all events, the Company shall act to deny
or accept the claim within 120 days of the receipt of the claimants written request for review.
The action of the Company shall be in the form of a written notice to the claimant and its contents
shall include all of the requirements for action on the original claim.
In no event may a claimant commence legal action for benefits the claimant believes are due to
the claimant until the claimant has exhausted all of the remedies and procedures afforded the
claimant by this Article V.
ARTICLE VI
ADMINISTRATION
Section 6.1
Plan is Unfunded
. The right of a Participant or the Participants
beneficiary to receive a distribution hereunder shall be an unsecured claim against the general
assets of the Company, and neither a Participant nor his or her designated beneficiary shall have
any rights in or against any amount
credited to any Voluntary Deferral Accounts under this Plan or any other assets of the Company. The
Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended. Any funds invested
hereunder shall continue for all purposes to be part of the general assets of the Company and
available to its general creditors in the event of bankruptcy or insolvency. Voluntary Deferral
Accounts under this Plan and any benefits which may be payable pursuant to this Plan are not
subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of a Participant or a Participants beneficiary. The Plan
constitutes a mere promise by the Company to make benefit payments in the future. No interest or
right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction
of the debts of, or other obligations or claims against, such person or entity, including claims
for alimony, support, separate maintenance and claims in bankruptcy proceedings.
Section 6.2
Plan Administration
. The Plan shall be administered by the
benefits committee or such other committee as designated by the Board of Directors of the Company.
The committee administering the Plan shall have the authority, duty and power to interpret and
construe the provisions of the Plan and the duty and responsibility of maintaining records, making
the requisite calculations and disbursing the payments hereunder The Board shall have the authority
to determine and identify participants eligible to participate in the Plan.
Section 6.3
Expenses of Administration
. Expenses of administration shall be
paid by the Company. The committee administering the Plan shall be entitled to rely on all tables,
valuations, certificates, opinions, data and reports furnished by any actuary, accountant,
controller, counsel or other person employed or retained by the Company with respect to the Plan.
Section 6.4
Individual Participant Accounts
. The committee administering the
Plan shall
furnish individual annual statements of accrued benefits to each Participant, or current
beneficiary, in such form as determined by the Company or as required by law.
Section 6.5
No Guaranty of Plan Benefits or of Employment
. The sole rights of
a Participant or beneficiary under this Plan shall be to have this Plan administered according to
its provisions, to receive whatever benefits he or she may be entitled to hereunder, and nothing in
the Plan shall be interpreted as a guaranty that any funds in any trust which may be established in
connection with the Plan or assets of the Company will be sufficient to pay any benefit hereunder.
Further, the adoption and maintenance of this Plan shall not be construed as creating any contract
of employment between the Company and any Participant. The Plan shall not affect the right of the
Company to deal with any participants in employment respects, including their hiring, discharge,
compensation, and conditions of employment.
Section 6.6
Incompetent Participant
. The Company may from time to time
establish rules and procedures which it determines to be necessary for the proper administration of
the Plan and the benefits payable to an individual in the event that individual is declared
incompetent and a conservator or other person legally charged with that individuals care is
appointed. Except as otherwise provided herein, when the Company determines that such individual is
unable to manage his or her financial affairs, the Company may pay such individuals benefits to
such conservator, person legally charged with such individuals care, or institution then
contributing toward or providing for the care and maintenance of such individual. Any such payment
shall constitute a complete discharge of any liability of the Company and the Plan for such
individual.
Section 6.7
Lost Participants
. Each Participant shall keep the Company
informed of his or her current address and the current address of his or her designated
beneficiary. The Company shall not be obligated to search for any person.
Section 6.8
No Liability
. Notwithstanding any provision herein to the
contrary, neither the Company nor any individual acting as an employee or agent of the Company
shall be liable to any Participant, former Participant, designated beneficiary, or any other person
for any claim, loss, liability or expense incurred in connection with the Plan, including without
limitation, the investment performance of any deemed investments, unless attributable to fraud or
willful misconduct on the part of the Company or any such employee or agent of the Company.
Section 6.9
Applicable Law
. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the laws of the United
States, and to the extent not preempted by such laws, by the laws of the State of Ohio.
Section 6.10
Compliance with Code §409A
. To the extent applicable, it is
intended that this Plan and any deferrals of compensation made hereunder comply with the provisions
of Code §409A. This Plan and any deferrals or compensation made hereunder shall be administrated
in a manner consistent with this intent, and any provisions that would cause this Plan or any grant
made hereunder to fail to satisfy Code §409A shall have no force and effect until amended to comply
with Code §409A (which amendment may be retroactive to the extent permitted by Code §409A and may
be made by the Company without the consent of Participants). Any reference in this Plan to Code
§409A will also include any proposed, temporary or final regulations, or any other guidance,
promulgated with respect to Code §409A by the U.S. Department of the Treasury or the Internal
Revenue Service. In no event, however, shall this section or any other provisions of this Plan be
construed to require the Company to provide any gross-up for the tax consequences of any provisions
of, or payments under, this Plan and the Company shall have no responsibility for tax or legal
consequences to any Participant (or beneficiary) resulting from the terms or operation of this
Plan.
ARTICLE VII
DEFINITIONS
Whenever used in the Plan, the following words and phrases shall have the meanings set forth below
unless the context plainly requires a different meaning, and when a defined meaning is intended,
the term is capitalized in this document.
7.1 Change of Control means the definition of change of control provided in The J. M. Smucker
Company 2006 Equity Compensation Plan (the 2006 Plan) provided that, for purposes of
distributions from the Plan (other than Grandfathered Benefits), such distribution shall only be
made on the basis of a Change in Control to the extent that the event constitutes a change in
ownership or effective control of the Company or in the ownership of a substantial portion of the
assets of the Company (as determined under Code §409A, and Treasury regulation §1.409A-3(i)(5)).
7.2 Code means the Internal Revenue Code of 1986, as amended from time to time, and any lawful
regulations or other pronouncements relating thereto.
7.3 Company means The J. M. Smucker Company and any of its subsidiaries or affiliated business
entities, as determined in accordance with the provisions contained in Code §414.
7.4 Participant means any employee described in Article I of this Plan.
7.5 Plan means The J. M. Smucker Company Voluntary Deferred Compensation Plan, as of May 1,
2003, amended and restated effective January 1, 2005, and as further amended and restated herein
effective January 1, 2009, and including any subsequent amendments thereto.
7.6 Separation from Service means a separation from service as defined in Code §409A with the
Company and all other related employers of the Company (as determined under Code §414), which Code
§409A is incorporated herein by reference, generally including the severance of the Employees
employment relationship for any reason, voluntarily or involuntarily, and with or without cause,
including without limitation, quit, discharge, retirement, death, leave of absence (including
military leave, sick leave, or other bona fide leave of absence if the period of such leave exceeds
the greater of six (6) months, or the period for which the Employees right to reemployment is
provided either by statute or by contract) or permanent decrease in service to the Company and all
such other related employers to a level that is no more than twenty percent (20%) of its prior
level.
7.7 Specified Employee refers to an individual defined in Code §416(i) without regard to
paragraph (5) of that Section as of the date of the individuals Separation from Service determined
as provided in Treasury Regulation §1.409A-1(i).
7.8 Totally Disabled or Total Disability means the first to occur of the following conditions,
all as determined in accordance with Code §409A:
(a) The Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death
or can be expect to last for a continuous period of not less than 12 months, or
(b) The Participant is, by reason of any medically determinable physical or mental
impairment
that can be expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period of not less
than 3 months under any plan covering employees of the Employer, or
(c) The Participant has been determined to be totally disabled by the Social Security
Administration.
The Company hereby adopts this Amendment and Restatement of the Plan effective as of January 1,
2009.
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THE J. M. SMUCKER COMPANY
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/s/ Mark R. Belgya
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Name: Mark R. Belgya
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Title: Senior Vice President and Chief Financial Officer
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DATED: December 31, 2010
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ADDENDUM I
PROVISIONS WITH RESPECT TO GRANDFATHERED BENEFITS
Section 1.1
Grandfathered Benefits
. A Participants Grandfathered Benefit,
as defined in Section 1.3 of the Plan, shall be determined in accordance with the provisions of
Code §409A and Treasury Regulation §1.409A-6(a)(3)(ii) and (iv). Notwithstanding any provision of
the Plan to the contrary, any Grandfathered Benefit under the Plan shall be subject to the
provisions of the Plan in effect on December 31, 2004, and as provided in this
Addendum I
.
Section 1.2
Distributions Upon Retirement or Termination of Employment
.
Distribution of a Grandfathered Benefit under the Plan will commence, on the first anniversary of
the date on which a Participants employment with the Company and all other related employers of
the Company (as determined under Code §414) terminates for any reason, (other than death,
disability (as defined in the 1998 Equity and Performance Incentive Plan), or change in control (as
defined in the 1998 Equity and Performance Incentive Plan)). The distributions will be in ten
annual installments, and shall reflect any gains or losses in the Grandfathered Portion of the
Participants Voluntary Deferral Account in such manner as the Company shall determine and which is
consistent with Treasury Regulation §1.409A-6(a)(3)(iv). In the alternative, the Participant may
select one of the alternative forms of distribution set forth below. Selection of an alternative
shall be made at the time the Participant first elects to participate in the Plan in accordance
with Section 1.2 of the Plan. Distribution elections as to a Grandfathered Benefit may be
subsequently changed provided that such new election is made at least 12 months prior to the date
that distributions under the Plan would commence.
The alternative forms of distribution are:
(a) lump sum payable within 60 days of retirement or termination of employment; or
(b) substantially equal annual installments for not less than two and not greater than ten
years. Distribution shall commence on the first anniversary of the date on which the Participants
employment with the Company and any other related employers of the Company (as determined under
Code §414) terminates. Subsequent installments, if any, will be made on each anniversary date
following the date of the first installment. The final installment will be the balance of the
Grandfathered Portion of the Participants Voluntary Deferral Account.
Section 1.3
Distribution Upon Death, Disability or Change in Control.
Within
30 days following the date on which a Participants employment with the Company and all other
related employers of the Company (as determined under Code §414) terminates as a result of death,
disability (as defined in Section 1.2 of this
Addendum I
), or change in control (as defined
in Section 1.2 of this
Addendum I
), the Company will distribute in a single lump sum the
amount constituting the Grandfathered Portion of the Participants Voluntary Deferral Account in
accordance with this Plan, to the Participant, or in the event of death, to the Participants
primary beneficiary. If the primary beneficiary is no longer alive, then such amounts shall be
distributed to the Participants secondary beneficiary. If a Participant has not designated a
beneficiary, or if no designated beneficiary is living on the date of distribution, then such
amounts shall be
distributed to such Participants spouse, or if deceased, or none, then to the Participants
children, per stirpes, or if none, then to the Participants estate in a lump sum distribution as
soon as administratively feasible following such Participants death.
Section 1.4
Distribution Upon Death if Payments have Commenced.
If a
Participant should die before distribution of the full amount of the Grandfathered Portion of the
Voluntary Deferral Account has been made to the Participant, any remaining amounts shall be
distributed to the Participants primary beneficiary by the same method as distributions were being
made to the Participant. If the primary beneficiary is no longer alive, then such amounts shall be
distributed to the Participants secondary beneficiary by the same method as distributions were
being made to the Participant. If a Participant has not designated a beneficiary, or if no
designated beneficiary is living on the date of distribution, then, such amounts shall be
distributed to such Participants spouse, or if deceased, or none, then to the Participants
children per stirpes, or if none, then to the Participants estate, in a lump sum distribution as
soon as administratively feasible following such Participants death.
Section 1.5
Small Amount Distribution.
If, at any time following termination
of employment, the value of a Participants Voluntary Deferral Account is less than $10,000, the
Company may elect to distribute such account balance in a lump sum payment regardless of the
Participants election.
Section 1.6
Distributions Not Deductible Under Code § 162(m).
Notwithstanding
the above provisions, no amount may be distributed from the Plan if the Company reasonably
anticipates that such amount would not be deductible under Code §162(m), as determined by the Board
of Directors in its sole discretion.
Section 1.7
Distributions Subject to Tax.
Notwithstanding the above
provisions, if, at any time, a court or the Internal Revenue Service determines that an amount in
the Grandfathered portion of a Participants Voluntary Deferral Account is includable in the gross
income of the Participant and subject to tax, the Board of Directors of the Company may, in its
sole discretion, permit a lump sum distribution of an amount equal to the amount determined to be
includable in the Participants gross income.
Section 1.8
Distributions in Violation of Securities Laws
. Notwithstanding
the above provisions, a payment under the Plan may be delayed if the Company reasonably anticipates
that the making of such payment will violate Federal securities laws or other applicable law, in
the Companys sole discretion, provided that the payment is made on the earliest at which the
Company reasonably anticipates that the making of the payment will not cause such violation.
EXHIBIT A
TO
VOLUNTARY DEFERRED COMPENSATION PLAN
Deferred amounts may be tracked with investments in either (or a combination of):
1. Common shares of the Company; or
2. Funds of Fidelity Management and Research Company or any of its affiliates, which are available
as designated investments under the Companys 401 (k) plan.