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, 2009
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 is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 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 of 1934. Yes
o
No
þ
The Company had 118,430,106 common shares outstanding on February 28, 2009.
The Exhibit Index is located at Page No. 27.
TABLE OF CONTENTS
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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2009
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2008
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2009
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2008
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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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1,182,594
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$
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665,373
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$
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2,689,393
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$
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1,934,776
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Cost of products sold
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781,553
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469,658
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1,837,154
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1,334,589
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Cost of products sold restructuring
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262
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262
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Gross Profit
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401,041
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195,453
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852,239
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599,925
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Selling, distribution,
and administrative expenses
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211,633
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121,384
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491,856
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367,957
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Amortization
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20,558
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1,523
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23,511
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3,061
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Merger and integration costs
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32,809
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2,900
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42,419
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5,884
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Restructuring costs
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257
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705
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903
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1,606
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Other operating expense (income) net
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325
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303
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(34
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)
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(1,070
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)
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Operating Income
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135,459
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68,638
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293,584
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222,487
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Interest income
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1,822
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3,694
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5,061
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11,015
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Interest expense
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(21,959
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(10,725
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(44,017
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(31,735
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Other (expense) income net
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(966
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553
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400
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92
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Income Before Income Taxes
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114,356
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62,160
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255,028
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201,859
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Income taxes
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36,415
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19,759
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83,343
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68,531
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Net Income
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$
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77,941
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$
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42,401
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$
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171,685
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$
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133,328
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Earnings per common share:
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Net Income
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$
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0.68
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$
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0.75
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$
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2.31
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$
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2.35
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Net Income Assuming Dilution
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$
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0.68
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$
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0.75
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$
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2.30
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$
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2.33
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Dividends declared per common share
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$
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0.32
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$
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0.30
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$
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5.96
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$
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0.90
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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, 2009
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April 30, 2008
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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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359,907
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$
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171,541
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Trade receivables, less allowances
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259,107
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162,426
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Inventories:
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Finished products
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400,032
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280,568
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Raw materials
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258,419
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99,040
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658,451
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379,608
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Other current assets
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66,832
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62,632
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Total Current Assets
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1,344,297
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776,207
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PROPERTY, PLANT, AND EQUIPMENT
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Land and land improvements
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51,019
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45,461
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Buildings and fixtures
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265,416
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202,564
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Machinery and equipment
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888,588
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586,502
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Construction in progress
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59,964
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39,516
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1,264,987
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874,043
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Accumulated depreciation
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(423,386
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(377,747
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Total Property, Plant, and Equipment
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841,601
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496,296
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OTHER NONCURRENT ASSETS
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Goodwill
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2,688,849
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1,132,476
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Other intangible assets, net
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3,270,646
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614,000
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Other noncurrent assets
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101,150
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110,902
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Total Other Noncurrent Assets
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6,060,645
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1,857,378
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$
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8,246,543
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$
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3,129,881
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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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176,399
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$
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119,844
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Note payable
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350,000
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Current portion of long-term debt
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277,466
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Other current liabilities
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319,660
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119,553
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Total Current Liabilities
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1,123,525
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239,397
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NONCURRENT LIABILITIES
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Long-term debt
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910,000
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789,684
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Deferred income taxes
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1,176,563
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175,950
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Other noncurrent liabilities
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121,515
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124,997
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Total Noncurrent Liabilities
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2,208,078
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1,090,631
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SHAREHOLDERS EQUITY
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Common shares
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29,606
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13,656
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Additional capital
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4,542,926
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1,181,645
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Retained income
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371,618
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567,419
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Amount due from ESOP Trust
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(4,830
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(5,479
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Accumulated other comprehensive (loss) income
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(24,380
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42,612
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Total Shareholders Equity
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4,914,940
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1,799,853
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$
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8,246,543
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$
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3,129,881
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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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2009
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2008
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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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171,685
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$
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133,328
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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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54,016
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43,528
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Amortization
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23,511
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3,061
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Asset impairments and other restructuring charges
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262
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Share-based compensation expense
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12,836
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8,692
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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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(73,294
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(6,205
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Inventories
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(18,880
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(15,176
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Accounts payable and accrued items
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93,705
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25,096
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Other adjustments
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25,431
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(11,344
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Net cash provided by operating activities
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289,010
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181,242
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INVESTING ACTIVITIES
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Businesses acquired, net of cash acquired
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(72,149
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(166,963
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Additions to property, plant, and equipment
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(84,888
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(53,562
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Proceeds from sale of business
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3,407
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Purchases of marketable securities
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(229,405
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Sales and maturities of marketable securities
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1,308
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256,861
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Disposals of property, plant, and equipment
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2,567
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1,766
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Other net
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6,877
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(793
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Net cash used for investing activities
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(146,285
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(188,689
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FINANCING ACTIVITIES
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Proceeds from long-term debt
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400,000
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400,000
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Repayments of long-term debt
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(148,000
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Dividends paid
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(347,023
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(51,478
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Purchase of treasury shares
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(3,356
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(86,300
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Proceeds from stock option exercises
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1,850
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16,680
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Other net
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(1,150
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)
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2,009
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Net cash provided by financing activities
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50,321
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132,911
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Effect of exchange rate changes
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(4,680
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4,901
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Net increase in cash and cash equivalents
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188,366
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130,365
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Cash and cash equivalents at beginning of period
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171,541
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199,541
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Cash and cash equivalents at end of period
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$
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359,907
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$
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329,906
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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 generally accepted accounting principles in the U.S. 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 footnotes required by generally accepted accounting
principles in the U.S. for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. Operating results for
the nine-month period ended January 31, 2009, are not necessarily indicative of the results that
may be expected for the year ending April 30, 2009. For further information, reference is made to
the consolidated financial statements and footnotes included in the Companys Annual Report on Form
10-K for the year ended April 30, 2008. References to the Company in the financial statements
include the accounts of wholly-owned subsidiaries and any majority-owned investment. Intercompany
transactions and accounts are eliminated in consolidation.
Note B
Folgers Merger
On November 6, 2008, the Company merged The Folgers Coffee Company (Folgers), a subsidiary of The
Procter & Gamble Company (P&G), with a wholly-owned subsidiary of the Company. Under the terms
of the agreement, P&G distributed the Folgers common shares to electing P&G shareholders in a
tax-free transaction, which was immediately followed by the conversion of Folgers common stock into
Company common shares. As a result of the merger, Folgers became a wholly-owned subsidiary of the
Company. In the merger, P&G shareholders received approximately 63.2 million common shares of the
Company valued at approximately $3,366.4 million based on the average closing price of the
Companys common shares for the period beginning two trading days before and concluding two trading
days after the announcement of the transaction on June 4, 2008. After closing of the transaction
on November 6, 2008, the Company had approximately 118 million common shares outstanding. As part
of the transaction, the Companys debt obligations increased by $350.0 million as a result of
Folgers LIBOR-based variable rate note. In addition, on
October 23, 2008, the Company issued $400 million in Senior
Notes with a weighted-average interest rate of 6.6 percent. A
portion of the proceeds was used to fund the payment of the
$5 per share, one-time special dividend on the Companys
common shares, totaling approximately $274.0 million, on
October 31, 2008.
The transaction with Folgers, the leading producer of retail packaged coffee products in the United
States, is consistent with the Companys strategy to own and market number one brands in North
America. For accounting purposes, the Company is the acquiring enterprise. The merger was
accounted for as a purchase business combination. Accordingly, the results of the Folgers business
are included in the Companys consolidated financial statements from the date of the merger. The
aggregate purchase price was approximately $3,735.6 million, including $19.2 million of capitalized
transaction related expenses. In addition, the Company incurred costs of $34.8 million in 2009
that were directly related to the merger and integration of Folgers. Due to the nature of these
costs, they were expensed as incurred. Total transaction costs of $54.0 million incurred to date
include approximately $3.8 million in noncash expense items.
The Company is in the process of allocating the purchase price to the underlying assets acquired
and liabilities assumed based upon their estimated fair values at the date of the merger. The
Company will determine the estimated fair values with the assistance of independent appraisals,
discounted cash flow analyses, quoted market prices, and estimates made by management. To the
extent the purchase price exceeds the fair value of the net identifiable tangible and intangible
assets acquired, such excess will be allocated to goodwill.
5
The initial estimated fair value of the net assets acquired consists of current assets of $310.3
million, property, plant, and equipment of $323.7 million, other intangible assets of $2,672.0
million, goodwill of $1,547.2 million, other assets of $5.0 million, current liabilities of
$96.0 million and noncurrent liabilities, primarily deferred tax
liabilities, of $1,026.6 million.
The
preliminary purchase price allocation to the identifiable intangible
assets acquired is as follows:
|
|
|
|
|
|
Intangible assets with finite lives (19 year average estimated useful life)
|
|
$
|
1,379,000
|
|
Intangible assets with indefinite lives
|
|
|
1,293,000
|
|
|
Total intangible assets
|
|
$
|
2,672,000
|
|
|
The allocation of the purchase
price is preliminary and subject to adjustment following completion
of the valuation process, including the independent appraisal of the
tangible and intangible assets acquired.
The Company expects the allocation of the purchase price to be completed
in the first half of fiscal 2010. Goodwill will be assigned to operating segments upon finalization of the allocation of the purchase
price.
Had the merger occurred on May 1, 2007, unaudited, pro forma consolidated results would have been
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net sales
|
|
$
|
1,210,065
|
|
|
$
|
1,144,393
|
|
|
$
|
3,616,206
|
|
|
$
|
3,254,829
|
|
Net income
|
|
$
|
82,001
|
|
|
$
|
72,948
|
|
|
$
|
258,391
|
|
|
$
|
260,137
|
|
Net income per common share-
assuming dilution
|
|
$
|
0.69
|
|
|
$
|
0.61
|
|
|
$
|
2.19
|
|
|
$
|
2.16
|
|
|
The unaudited, pro forma consolidated results are based on the Companys historical financial
statements and those of the acquired businesses and do not necessarily indicate the results of
operations that would have resulted had the merger been completed at the beginning of the
applicable period presented, nor is it indicative of the results of operations in future periods.
Note C
Inventories
Inventories are stated at the lower of cost or market. The Company applies the last-in, first-out
(LIFO) method of accounting to the majority of coffee
inventories, accounting for approximately 34 percent of total
inventory as of January 31, 2009. All other
inventory is valued using the first-in, first-out (FIFO) method. An actual valuation of inventory under
the LIFO method is made only at the end of each year based on the inventory levels and costs at
that time. Accordingly, interim LIFO calculations are based on managements estimates of expected
year-end inventory levels and costs. Because these estimates are subject to many external factors
beyond managements control, interim results are subject to the
final year-end LIFO inventory
valuation. As of January 31, 2009, coffee inventory valued using
the LIFO method approximated its value using the FIFO method.
Note D
Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 157,
Fair Value Measurements
(SFAS 157). SFAS 157 and related
interpretations provide guidance for using fair value to measure assets and liabilities and only
applies when other standards require or permit the fair value measurement of assets and
liabilities. It does not expand the use of fair value measurement. In February 2008, the FASB
issued Staff Position No. 157-2,
Effective Date of FASB Statement No. 157
(FSP SFAS 157-2). FSP
SFAS 157-2 amends SFAS 157 to delay the effective date of the standard, as it relates to
nonfinancial assets and nonfinancial liabilities, to fiscal years beginning after November 15,
2008, (May 1, 2009, for the Company). SFAS 157 for financial
6
assets and financial liabilities was
effective for fiscal years beginning after November 15, 2007. The Company adopted the provisions
of SFAS 157 effective May 1, 2008. The adoption of SFAS 157 did not have a material impact on the
Companys condensed consolidated financial statements.
SFAS 157 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. SFAS 157 classifies these inputs into the following hierarchy:
Level 1 Inputs
Quoted prices for identical instruments in active markets.
Level 2 Inputs
Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived valuations
whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs
Instruments with primarily unobservable value drivers.
The following table is a summary of the fair values of the Companys financial assets
(liabilities).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
Fair Value at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
April 30,
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
2009
|
|
|
2008
|
|
|
Marketable securities
(A)
|
|
$
|
|
|
|
$
|
13,089
|
|
|
$
|
|
|
|
$
|
13,089
|
|
|
$
|
16,043
|
|
Other investments
and securities
(B)
|
|
|
8,674
|
|
|
|
14,631
|
|
|
|
|
|
|
|
23,305
|
|
|
|
25,563
|
|
Derivatives
(C)
|
|
|
(2,858
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,858
|
)
|
|
|
1,269
|
|
|
Total
|
|
$
|
5,816
|
|
|
$
|
27,720
|
|
|
$
|
|
|
|
$
|
33,536
|
|
|
$
|
42,875
|
|
|
|
|
|
(A)
|
|
The Companys marketable securities consist entirely of mortgage-backed
securities. The securities are broker-priced, and valued by a third party using an
evaluated pricing methodology. An evaluated pricing methodology is a valuation technique
which uses inputs that are derived principally from or corroborated by observable market
data.
|
|
(B)
|
|
The Company maintains funds for the payment of benefits associated with
nonqualified retirement plans. These funds consist of equity securities listed in active
markets and municipal bonds. The municipal bonds are valued by a third party using an
evaluated pricing methodology.
|
|
(C)
|
|
The Companys derivatives are valued using quoted market prices.
|
Note E
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.
Compensation expense related to share-based awards was $6,801 and $2,719 for the three months ended
January 31, 2009 and 2008, and $12,836 and $8,692 for the nine months ended January 31, 2009 and
2008, respectively. Of the total compensation expense for share-based awards recorded, $3,873 is
included in merger and integration costs in the Condensed Statements of Consolidated Income for the
three months and nine months ended January 31, 2009. The related tax benefit recognized on all
share-based awards was $2,165 and $864 for the three months ended January 31, 2009 and 2008, and
$4,178 and $2,951 for the nine months ended January 31, 2009 and 2008, respectively.
7
As of January 31, 2009, total compensation cost related to nonvested share-based awards not yet
recognized was approximately $33,109. The weighted-average period over which this amount is
expected to be recognized is approximately 2.7 years.
Note F
Restructuring
In 2003, the Company announced its plan to restructure certain operations as part of its ongoing
efforts to refine its portfolio, optimize its production capacity, improve productivity and
operating efficiencies, and improve the Companys overall cost base as well as service levels in
support of its long-term strategy. To date, the Company has completed a number of transactions
resulting in the rationalization or divestiture of manufacturing facilities and businesses in the
United States, Europe, and Canada, including the September 2006 sale of the Canadian nonbranded
businesses, which were acquired as part of International Multifoods Corporation, to Horizon Milling
G.P., a subsidiary of Cargill and CHS Inc. The restructurings resulted in the reduction of
approximately 410 full-time positions.
The Company expects to incur total restructuring costs of approximately $69 million related to
these initiatives, of which $59.4 million has been incurred since the announcement of the
initiatives in March 2003. The balance of the costs and remaining cash payments, estimated to be
approximately $9.6 million and $1.6 million, respectively, are related to the Canadian
restructuring and are anticipated to be incurred through 2009.
The following table summarizes the activity with respect to the restructuring and related asset
impairment charges recorded and reserves established and the total amount expected to be incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
Asset
|
|
|
Equipment
|
|
|
|
|
|
|
|
|
|
Separation
|
|
|
Charges
|
|
|
Relocation
|
|
|
Other Costs
|
|
|
Total
|
|
|
Total expected restructuring charge
|
|
$
|
16,900
|
|
|
$
|
20,700
|
|
|
$
|
6,900
|
|
|
$
|
24,500
|
|
|
$
|
69,000
|
|
|
Balance at May 1, 2007
|
|
$
|
528
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
528
|
|
First quarter charge to expense
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
260
|
|
|
|
313
|
|
Second quarter charge to expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
|
|
588
|
|
Third quarter charge to expense
|
|
|
|
|
|
|
262
|
|
|
|
64
|
|
|
|
641
|
|
|
|
967
|
|
Fourth quarter charge to expense
|
|
|
|
|
|
|
1,248
|
|
|
|
48
|
|
|
|
1,583
|
|
|
|
2,879
|
|
Cash payments
|
|
|
(176
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
(3,072
|
)
|
|
|
(3,360
|
)
|
Noncash utilization
|
|
|
|
|
|
|
(1,510
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,510
|
)
|
|
Balance at April 30, 2008
|
|
$
|
405
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
405
|
|
First quarter charge to expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
519
|
|
Second quarter charge to expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
127
|
|
Third quarter charge to expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257
|
|
|
|
257
|
|
Cash payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(903
|
)
|
|
|
(903
|
)
|
|
Balance at January 31, 2009
|
|
$
|
405
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
405
|
|
|
Remaining expected
restructuring charge
|
|
$
|
400
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,200
|
|
|
$
|
9,600
|
|
|
Total restructuring charges were $257 and $967 for the three months ended January 31, 2009 and
2008, and $903 and $1,868 for the nine months ended January 31, 2009 and 2008, respectively.
Expected employee separation costs are being recognized over the estimated future service period of
the related employees. The obligation related to employee separation costs is included in other
current liabilities in the Condensed Consolidated Balance Sheets.
Long-lived asset charges include impairments and accelerated depreciation related to machinery and
equipment that will be used at the affected production facilities until they close or are sold.
Other costs include miscellaneous expenditures associated with the Companys restructuring
initiative and are
8
expensed as incurred. These costs include employee relocation, professional
fees, and other closed facility costs.
Note G
Common Shares
At January 31, 2009, 150,000,000 common shares were authorized. There were 118,425,290 and
54,622,612 shares outstanding at January 31, 2009 and April 30, 2008, respectively. Shares
outstanding are shown net of 10,176,822 and 10,807,615 treasury shares at January 31, 2009 and
April 30, 2008, respectively.
Note H
Reportable Segments
The Company operates in one industry: the manufacturing and marketing of food products. The
Company has three reportable segments: U.S. retail market, U.S. retail coffee market, and special
markets. The U.S. retail market segment includes the consumer and consumer oils and baking
strategic business areas. This segment primarily represents the domestic sales of
Smuckers
®
,
Jif
®
, Crisco
®
, Pillsbury
®
, Eagle Brand
®
, Hungry Jack
®
, White Lily
®
, and
Martha White
®
branded
products to retail customers. The U.S. retail coffee market segment represents the domestic sale
of
Folgers
®
, Millstone
®
, and
Dunkin Donuts
®
branded coffee to retail customers. The special
markets segment is comprised of the international, foodservice, beverage, and Canada strategic
business areas. Special markets segment products are distributed domestically and in foreign
countries through retail channels, foodservice distributors and operators (i.e., restaurants,
schools and universities, health care operations), and health and natural foods stores and
distributors.
The following table sets forth reportable segment information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. retail market
|
|
$
|
549,258
|
|
|
$
|
502,174
|
|
|
$
|
1,656,387
|
|
|
$
|
1,455,553
|
|
U.S. retail coffee market
|
|
|
442,933
|
|
|
|
|
|
|
|
442,933
|
|
|
|
|
|
Special markets
|
|
|
190,403
|
|
|
|
163,199
|
|
|
|
590,073
|
|
|
|
479,223
|
|
|
|
|
Total net sales
|
|
$
|
1,182,594
|
|
|
$
|
665,373
|
|
|
$
|
2,689,393
|
|
|
$
|
1,934,776
|
|
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. retail market
|
|
$
|
110,259
|
|
|
$
|
79,379
|
|
|
$
|
297,080
|
|
|
$
|
256,544
|
|
U.S. retail coffee market
|
|
|
90,218
|
|
|
|
|
|
|
|
90,218
|
|
|
|
|
|
Special markets
|
|
|
26,982
|
|
|
|
25,206
|
|
|
|
74,171
|
|
|
|
67,630
|
|
|
|
|
Total segment profit
|
|
$
|
227,459
|
|
|
$
|
104,585
|
|
|
$
|
461,469
|
|
|
$
|
324,174
|
|
|
|
|
Interest income
|
|
|
1,822
|
|
|
|
3,694
|
|
|
|
5,061
|
|
|
|
11,015
|
|
Interest expense
|
|
|
(21,959
|
)
|
|
|
(10,725
|
)
|
|
|
(44,017
|
)
|
|
|
(31,735
|
)
|
Amortization
|
|
|
(20,558
|
)
|
|
|
(1,523
|
)
|
|
|
(23,511
|
)
|
|
|
(3,061
|
)
|
Share-based compensation expense
|
|
|
(2,928
|
)
|
|
|
(2,719
|
)
|
|
|
(8,963
|
)
|
|
|
(8,692
|
)
|
Restructuring costs
|
|
|
(257
|
)
|
|
|
(967
|
)
|
|
|
(903
|
)
|
|
|
(1,868
|
)
|
Merger and integration costs
|
|
|
(32,809
|
)
|
|
|
(2,900
|
)
|
|
|
(42,419
|
)
|
|
|
(5,884
|
)
|
Corporate administrative expenses
|
|
|
(33,667
|
)
|
|
|
(27,929
|
)
|
|
|
(90,295
|
)
|
|
|
(83,309
|
)
|
Other unallocated (expense) income
|
|
|
(2,747
|
)
|
|
|
644
|
|
|
|
(1,394
|
)
|
|
|
1,219
|
|
|
|
|
Income before income taxes
|
|
$
|
114,356
|
|
|
$
|
62,160
|
|
|
$
|
255,028
|
|
|
$
|
201,859
|
|
|
|
|
9
Note I
Long-Term Debt and Financing Arrangements
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
January 31, 2009
|
|
|
April 30, 2008
|
|
|
6.77% Senior Notes due June 1, 2009
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
6.60% Senior Notes due November 13, 2009
|
|
|
202,466
|
|
|
|
204,684
|
|
7.94% Series C Senior Notes due September 1, 2010
|
|
|
10,000
|
|
|
|
10,000
|
|
4.78% Senior Notes due June 1, 2014
|
|
|
100,000
|
|
|
|
100,000
|
|
6.12% Senior Notes due November 1, 2015
|
|
|
24,000
|
|
|
|
|
|
6.63% Senior Notes due November 1, 2018
|
|
|
376,000
|
|
|
|
|
|
5.55% Senior Notes due April 1, 2022
|
|
|
400,000
|
|
|
|
400,000
|
|
|
Total long-term debt
|
|
$
|
1,187,466
|
|
|
$
|
789,684
|
|
Current portion of long-term debt
|
|
|
277,466
|
|
|
|
|
|
|
Total long-term debt less current portion
|
|
$
|
910,000
|
|
|
$
|
789,684
|
|
|
On October 23, 2008, the Company issued $400 million in Senior Notes in two series with maturity
dates of November 1, 2015 and November 1, 2018. A portion of the proceeds from the Notes was used
to fund costs related to the Folgers merger and the payment of the $5
per share one-time special dividend, totaling approximately $274.0
million, on October 31, 2008.
In addition, as part of the merger on November 6, 2008, the Companys debt obligations increased by
$350.0 million as a result of Folgers term loan facility with two banks. Interest on the facility is
based on prevailing federal funds rate, U.S. prime, or LIBOR, as determined by the Company, and is
payable either on a quarterly basis, or at the end of a borrowing term. At January 31, 2009, the
interest rate on the facility was 1.8 percent. This facility matures on November 9, 2009.
All of the Companys Senior Notes are unsecured and interest is paid annually on the 6.60 percent
Senior Notes and semiannually on the other notes. The 6.60 percent Senior Notes are guaranteed by
Diageo plc. The guarantee may terminate, in limited circumstances, prior to the maturity of the
notes. Among other restrictions, the note purchase agreements contain certain covenants relating
to liens, consolidated net worth, and sale of assets as defined in the agreements. The Company is
in compliance with all covenants.
10
Note J
Earnings per Share
The following table sets forth the computation of earnings per common share and earnings per common
share assuming dilution.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,941
|
|
|
$
|
42,401
|
|
|
$
|
171,685
|
|
|
$
|
133,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
|
|
|
114,075,455
|
|
|
|
56,400,147
|
|
|
|
74,247,728
|
|
|
|
56,716,734
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
65,011
|
|
|
|
167,425
|
|
|
|
117,350
|
|
|
|
250,285
|
|
Restricted stock
|
|
|
423,102
|
|
|
|
255,693
|
|
|
|
304,370
|
|
|
|
239,719
|
|
|
|
|
Weighted-average shares assuming dilution
|
|
|
114,563,568
|
|
|
|
56,823,265
|
|
|
|
74,669,448
|
|
|
|
57,206,738
|
|
|
|
|
Net income per common share
|
|
$
|
0.68
|
|
|
$
|
0.75
|
|
|
$
|
2.31
|
|
|
$
|
2.35
|
|
|
|
|
Net income per common share assuming dilution
|
|
$
|
0.68
|
|
|
$
|
0.75
|
|
|
$
|
2.30
|
|
|
$
|
2.33
|
|
|
|
|
Note K
Pensions and Other Postretirement Benefits
The components of the Companys net periodic benefit cost for defined benefit pension plans and
other postretirement benefits are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
|
Defined Benefit Pension Plans
|
|
|
Other Postretirement Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
1,452
|
|
|
$
|
1,739
|
|
|
$
|
241
|
|
|
$
|
323
|
|
Interest cost
|
|
|
6,420
|
|
|
|
6,538
|
|
|
|
623
|
|
|
|
634
|
|
Expected return on plan assets
|
|
|
(7,302
|
)
|
|
|
(8,940
|
)
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss (gain)
|
|
|
327
|
|
|
|
254
|
|
|
|
(182
|
)
|
|
|
(131
|
)
|
Other
|
|
|
323
|
|
|
|
341
|
|
|
|
(122
|
)
|
|
|
(113
|
)
|
|
Net periodic
benefit cost (credit)
|
|
$
|
1,220
|
|
|
$
|
(68
|
)
|
|
$
|
560
|
|
|
$
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31,
|
|
|
|
Defined Benefit Pension Plans
|
Other Postretirement Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
4,419
|
|
|
$
|
5,335
|
|
|
$
|
726
|
|
|
$
|
1,028
|
|
Interest cost
|
|
|
19,875
|
|
|
|
19,421
|
|
|
|
1,919
|
|
|
|
1,892
|
|
Expected return on plan assets
|
|
|
(22,659
|
)
|
|
|
(26,495
|
)
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss (gain)
|
|
|
1,029
|
|
|
|
760
|
|
|
|
(548
|
)
|
|
|
(393
|
)
|
Other
|
|
|
971
|
|
|
|
1,090
|
|
|
|
(366
|
)
|
|
|
(331
|
)
|
|
Net periodic benefit cost
|
|
$
|
3,635
|
|
|
$
|
111
|
|
|
$
|
1,731
|
|
|
$
|
2,196
|
|
|
11
Note L
Comprehensive Income
The following table summarizes the components of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net income
|
|
$
|
77,941
|
|
|
$
|
42,401
|
|
|
$
|
171,685
|
|
|
$
|
133,328
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(3,741
|
)
|
|
|
(14,915
|
)
|
|
|
(51,854
|
)
|
|
|
21,138
|
|
Unrealized
(loss) gain on available-for-sale securities
|
|
|
(1,861
|
)
|
|
|
(188
|
)
|
|
|
(3,855
|
)
|
|
|
20
|
|
Unrealized
(loss) gain on cash flow hedging derivatives
|
|
|
(1,374
|
)
|
|
|
3,719
|
|
|
|
(11,283
|
)
|
|
|
6,561
|
|
Pension and other postretirement liabilities
|
|
|
|
|
|
|
(353
|
)
|
|
|
|
|
|
|
3,431
|
|
|
Comprehensive income
|
|
$
|
70,965
|
|
|
$
|
30,664
|
|
|
$
|
104,693
|
|
|
$
|
164,478
|
|
|
Note M
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
not currently party to any pending proceedings which could reasonably be expected to have a
material adverse effect on the Company.
Note N
Income Taxes
During the three months ended January 31, 2009, the Companys unrecognized tax benefits decreased
by $2,171 to $11,051, primarily as a result of state settlement negotiations and expiring statute
of limitations periods. This decrease was reflected in the effective tax rate for the quarter. Of
the remaining unrecognized tax benefits, $5,916 would affect the effective tax rate, if recognized.
Within the next twelve months, it is reasonably possible that the Company could decrease its
unrecognized tax benefits by an additional $2,164, primarily as a result of expiring statute of
limitations periods.
Note O
Recently Issued Accounting Standards
Effective May 1, 2008, the Company adopted the financial statement presentation requirements of
Financial Accounting Standards Board (FASB) Staff Position No. FIN 39-1,
An Amendment to FASB
Interpretation No. 39,
(FSP FIN 39-1). Among other amendments, FSP FIN 39-1 requires the Company
to make an accounting policy election to offset or not offset fair value amounts recognized for
derivative instruments and fair value amounts recognized for the right to reclaim cash collateral
or the obligation to return cash collateral arising from derivative instruments recognized at fair
value with the same counterparty under a master netting arrangement. The effects of FSP FIN 39-1
are to be applied retrospectively to all periods presented. 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 $16,503 and $12,634 at
January 31, 2009 and April 30, 2008, respectively, that are included in other current assets in the
Condensed Consolidated Balance Sheets. Prior to adoption, the Companys cash margin accounts were
included in cash and cash equivalents in the Condensed Consolidated Balance Sheets as they were not
considered material. The retrospective application of FSP FIN 39-1 had no impact on the Companys
financial position or results of operations for all periods presented and resulted in an increase
of $2.8 million in cash provided by operating activities for the nine months ended January 31,
2008.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 (revised),
Business Combinations
(SFAS 141R). SFAS 141R continues
to require the purchase method of accounting to be applied to all business combinations, but it
significantly changes the accounting for certain aspects of business combinations. SFAS 141R
establishes principles and requirements for how the Company recognizes the assets acquired and
liabilities assumed, recognizes the goodwill acquired,
12
and determines what information to disclose
to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R
is effective for business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008, (May 1, 2009, for the
Company).
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,
Disclosures
about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133
(SFAS 161). SFAS 161 seeks to improve financial reporting of derivative instruments and hedging
activities by requiring enhanced disclosures regarding the impact on financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008, (February 1, 2009, for the Company).
In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3,
Determination of the Useful
Life of Intangible Assets
(FSP 142-3). FSP 142-3 amends the factors to be considered in
developing renewal or extension assumptions used to determine the useful life of intangible assets
under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets
.
Its intent is to improve the consistency between the useful life of an intangible asset and the
period of expected cash flows used to measure its fair value. This FSP is effective for fiscal
years beginning after December 15, 2008, (May 1, 2009, for the Company).
In June 2008, the FASB issued FSP Emerging Issues Task Force 03-6-1,
Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities
(FSP EITF
03-6-1). FSP EITF 03-6-1 clarifies that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and are to be included in the computation of earnings per share under the
two-class method described in SFAS No. 128,
Earnings Per Share
. This FSP is effective for fiscal
years beginning after December 15, 2008, (May 1, 2009, for the Company), and requires all presented
prior period earnings per share data to be adjusted retrospectively.
In
December 2008, the FASB issued FSP FAS No. 132(R)-1,
Employers Disclosures about Postretirement
Benefit Plan Assets
(FSP FAS No. 132R-1). FSP FAS No. 132R-1 provides guidance on employers
disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP
is effective for fiscal years ending after December 15, 2009,
(April 30, 2010, for the Company).
The Company is currently assessing the impact, if any, on the consolidated financial statements of
recently issued accounting standards that are not yet effective for the Company.
Note P
Reclassifications
Certain prior year amounts have been reclassified to conform to current year classifications.
13
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, 2009
and 2008, respectively. Results for the three-month and nine-month periods ended January 31, 2009,
include the results of The Folgers Coffee Company (Folgers) since the completion of the merger on
November 6, 2008.
This
Company is the owner of all trademarks, except
Pillsbury
®
is a trademark of The Pillsbury Company, used under license; and
Dunkin
Donuts
®
is a registered trademark of DD IP Holder LLC used
under license.
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
%
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
%
|
|
|
|
(Dollars in millions)
|
|
Net sales
|
|
$
|
1,182.6
|
|
|
$
|
665.4
|
|
|
$
|
517.2
|
|
|
|
78
|
%
|
|
$
|
2,689.4
|
|
|
$
|
1,934.8
|
|
|
$
|
754.6
|
|
|
|
39
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
(491.7
|
)
|
|
|
|
|
|
|
(491.7
|
)
|
|
|
|
|
|
|
(558.1
|
)
|
|
|
|
|
|
|
(558.1
|
)
|
|
|
|
|
Foreign exchange
|
|
|
16.0
|
|
|
|
|
|
|
|
16.0
|
|
|
|
|
|
|
|
19.0
|
|
|
|
|
|
|
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales without acquisitions
and foreign exchange
|
|
$
|
706.9
|
|
|
$
|
665.4
|
|
|
$
|
41.5
|
|
|
|
6
|
%
|
|
$
|
2,150.3
|
|
|
$
|
1,934.8
|
|
|
$
|
215.5
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales were $1,182.6 million in the third quarter of 2009, an increase of $517.2 million or 78
percent, compared to the third quarter of 2008. Acquisitions contributed approximately $491.7
million of the increase, including $468.5 million from Folgers, while the foreign exchange impact,
primarily due to the weakening Canadian dollar, reduced net sales by approximately $16.0 million.
Excluding acquisitions and foreign exchange, net sales increased six percent reflecting a 13
percent net pricing gain which offset a seven percent volume and mix decline.
Over the last year, the Company has implemented price increases necessary to offset rising costs.
While pricing was the main driver of the net sales growth, a number of categories experienced
volume gains, including
Pillsbury
®
baking mixes and frostings,
Hungry Jack
®
pancakes and syrups,
and canned milk, reflecting current back-to-home meal trends. Volume declines were concentrated in
oils and flour, as anticipated, due to significant price increases taken over the prior year in
these categories.
During January 2009, the U.S. Food and Drug Administration initiated a recall of another
manufacturers foodservice peanut butter and ingredient peanut products. As a result, volume in the retail peanut butter category declined approximately 22
percent in January 2009. The Companys products experienced a lesser decline and these category
pressures are expected to continue through the fourth quarter.
Company net sales for the first nine months of 2009 were $2,689.4 million, an increase of 39
percent, compared to $1,934.8 million in the first nine months of 2008. Acquisitions contributed
approximately $558.1 million of the net sales increase. Excluding acquisitions and foreign
exchange, net sales increased 11 percent for the first nine months of 2009 compared to 2008
primarily reflecting the net pricing gains over the prior year.
14
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,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Gross profit
|
|
|
33.9
|
%
|
|
|
29.4
|
%
|
|
|
31.7
|
%
|
|
|
31.0
|
%
|
Selling, distribution, and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and selling
|
|
|
10.0
|
%
|
|
|
9.4
|
%
|
|
|
10.0
|
%
|
|
|
9.8
|
%
|
Distribution
|
|
|
3.6
|
%
|
|
|
3.3
|
%
|
|
|
3.5
|
%
|
|
|
3.4
|
%
|
General and administrative
|
|
|
4.3
|
%
|
|
|
5.5
|
%
|
|
|
4.8
|
%
|
|
|
5.8
|
%
|
|
Total selling, distribution, and administrative expenses
|
|
|
17.9
|
%
|
|
|
18.2
|
%
|
|
|
18.3
|
%
|
|
|
19.0
|
%
|
|
Amortization
|
|
|
1.7
|
%
|
|
|
0.2
|
%
|
|
|
0.9
|
%
|
|
|
0.2
|
%
|
Restructuring and merger and integration costs
|
|
|
2.8
|
%
|
|
|
0.5
|
%
|
|
|
1.6
|
%
|
|
|
0.4
|
%
|
Other operating expense (income)
|
|
|
0.0
|
%
|
|
|
0.2
|
%
|
|
|
0.0
|
%
|
|
|
(0.1
|
%)
|
|
Operating income
|
|
|
11.5
|
%
|
|
|
10.3
|
%
|
|
|
10.9
|
%
|
|
|
11.5
|
%
|
|
Overall, gross profit increased $205.6 million and improved from 29.4 percent to 33.9 percent of
net sales in the third quarter of 2009 compared to 2008. The primary driver of the gross profit
improvement was the addition of Folgers. The Company improved gross profit on its base business by
approximately 17 percent, or 2.6 percentage points, despite higher costs on many key ingredients.
Current pricing is more in line with these higher costs, contributing to the gross profit increase.
In addition, lower costs have been realized on certain raw materials allowing the Company to
continue to recover margin lost over the past few years while also returning some pricing to
customers. Margin gains in oils, canned milk, and regional baking brands also contributed to the
increased gross margin in the third quarter of 2009.
Selling, distribution, and administrative (SD&A) expenses increased $90.2 million, or 74 percent,
for the third quarter of 2009 compared to 2008. An increase in marketing and distribution
expenses, much of which was related to the addition of Folgers, accounted for approximately 70
percent of the SD&A increase. Most SD&A expenses, particularly selling and corporate overhead,
increased at a lesser rate than net sales resulting in an overall decrease in SD&A from 18.2
percent of net sales to 17.9 percent, further contributing to the improvement in operating margin.
Amortization expense increased $19.0 million to 1.7 percent of net sales compared to 0.2 percent of
net sales in the same period in 2008 reflecting the addition of intangible assets associated with
the Folgers transaction. The valuation of these intangible assets is preliminary, and amortization
expense in future periods may vary from the amounts recorded, depending on the final values.
Operating income increased 97 percent compared to the third quarter of 2008 and improved from 10.3
percent to 11.5 percent of net sales. Restructuring and merger and integration costs were $29.5
million higher in the third quarter of 2009 compared to 2008, as integration activities related to
Folgers commenced, reducing operating margin by 2.3 percentage points.
Year-to-date operating income increased $71.1 million, or 32 percent, from last year but decreased
from 11.5 percent to 10.9 percent of net sales. Gross profit improved from 31.0 percent of net
sales to 31.7 percent due to the addition of Folgers. For the first nine months of 2009, SD&A as a
percentage of net
sales decreased to 18.3 percent of net sales from 19.0 percent for the comparable period in 2008,
primarily due to corporate overhead expenses increasing at a lesser rate than net sales.
15
Other
During the third quarter, the Companys debt obligations increased by Folgers $350 million of
LIBOR-based variable rate debt. In addition, the Company issued $400 million in Senior Notes with
a weighted-average interest rate of 6.6 percent during the second quarter. As a result, interest
expense increased $11.2 million and $12.3 million during the third quarter and first nine months of
2009, respectively, compared to 2008.
Income tax expense increased $16.7 million, or 84 percent during the third quarter of 2009 compared
to 2008, in line with the percentage increase in income before taxes as the effective tax rate was
31.8 percent, consistent in both periods. For the first nine months of 2009 income tax expense
increased $14.8 million, or 22 percent, compared to 2008 while the effective tax rate decreased
from 33.9 percent to 32.7 percent.
Folgers Merger
On November 6, 2008, the Company completed the transaction with Folgers, a subsidiary of The
Procter & Gamble Company (P&G). The value of the transaction was approximately $3.7 billion,
including the issuance of Smucker common shares in connection with the merger and $350 million of
Folgers debt. Under the terms of the transaction agreements, P&G distributed common shares of
Folgers to participating P&G shareholders which were then automatically converted into the right to
receive Smucker common shares in the merger. Immediately following the merger, P&G shareholders
and pre-merger Company shareholders owned approximately 53.5 percent and 46.5 percent,
respectively, of the Companys approximately 118 million common shares outstanding. The Company
expects to incur one-time costs related to the transaction over the two fiscal years following the
merger of approximately $100 million to $125 million, including certain amounts during the first
year expected to be allocated to goodwill.
The merger was accounted for as a purchase business combination, with the Company treated as the
acquiring entity.
16
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31,
|
|
|
Nine Months Ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(Dollars in millions)
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. retail market
|
|
$
|
549.3
|
|
|
$
|
502.2
|
|
|
|
9
|
%
|
|
$
|
1,656.4
|
|
|
$
|
1,455.6
|
|
|
|
14
|
%
|
U.S. retail coffee market
|
|
$
|
442.9
|
|
|
$
|
|
|
|
|
n/a
|
|
|
$
|
442.9
|
|
|
$
|
|
|
|
|
n/a
|
|
Special markets
|
|
$
|
190.4
|
|
|
$
|
163.2
|
|
|
|
17
|
%
|
|
$
|
590.1
|
|
|
$
|
479.2
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. retail market
|
|
$
|
110.3
|
|
|
$
|
79.4
|
|
|
|
39
|
%
|
|
$
|
297.1
|
|
|
$
|
256.5
|
|
|
|
16
|
%
|
% of net sales
|
|
|
20.1
|
%
|
|
|
15.8
|
%
|
|
|
|
|
|
|
17.9
|
%
|
|
|
17.6
|
%
|
|
|
|
|
U.S. retail coffee market
|
|
$
|
90.2
|
|
|
$
|
|
|
|
|
n/a
|
|
|
$
|
90.2
|
|
|
$
|
|
|
|
|
n/a
|
|
% of net sales
|
|
|
20.4
|
%
|
|
|
n/a
|
|
|
|
|
|
|
|
20.4
|
%
|
|
|
n/a
|
|
|
|
|
|
Special markets
|
|
$
|
27.0
|
|
|
$
|
25.2
|
|
|
|
7
|
%
|
|
$
|
74.2
|
|
|
$
|
67.6
|
|
|
|
10
|
%
|
% of net sales
|
|
|
14.2
|
%
|
|
|
15.4
|
%
|
|
|
|
|
|
|
12.6
|
%
|
|
|
14.1
|
%
|
|
|
|
|
With the addition of Folgers, the Company added the U.S. retail coffee market reportable segment
representing the domestic sale of
Folgers
®
,
Millstone
®
, and
Dunkin Donuts
®
branded coffee to
retail customers. Coffee sales to other than domestic retail customers are included in the
special markets segment.
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up nine percent, with pricing accounting
for the majority of the increase. Net sales in the consumer strategic business area increased nine
percent, with gains in
Smuckers
®
fruit spreads,
Jif
®
and
Hungry Jack
®
. Acquisitions contributed
approximately one-quarter of the consumer increase offsetting volume declines in fruit spreads and
peanut butter of approximately three percent on a combined basis. Net sales in the consumer oils
and baking strategic business area were also up nine percent, with increases in
Pillsbury
®
,
Crisco
®
and
Eagle Brand
®
canned milk, primarily due to the effect of price increases. Volume gains were
realized in baking mixes, frostings, and canned milk. While total volume in the business area was
down 11 percent, much of the decline was expected and reflects the impact of last years price
increases in oils and flour.
For the first nine months of 2009, U.S. retail market segment net sales increased 14 percent
compared to the first nine months of 2008 with net sales up 12 percent in the consumer strategic
business area, and up 15 percent in the consumer oils and baking strategic business area.
U.S. retail market segment profit increased 39 percent for the quarter, ahead of the increase in
net sales, and 16 percent for the first nine months of 2009 compared to the same periods in 2008.
Much of the gain for the quarter was in the oils and baking area with almost half of the segment
profit increase attributable to improvements in the canned milk business. A better match of prices
to costs this year compared to last year accounted for most of the remainder of the profit
increase.
U.S. Retail Coffee Market
The U.S. retail coffee market contributed $442.9 million to net sales and $90.2 million in segment
profit for the third quarter and first nine months of 2009. On a pro forma basis, net sales
increased four percent for the quarter led by
Dunkin
Donuts
®
,
while
Folgers
®
and
Millstone
®
were essentially flat. The increase in
Dunkin
Donuts
®
reflects the continued shares growth of the brand over the prior year.
17
Special Markets
Net sales in the third quarter for the special markets segment increased 17 percent. Canada
strategic business area net sales were flat, as the impact of the
Europes Best
®
acquisition and
pricing gains were offset by unfavorable foreign exchange. Net sales increased in the foodservice
business area by 64 percent, as the acquisition of Folgers added $25.6 million of the increase and
the
Knotts Berry Farm
®
acquisition also contributed. The gains from acquisitions accounted for
most of the increase, and more than offset declines in the portion control business resulting from
a general decline in away-from-home dining. Net sales in the beverage business area were down
seven percent reflecting the impact of softening consumer demand attributable to the current
economic environment. For the first nine months of 2009, special markets segment net sales are up
23 percent, primarily due to acquisitions.
Special markets segment profit increased seven percent for the quarter and 10 percent for the first
nine months of 2009 compared to the same periods in 2008, again resulting from the impact of recent
acquisitions which offset the impact of higher costs, particularly in the Canada strategic business
area.
Financial Condition
Liquidity
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31,
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
Net cash provided by operating activities
|
|
$
|
289,010
|
|
|
$
|
181,242
|
|
Net cash used for investing activities
|
|
$
|
(146,285
|
)
|
|
$
|
(188,689
|
)
|
Net cash provided by financing activities
|
|
$
|
50,321
|
|
|
$
|
132,911
|
|
|
The Companys principal source of funds is cash generated from operations, supplemented as needed
by borrowings against the Companys revolving credit facility. Total cash and cash equivalents at
January 31, 2009, were $359.9 million compared to $171.5 million at April 30, 2008.
The Companys working capital requirements are greatest during the first half of its fiscal year,
primarily due to the need to build inventory levels in advance of the fall bake season, and the
seasonal procurement of fruit and vegetables.
Cash provided by operating activities was approximately $280.3 million and $289.0 million during
the three and nine-months ended January 31, 2009, respectively. Cash provided by operating
activities increased $107.8 million in the first nine months of 2009 compared to 2008, as the
impact of the Folgers business has added to net income adjusted for noncash items.
Net cash used for investing activities was approximately $146.3 million in the first nine months of
2009, compared to $188.7 million in the first nine months of 2008, consisting of $72.1 million used
for business acquisitions, primarily the
Knotts Berry Farm
®
brand, and capital expenditures of
approximately $84.9 million. The Company expects capital expenditures for fiscal 2009, including
amounts associated with Folgers, to total approximately $115 to $120 million.
Cash provided by financing activities during the first nine months of 2009 consisted primarily of
the proceeds from the Companys $400 million Senior Note placement. A portion of the proceeds was
used to fund the payment of the $5 per share one-time special dividend, totaling approximately
$274.0 million, on October 31, 2008. In addition, quarterly dividend payments of approximately
$73.0 million were made in the first nine months of 2009, resulting in total dividend payments of
$347.0 million.
18
Capital Resources
The following table presents the Companys capital structure:
|
|
|
|
|
|
|
|
|
|
|
January 31, 2009
|
|
|
April 30, 2008
|
|
|
|
|
Note payable
|
|
$
|
350,000
|
|
|
$
|
|
|
Current portion of long-term debt
|
|
|
277,466
|
|
|
|
|
|
Long-term debt
|
|
|
910,000
|
|
|
|
789,684
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
1,537,466
|
|
|
$
|
789,684
|
|
Shareholders equity
|
|
|
4,914,940
|
|
|
|
1,799,853
|
|
|
|
|
|
|
|
|
Total capital
|
|
$
|
6,452,406
|
|
|
$
|
2,589,537
|
|
|
|
|
|
|
|
|
In addition to borrowings outstanding, the Company has available a $180 million revolving credit
facility with a group of three banks that expires in 2011.
Total debt at January 31, 2009, includes $400 million in Senior Notes with a weighted-average
interest rate of 6.6 percent issued on October 23, 2008, and $350 million resulting from the
Companys guarantee of Folgers LIBOR-based variable rate note with an interest rate of 1.8 percent
at January 31, 2009.
Approximately $625 million of debt will mature through November 2009. Absent any other material
acquisitions or other significant investments, the Company believes that cash on hand, combined
with cash provided by operations, borrowings available under existing and anticipated credit
facilities, and potential future note placements will be sufficient to meet cash requirements for
the next twelve months, including capital expenditures, the payment of quarterly dividends, and
principle and interest on debt outstanding.
Contractual Obligations
The following table summarizes the Companys contractual obligations at January 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to
|
|
|
Three to
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
Three
|
|
|
Five
|
|
|
More Than
|
|
(Dollars in millions)
|
|
Total
|
|
|
One Year
|
|
|
Years
|
|
|
Years
|
|
|
Five Years
|
|
|
Debt obligations
|
|
$
|
1,537.5
|
|
|
$
|
627.5
|
|
|
$
|
10.0
|
|
|
$
|
|
|
|
$
|
900.0
|
|
Operating lease obligations
|
|
|
34.8
|
|
|
|
1.5
|
|
|
|
10.3
|
|
|
|
8.4
|
|
|
|
14.6
|
|
Purchase obligations
|
|
|
564.3
|
|
|
|
219.7
|
|
|
|
334.4
|
|
|
|
3.7
|
|
|
|
6.5
|
|
Deferred
income taxes
|
|
|
1,176.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,176.6
|
|
Other long-term liabilities
|
|
|
121.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121.5
|
|
|
Total
|
|
$
|
3,434.7
|
|
|
$
|
848.7
|
|
|
$
|
354.7
|
|
|
$
|
12.1
|
|
|
$
|
2,219.2
|
|
|
Purchase obligations in the above table include agreements to purchase goods or services that are
enforceable and legally binding on the Company. Included in this category are certain obligations
related to normal, ongoing purchase obligations in which the Company has guaranteed payment to
ensure availability of raw materials and packaging supplies. The Company expects to receive
consideration for these purchase obligations in the form of materials. The purchase obligations in
the above table do not represent the entire anticipated purchases in the future, but represent only
those items for which the Company is contractually obligated.
19
The Company expects cash provided by operations combined, as necessary, with borrowings under
existing and anticipated credit facilities, and potential future note placements will be sufficient
to repay debt obligations over the next year.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk related to changes in interest rates, commodity prices, and
foreign currency exchange rates. For further information related to changes in interest rates and
foreign currency exchange rates, reference is made to the Companys Annual Report on Form 10-K for
the year ended April 30, 2008.
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, 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.
The following sensitivity analysis presents the Companys potential loss of fair value resulting
from a hypothetical 10 percent decrease in market prices.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
January 31, 2009
|
|
|
April 30, 2008
|
|
|
Raw material commodities:
|
|
|
|
|
|
|
|
|
High
|
|
$
|
12,582
|
|
|
$
|
13,229
|
|
Low
|
|
|
2,874
|
|
|
|
3,289
|
|
Average
|
|
|
7,929
|
|
|
|
8,474
|
|
|
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 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 fair value of its derivatives
would generally be offset by an increase or decrease in the fair value of the underlying exposures.
20
Certain Forward-Looking Statements
This quarterly report contains forward-looking statements, such as projected operating results,
earnings and cash flows, that are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from any future results, performance, or achievements
expressed or implied by those forward-looking statements. The risks, uncertainties, factors and
assumptions listed and discussed in this quarterly report, including the following important
factors and assumptions, could affect the future results of the Company and could cause actual
results to differ materially from those expressed in the forward-looking statements:
|
|
|
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;
|
|
|
|
|
the successful integration of the coffee business with the Companys business,
operations, and culture and the ability to realize synergies and other potential benefits
of the merger within the time frames currently contemplated;
|
|
|
|
|
crude oil price trends and their impact on transportation, energy, and packaging costs;
|
|
|
|
|
the ability to successfully implement price changes;
|
|
|
|
|
the success and cost of introducing new products and the competitive response;
|
|
|
|
|
the success and cost of marketing and sales programs and strategies intended to promote
growth in the Companys businesses;
|
|
|
|
|
general competitive activity in the market, including competitors pricing practices and
promotional spending levels;
|
|
|
|
|
the impact of food safety concerns, involving either the Company or its competitors
products;
|
|
|
|
|
the concentration of certain of the Companys businesses with key customers and the
ability to manage and maintain key customer relationships;
|
|
|
|
|
the loss of significant customers or a substantial reduction in orders from these
customers or the bankruptcy of any such customer;
|
|
|
|
|
changes in consumer coffee preferences, and other factors affecting the coffee business,
which represents a substantial portion of the Companys business;
|
|
|
|
|
the ability of the Company to obtain any required financing;
|
|
|
|
|
the timing and amount of the Companys capital expenditures, restructuring, and merger
and integration costs;
|
|
|
|
|
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 due to the global recession and credit crisis;
|
|
|
|
|
other factors affecting share prices and capital markets generally; and
|
|
|
|
|
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 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 assume any obligation to update or revise these forward-looking statements to reflect new
events or circumstances.
21
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, 2009, (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
recorded, processed, summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms.
Changes in Internal Controls
. In connection with the Folgers merger, the Company
entered into a Transition Services Agreement (TSA) with P&G to facilitate the transition of
Folgers to the Company. Under the TSA, P&G will provide, on a fee-for-service basis, specified
services for a limited time following completion of the merger including, but not limited to:
supply chain related activities, purchasing, data management, information technology services, and
certain financial services and accounting. The Company has instituted internal controls related to
information obtained under the TSA in order to provide reasonable assurance as to the reliability
of information that is used in financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles.
Other than described above, there were no changes in the Companys internal controls over
financial reporting that occurred during the quarter ended January 31, 2009, that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
22
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, 2008, should be carefully considered,
together with the other information contained or incorporated by reference in the Quarterly Report
on Form 10-Q including risks described below and risks specific to the Companys coffee business
incorporated by reference to Exhibit 99 of the Companys Periodic Report on Form 10-Q for the
period ended October 31, 2008, and in the Companys other filings with the SEC in connection with
evaluating the Company, its business and the forward-looking statements contained in this 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.
|
|
Consumers may shift purchases to lower-priced private label or other value offerings during
economic downturns, which may adversely affect the Companys results of operations
.
|
|
|
|
During economic downturns, consumers may be less willing or able to pay a price differential for
the Companys branded products, and may increasingly purchase more lower-priced offerings and
may forego some purchases altogether. The Company has experienced increased competitive pressure
from private label products during recent periods. Retailers may also increase levels of
promotional activity for lower-priced or value offerings as they seek to maintain sales volumes
during times of economic uncertainty. Accordingly, economic downturns could reduce sales volumes
of the Companys branded products or lead to a shift in sales mix toward its lower margin
offerings, which could have an adverse effect on its results of operations.
|
|
|
|
The Companys peanut butter sales have been adversely affected by the recent recall of
another manufacturers peanut products
.
|
|
|
|
As noted in the Companys Annual Report on Form 10-K, the food industry is subject to risks
posed by food spoilage and contamination, product tampering, product recall, and consumer
product liability claims. During January 2009, the U.S. Food and
Drug Administration initiated a recall of another manufacturers
food service peanut butter and ingredient peanut products. As a
result, volume in the retail peanut butter category
declined approximately 22 percent in January 2009. The
Companys products experienced a lesser decline and these
category pressures are expect to continue through the fourth quarter.
|
|
|
|
Volatility in the equity markets or interest rates could substantially increase the
Companys pension costs and required pension contributions.
|
|
|
|
The Company sponsors qualified defined benefit pension plans and various other nonqualified
postretirement plans. The qualified defined benefit pension plans are funded with trust assets
invested in a diversified portfolio of debt and equity securities and other investments. Among
other factors, changes in interest rates, investment returns and the market value of plan assets
can (i) affect the level of plan funding; (ii) cause volatility in the net periodic pension
cost; and (iii) increase the Companys future contribution requirements. A significant decrease
in investment returns or the market value of plan assets or a significant decrease in interest
rates could increase the Companys net periodic pension costs and adversely affect its
results of operations. A significant increase in the Companys contribution requirements with
respect to qualified defined benefit pension plans could have an adverse impact on its cash
flow.
|
23
|
|
Disruptions in the financial markets may adversely affect the Companys ability to access
capital in the future
.
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|
|
|
The Company may need new or additional financing in the future to conduct its operations, expand
its business or refinance existing indebtedness. Recent disruptions in global financial markets
and banking systems have made credit and capital markets more difficult for companies to access,
even for some companies with established revolving or other credit facilities. Any sustained
weakness in the general economic conditions and/or financial markets in the United States or
globally could affect adversely the Companys ability to raise capital on favorable terms or at
all. From time to time the Company has relied, and also may rely in the future, on access to
financial markets as a source of liquidity for working capital requirements, acquisitions and
general corporate purposes. The Companys access to funds under its revolving credit facilities
is dependent on the ability of the financial institutions that are parties to those facilities
to meet their funding commitments. The obligations of the financial institutions under the
Companys revolving credit facilities are several and not joint and, as a result, a funding
default by one or more institutions does not need to be made up by the others. Longer term
volatility and continued disruptions in the capital and credit markets as a result of
uncertainty, changing or increased regulation of financial institutions, reduced alternatives or
failure of significant financial institutions could affect adversely the Companys access to the
liquidity needed for its businesses in the longer term. Such disruptions could require the
Company to take measures to conserve cash until the markets stabilize or until alternative
credit arrangements or other funding for its business needs can be arranged. The disruptions in
the capital and credit markets also have resulted in higher interest rates on publicly issued
debt securities and increased costs under credit facilities. Continuation of these disruptions
would increase the Companys interest expense and capital costs and could affect adversely its
results of operations and financial position.
|
|
|
|
If there is a significant interruption in the operation of any of the Companys facilities,
the Company may not have the capacity to service its customers in a timely manner, thereby
reducing its revenues and earnings.
|
|
|
|
A significant interruption in the operation of any of the Companys facilities, particularly
the Folgers facilities in New Orleans where approximately 80 percent of Folgers production
capacity is located, whether as a result of a natural disaster or other causes, could
significantly impair the Companys ability to operate its business. For example, in August
2005, Hurricane Katrina caused catastrophic damage to the New Orleans area. Following the
hurricane, production at Folgers New Orleans facility was interrupted for approximately two
months, resulting in a significant decline in Folgers revenues for the first half of fiscal
2006. A significant interruption in the operation of one of the Companys facilities may
affect its ability to service all of its customers, and business may be lost to its
competitors, resulting in a material adverse effect to the Companys revenues, earnings, and
financial position.
|
24
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Issuer Purchases of Equity Securities
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(a)
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(b)
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(c)
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(d)
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Maximum
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|
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|
|
|
|
|
|
|
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Number (or
|
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|
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|
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|
|
|
|
|
|
Total Number
|
|
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Approximate
|
|
|
|
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|
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of Shares
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|
Dollar Value) of
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Purchased as
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Shares That
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|
|
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Part of
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May Yet Be
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|
|
|
|
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|
|
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Publicly
|
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Purchased
|
|
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Total Number
|
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Average Price
|
|
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Announced
|
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Under the
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|
of Shares
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Paid Per
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Plans or
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Plans or
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Period
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Purchased
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Share
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Programs
|
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Programs
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November 1, 2008 November 30, 2008
|
|
|
|
|
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$
|
|
|
|
|
|
|
|
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3,744,222
|
|
December 1, 2008 December 31, 2008
|
|
|
1,420
|
|
|
|
38.79
|
|
|
|
|
|
|
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3,744,222
|
|
January 1, 2009 January 31, 2009
|
|
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5,701
|
|
|
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49.46
|
|
|
|
|
|
|
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3,744,222
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Total
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7,121
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$
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47.33
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3,744,222
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Information set forth in the table above represents activity in the Companys third fiscal
quarter of 2009.
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(a)
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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.
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(d)
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Since August 2004, the Companys Board of Directors has authorized management to
repurchase up to 10 million common shares. Share repurchases will occur at managements
discretion with no established expiration date. The Company has repurchased a total of
6,255,778 common shares since November 2004 under the buyback program authorized by the
Companys Board of Directors. At January 31, 2009, 3,744,222 common shares remain
available for repurchase under this program. Under the transaction agreement relating to
the Folgers merger and related ancillary agreements, the Company may repurchase common shares only under specific conditions. As a result, the Company does not anticipate that
it will repurchase shares for a period of at least two years following the closing of the
merger on November 6, 2008.
|
Item 6.
Exhibits.
See the Index of Exhibits that appears on Page No. 27 of this report.
25
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.
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March 10, 2009
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THE J. M. SMUCKER COMPANY
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/s/ Timothy P. Smucker
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BY TIMOTHY P. SMUCKER
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Chairman of the Board and Co-Chief Executive
Officer
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/s/ Richard K. Smucker
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BY RICHARD K. SMUCKER
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Executive Chairman and Co-Chief Executive Officer
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/s/ Mark R. Belgya
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BY MARK R. BELGYA
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Vice President and Chief Financial Officer
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26
INDEX OF EXHIBITS
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Assigned
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Exhibit No.
|
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Description
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10.1
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Top Management Supplemental Retirement Benefit Plan (Amended and Restated Effective January 1, 2007) *
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10.2
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Consulting and Noncompete Agreement of Timothy P. Smucker *
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10.3
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Consulting and Noncompete Agreement of Richard K. Smucker *
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10.4
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Voluntary Deferred Compensation Plan (Amended and Restated Effective January 1, 2005) *
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10.5
|
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Nonemployee Director Deferred Compensation Plan (Amended and Restated Effective January 1, 2007) *
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10.6
|
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Second Amendment to Defined Contribution Supplemental Retirement Plan *
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31.1
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Certification of Timothy P. Smucker pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act.
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31.2
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Certification of Richard K. Smucker pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act.
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31.3
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Certification of Mark R. Belgya pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act.
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32
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
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*
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Management contract or compensatory plan or arrangement.
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Exhibits 2, 11, 15, 18, 19, 22, 23, 24, and 99 are either inapplicable to the Company or require no answer.
27
Exhibit 10.1
THE J. M. SMUCKER COMPANY
TOP MANAGEMENT SUPPLEMENTAL
RETIREMENT BENEFIT PLAN
(JANUARY 1, 2005 RESTATEMENT)
THE J. M. SMUCKER COMPANY
TOP MANAGEMENT SUPPLEMENTAL
RETIREMENT BENEFIT PLAN
(JANUARY 1, 2005 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, 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, and the Company hereby amends and restates
the Plan, effective January 1, 2005, in order to comply with Code §409A and the regulations and
other guidance promulgated thereunder.
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 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,
2
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 retired due to permanent and total disability and was
entitled to receive long-term disability benefits under any plan maintained by an Employer,
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.
3
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 later of age
55 or the Participants actual age at date of employment termination or retirement, and the single
lump sum form of payment and shall be determined using the following:
|
a)
|
|
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;
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|
|
b)
|
|
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.
|
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.
1.13 Code means the Internal Revenue Code of 1986, as amended from time to time, and any
Regulations relating thereto.
1.14 The Committee means the Executive Committee of the Company.
4
1.15 Separation from Service means a separation from service as defined in Code §409A, which
Code §409A is incorporated herein by reference, and includes, without limitation: An employee
Separates from Service with the Company, and any related employer (as determined under Code §414),
if the employee dies, retires, becomes Totally Disabled, or otherwise has a termination of
employment with the Company or any related employer (as determined under Code §414).
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:
(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.
Wherever used herein, the masculine pronoun shall include the feminine, the singular shall
include the plural, and the plural shall include the singular.
5
ARTICLE II
SUPPLEMENTAL RETIREMENT BENEFITS
2.1
Normal Retirement
. A Participant who Separates from Service due to retirement
from his Employer on or after his Normal Retirement Date, or who has Separated from Service prior
to his Normal Retirement Date due to Total Disability and continues to be Totally Disabled on his
Normal Retirement Date, shall be eligible for a normal retirement Monthly Retirement Benefit in an
amount equal to:
|
(a)
|
|
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
|
|
|
(b)
|
|
100 percent of his Social Security Offset Amount, less
|
|
|
(c)
|
|
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 2.1(d);
less
|
|
|
(d)
|
|
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
|
6
|
|
|
Savings Plan (the Savings Plan). The amount to be offset, if applicable, is
shown in Addendum II.
|
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 Separates from Service
due to retirement or, with respect to a Participant who is Totally Disabled, attains 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.
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 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
Early Retirement
. A Participant who Separates from Service due to retirement from
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 eligible for an Ancillary Disability Benefit under the Retirement
Plan shall be eligible for an early retirement Monthly Retirement Benefit in an amount determined
after his early retirement in the same manner as provided for a normal retirement Monthly
Retirement Benefit, except that the amount determined in Section 2.1(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. 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 Separates from
7
Service due to
retirement, 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, 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 such election is made in accordance with Section 2.7.
2.3
Separation from Service
. The Plan is intended to provide benefits for career
employees of an Employer. Therefore, a Participant who Separates from Service with his Employer
for any reason other than death and who is not eligible for any retirement benefit under the Plan,
or who is eligible for an Ancillary Disability Benefit under the Retirement Plan, 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 Separation from Service in the same manner as provided for an early
retirement Monthly Retirement Benefit. 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, 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, 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 such election is made in accordance with Section 2.7.
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
8
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
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 retired Participant shall
receive a reduced Monthly Retirement Benefit payable for his lifetime, the last monthly
9
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 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
10
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 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 retired Participant shall receive a payment in a single lump sum
11
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 Severance from Service due to employment termination or retirement.
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. 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 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.
(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.
(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.
(D) 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
12
among the optional forms of benefit provided in Section 2.5 may be made at the time of
distribution.
ARTICLE III
SURVIVOR BENEFITS
3.1 If a Participant who has at least five (5) Years of Service should die after his
Separation from Service due to retirement or termination of employment but 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 the 50 percent joint and survivor option described under the
Retirement Plan and designated his spouse as his beneficiary, and such payments shall commence as
of the first day of the month following the month in which the Participants death occurs.
3.2 If a Participant who has at least five (5) Years of Service should die prior to Separation
from Service due to retirement or termination of employment, 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 the 50 percent joint and survivor option described under
the Retirement Plan and designated his spouse as his beneficiary, and such payments shall commence
on the first day of the month following the month in which the Participants death occurs.
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
13
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 Separation from Service.
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.
14
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 by action of its
board of directors. Notwithstanding any such action, the Company shall be obligated to pay any
benefits already accrued to any Participant under the Plan at the date of amendment or termination
of the Plan and to continue making payments in the amounts determined to any retired Participant or
his beneficiary, and shall be obligated to pay benefits in amounts not less than the benefits to
which a Participant or his beneficiary would be entitled hereunder upon Separation from Service due
to retirement, death or other termination of employment at the time of such amendment or
termination. 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, and to the
extent permitted under Code §409A and the Regulations promulgated thereunder, in no event shall the
termination of the Plan result in the acceleration of payment of benefits due in violation of Code
§409A and the regulations promulgated thereunder.
15
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.
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.
16
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.
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
17
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 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.
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 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.
18
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.
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.
19
EXECUTED at Orrville, Ohio, this
19th
day of
December
, 2008.
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THE J. M. SMUCKER COMPANY
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By
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/s/ Richard K. Smucker
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Title: Executive Chairman & Co-CEO
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And
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/s/ Timothy P. Smucker
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Title: Chairman of the Board & Co-CEO
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20
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 claim, or
subordinate of such
person) upon written request therefore submitted by the claimant or the claimants duly
21
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.
22
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 2.1 of the Plan.
23
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 2.2 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.
24
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 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) 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.
25
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:
(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
26
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 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.
27
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.
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.
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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.
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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 2.1 (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.
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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$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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30
Exhibit 10.2
Since 1897
December 19, 2008
Mr. Timothy Smucker
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Dear Tim:
The purpose of this letter 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. Accordingly,
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 letter agreement is a
complete amendment and restatement, effective as of January 1, 2005, of the letter agreement
between you and the Company dated May 1, 2002, and brings that agreement into 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 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.
(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 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.
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Telephone (330) 682-3000
Fax (330) 684-3370
www.smuckers.com
(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.
Certain Terminations
. If your employment terminates because of your death,
Disability or Retirement (as defined in Section 3(c)), or if you have an Involuntary Separation
from Service (as defined in Section 3(d)), your compensation will be governed by this Section 3.
(a)
Disability
. If your employment terminates on account of your having become
Disabled , (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, because you are a Specified Employee, six months after the date on which you
Separate from Service due to Disability, (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 (May 1, 1999 Restatement) (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 of the date on which you
Separate from Service due to Disability 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 termination of your employment (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 your employment terminates on account of your death, 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.
(c)
Retirement
. If you voluntarily Separate from Service other than for Good Cause
under circumstances where you are entitled, subject to the six-month delay for Specified
Employees to commence receiving your Monthly Retirement Benefit under the SERP
(Retirement), (i) the Company will pay you, within two and one-half months after the date
of Retirement, 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) and (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.
(d)
Involuntary Separation from Service
. If you have an Involuntary Separation from
Service, either because the Company terminates your employment under circumstances that
constitute a Separation from Service other than for Disability or for Cause or because you
Separate 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).
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)
Involuntary Separation from Service for Good Reason
. If you Separate from Service
for Good Reason by means of advance written notice to the Company at
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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).
(f)
Termination by the Company for Cause
. If the Company terminates your employment
and you Separate from Service 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).
(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 on demand. 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 reasonable 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
4
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 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
5
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.
(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.
6
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.
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.
7
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
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 Code §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.
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:
Name:
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/s/ Richard K. Smucker
Richard K. Smucker
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Title:
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Executive Chairman and Co-CEO
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Accepted and agreed to:
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/s/ Timothy P. Smucker
Timothy Smucker
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Date: December 19, 2008
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8
Appendix I
The following definitions will apply for purposes of the letter agreement between Timothy
Smucker dated May 1, 2002, as amended and restated effective as of January 1, 2005:
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
9
(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.
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 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).
10
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.
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(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
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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.
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Exhibit 10.3
Since 1897
December 19, 2008
Mr. Richard K. Smucker
The J.M. Smucker Company
Strawberry Lane
Orrville, OH 44667-0280
Dear Richard:
The purpose of this letter 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. Accordingly,
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 letter agreement is a
complete amendment and restatement, effective as of January 1, 2005, of the letter agreement
between you and the Company dated May 1, 2002, and brings that agreement into 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 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.
(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 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.
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Telephone (330) 682-3000
Fax (330) 684-3370
www.smuckers.com
(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.
Certain Terminations
. If your employment terminates because of your death,
Disability or Retirement (as defined in Section 3(c)), or if you have an Involuntary Separation
from Service (as defined in Section 3(d)), your compensation will be governed by this Section 3.
(a)
Disability
. If your employment terminates on account of your having become
Disabled , (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, because you are a Specified Employee, six months after the date on which you
Separate from Service due to Disability, (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 (May 1, 1999 Restatement) (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 of the date on which you
2
Separate from Service due to Disability 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 termination of your employment (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 your employment terminates on account of your death, 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.
(c)
Retirement
. If you voluntarily Separate from Service other than for Good Cause
under circumstances where you are entitled, subject to the six-month delay for Specified
Employees to commence receiving your Monthly Retirement Benefit under the SERP
(Retirement), (i) the Company will pay you, within two and one-half months after the date
of Retirement, 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) and (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.
(d)
Involuntary Separation from Service
. If you have an Involuntary Separation from
Service, either because the Company terminates your employment under circumstances that
constitute a Separation from Service other than for Disability or for Cause or because you
Separate 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).
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)
Involuntary Separation from Service for Good Reason
. If you Separate from Service
for Good Reason by means of advance written notice to the Company at
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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).
(f)
Termination by the Company for Cause
. If the Company terminates your employment
and you Separate from Service 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).
(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 on demand. 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 reasonable 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
4
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 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
5
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.
(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.
6
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.
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.
7
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
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 Code §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.
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:
Name:
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/s/ Timothy P. Smucker
Timothy P. Smucker
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Title:
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Chairman of the Board and Co-CEO
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Accepted and agreed to:
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/s/ Richard K. Smucker
Richard K. Smucker
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Date: December 19, 2008
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8
Appendix I
The following definitions will apply for purposes of the letter agreement between Richard
Smucker dated May 1, 2002, as amended and restated effective as of January 1, 2005:
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
9
(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.
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 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).
10
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.
11
(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
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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.
13
Exhibit 10.4
THE J. M. SMUCKER COMPANY
VOLUNTARY DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2005)
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 has been operated in good faith compliance with the
provisions of Code §409A and the Treasury regulations, and other guidance promulgated thereunder,
and the Company adopts this amendment and restatement, effective January 1, 2005, in order to
comply with Code § 409A and the regulations and other guidance promulgated thereunder.
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
2
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
3
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.
4
Section 3.2
Distribution of Nongrandfathered Benefit Upon Separation from
Service
. Distribution of amounts deferred under the Plan other than a Grandfathered Benefit,
will commence: on the first anniversary of the date on which a Participant has a Separation from
Service with the Company and all other related employers of the Company (as determined under Code
§414) for any reason, (other than death, Total Disability, or Change in Control). The distributions
will be in ten annual installments, 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) lump sum payable within 60 days of Separation from Service due to retirement or
termination of employment; 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 a Separation from Service. 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 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 with respect
to a calendar year or fiscal year, as applicable, shall not be effective unless the election
satisfies the
5
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.
(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.
(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.
Section 3.3
Distribution of Nongrandfathered Benefit in Event of Death, Total
Disability or Change in Control
. Within 30 days following the date on which a Participant
Separates from Service as a result of death, Total Disability, or Change in Control, the Company
will distribute in a single lump sum the amount credited to 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
6
distribution as soon as administratively feasible following such Participants death.
Section 3.4
Distribution of Nongrandfathered Benefit When Distributions Have
Commenced
. If a Participant should die before distribution of the full amount 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 3.5
Distribution of Small Amounts
. 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 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
7
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, 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.
8
ARTICLE IV
AMENDMENT AND TERMINATION OF PLAN
The Company, through the action of the Board or a committee designated by the Board, reserves
the right to amend or terminate the Plan at any time. Any such termination shall be in writing and
shall be effective when made. The termination of the Plan shall be permitted only under the
circumstances provided and in accordance with Code §409A and the regulations promulgated
thereunder. 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 other notice acknowledged in writing by the Participant. Any amounts credited to the
Voluntary Deferral Account of any Participant shall remain subject to the provisions of the Plan
and distribution will not be accelerated because of the termination of the Plan. No amendment or
termination shall directly or indirectly reduce the balance of any Voluntary Deferral Account
described in this Plan as of the effective date of such amendment or termination. Upon termination
of the Plan, distribution of amounts credited to a Participants Voluntary Deferral Account shall
only be made in accordance with the Plan and with Code §409A and the regulations promulgated
thereunder. 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. Upon termination
of the Plan, distribution of amounts credited to the Voluntary Deferral Accounts of the
Participants shall be made to the Participants or their beneficiaries in accordance with Article
III and
Addendum I
of this Plan.
9
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
10
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.
11
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
12
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
13
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. If such person is not
located within three years after the date on which payment of the Participants benefits payable
under this Plan may first be made, payment may be made as though the Participant or his or her
beneficiary had died at the end of such three-year period.
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
14
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.
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
15
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
Regulations 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 including any subsequent amendments thereto.
7.6 Separation from Service means a separation from service as defined in Code §409A, which Code
§409A is incorporated herein by reference, and includes, without limitation: An employee separates
from service with the Company, and any related employer (as determined under Code §414), if the
employee dies, retires, becomes Totally Disabled, or otherwise has a termination of employment with
the Company or any related employer (as determined under Code §414).
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
16
Treasury Regulation §1.409A-1(i).
7.8 Totally Disabled or Total Disability means the first to occur of the following conditions:
(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 January 1, 2005.
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THE J. M. SMUCKER COMPANY
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/s/ Richard K. Smucker
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DATED:
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December 19, 2008
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17
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.
Exhibit 10.5
THE J. M. SMUCKER COMPANY
NONEMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2007)
ARTICLE I
INTRODUCTION
1. 1
Purpose of the Plan.
The purpose of The J.M. Smucker Company Nonemployee Director
Deferred Compensation Plan is to provide the nonemployee Directors of The J. M. Smucker Company
(the Company) with the opportunity to defer receipt of all or a portion of compensation received
for services as a Director and to continue to align the common interest of Directors and
shareholders in enhancing the value of the Companys Common Shares. The Plan has been operated in
good faith compliance with the provisions of Code §409A and the Treasury regulations, and other
guidance promulgated thereunder, and the Company adopts this amendment and restatement on December
19, 2008, effective January 1, 2007, in order to comply with Code §409A and the regulations and
other guidance promulgated thereunder.
ARTICLE II
DEFINITIONS
As used herein, the terms set forth below shall have the following meanings:
2.1
Board
means the Board of Directors of the Company.
2.2
Change in Control
has the meaning assigned thereto in the Companys 2006 Equity
Compensation Plan, except that for purposes of Article V, Change in Control is modified as
provided in Section 5.1.
2.3
Code
means the Internal Revenue Code of 1986, as amended.
2.4
Committee
means the Executive Compensation Committee of the Board
2 5.
Common Shares
means the Common Shares, without par value, of the Company.
2.6.
Company
means The J. M. Smucker Company.
2.7.
Deferred Compensation Account
has the meaning assigned thereto in Section 3.1 hereof.
2.8
Deferred Stock Units
has the meaning assigned thereto in Section 4.1 hereof.
2.9
Director
means any nonemployee director of the Company.
2.10
Market Value per Share
means, as of any particular date, the average of the high and
low sales prices of the Common Shares as reported on the New York Stock Exchange
1
Composite Tape or, if not listed on such exchange, on any other national securities exchange on
which the Common Shares are listed, or if there are no sales on such day, on the immediately
preceding trading day during which a sale occurred. If there is no regular trading market for such
Common Shares, the Market Value per Share shall be determined by the Board.
2.11
Plan
means The J. M. Smucker Company Nonemployee Director Deferred Compensation Plan,
as amended from time to time.
ARTICLE III
ELECTIONS BY DIRECTORS
3.1
Compensation Reduction for 2007 and Later Years.
Not later than December 31 of any calendar year, beginning with December 31, 2006 for the calendar year 2007, a Director may,
by delivering an annual written election to the Corporate Secretary of the Company, direct the
Company (a) to reduce the cash compensation payable to him or her (determined without regard to the
provisions of this Section) for services as a Director during the next calendar year (including
annual retainer and committee and meeting fees) in such amount as elected by the Director and (b)
to credit the cash amount identified in subsection 3.1(a) above to an account established in the
name of the Director (a Deferred Compensation Account).
3.2
Partial Years.
If a Director first becomes a Director after January 1st of any calendar
year, the Director may, by delivering a written election to the Corporate Secretary of the Company,
direct the Company (a) to reduce the cash compensation payable to him or her for future services as
a Director during the year in such amount as elected by the Director and (b) to credit the amount
of such reduction to the Directors Deferred Compensation Account. Any such election shall be made
within 30 calendar days after an individual becomes a Director, and shall apply only to cash
compensation for services as a Director performed after the date of such election.
3.3
Elections.
All deferral elections described in this Article shall be made on an election
form specified by the Committee and delivered to Corporate Secretary of the Company. The elections
described in this Article will remain in effect for future calendar years unless a new written
deferral election form is submitted. Any subsequent election or written termination of election
shall become effective as of the first day of the calendar year following the calendar year in
which the notice is given and is effective only for cash compensation earned in such following
calendar year and thereafter. If a Director does not have a deferral election form on file with the
Corporate Secretary, he or she will receive his or her Director compensation for the year (that
would otherwise be paid in cash) in cash on a current basis.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1
Deferred Compensation Accounts.
Upon reduction of a Directors cash compensation in a
particular year, the Directors Deferred Compensation Account will be credited with a number of
deferred stock units equal to the cash amount that would have been paid to the Director divided by
the Market Value per Share of one Common Share on the date on
2
which such cash amount would have been paid (the Deferred Stock Units) The Deferred Stock Units
credited to a Directors Deferred Compensation Account (plus any shares credited pursuant to
Section 4.3 below) will represent the number of Common Shares that the Company will issue to the
Director at the times provided in Article V.
4.2
Nonforfeitable Right.
Each Director who has elected to have his or her cash compensation
reduced under this Plan shall have a nonforfeitable right to the balance from time to time of his
or her Deferred Compensation Account and all Deferred Stock Units credited to Deferred Compensation
Accounts under this Plan will be 100% vested on the date such Deferred Stock Units are credited to
the Directors Deferred Compensation Account. Each Directors Deferred Compensation Account shall
be subdivided into separate subaccounts for each year of participation (an Annual Subaccount).
4.3
Dividend Equivalents.
Dividend equivalents shall be earned on Deferred Stock Units
provided under this Plan. Such dividend equivalents shall be converted into equivalent amounts of
Deferred Stock Units and credited to each Director. Such dividend equivalents will be 100% vested
at all times and will be paid as provided in Section 5.1(b) below.
ARTICLE V
PAYMENT OF ACCOUNTS
5.1.
Time of Payment
.
(a) Distribution of each Annual Subaccount included in a Directors Deferred Compensation
Account shall commence or be made in the manner described in Section 5.2 hereof as soon as is
reasonably practicable, but not later than 60 calendar days, after a Directors separation from
service (as defined under Section 409A of the Code and Treasury Regulation Section
§1.409A-1(h)(2), (Separation from Service)), except for any delay in payments required by Section
409A of the Code, as provided in Section 5.6 of the Plan. Notwithstanding anything to the contrary
contained in this Plan (or in any election relating to this Plan), (i) if the aggregate amount
credited to any Directors Deferred Compensation Account is less than $50,000 on the date of the
Directors Separation from Service, or (ii) if a Change in Control of the Company occurs (but only
to the extent the event constitutes a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the assets of the Company (as determined
under Section 409A of the Code and the regulations promulgated thereunder)), the distribution of
the Directors entire Deferred Compensation Account shall be made, as soon as practicable, but not
later than sixty (60) calendar days, except for any delay in payments required by Section 409A of
the Code, as provided in Section 5.6, in a lump sum upon Separation from Service or the date of the
Change in Control, as the case may be.
(b) Notwithstanding anything to the contrary contained in this Plan (or in any election
relating to this Plan), dividend equivalents credited to a Director pursuant to Section 4.3 above
shall be paid to the Director in a single lump sum as soon as is reasonably practicable, but not
later than 60 calendar days, after a Directors Separation from Service, except for any delay in
payment required by Section 409A of the Code, as provided in Section 5.6 of the Plan. Thereafter,
any dividend equivalents earned on Deferred Stock Units that are paid to the Director
3
in installments following the Directors Separation from Service, as described in Section 5.2
below, shall be paid to the Director on a current basis.
5.2
Method of Distribution.
Prior to December 31 of each year, beginning with December 31,
2006, a Director shall deliver an annual election to the Corporate Secretary of the Company to
specify whether Deferred Stock Units credited to his or her Deferred Compensation Account (other
than additional Deferred Stock Units credited pursuant to Section 4.3) for the following year shall
be distributed to him or her (or his or her beneficiary): (a) in a single lump sum payment, (b) in
up to ten annual installments or (c) a combination of (a) and (b). The Director shall designate the
percentage payable under each option. Subsequent changes to an election of an alternative form of
distribution with respect to amounts in a Directors Annual Subaccount, 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 Director
with the Company; and (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; and (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 (as defined in Section 409A of the
Code and regulations promulgated thereunder). The Deferred Stock Units credited to the Directors
Annual Subaccount of his or her Deferred Compensation Account such year shall be distributed or
commence to be distributed to the Director or the Directors beneficiary at the time described in
Section 5.1 and, except for additional Deferred Stock Units credited pursuant to Section 4.3, in
the manner so specified. The amount of each installment payment with respect to an Annual
Subaccount shall be calculated by dividing the number of Deferred Stock Units that are to be paid
in installments from such Annual Subaccount in the Directors Deferred Compensation Account at the
time of each such payment by the number of remaining installments in such Annual Subaccount
(including the current installment). If a Director does not file an election under this Section
5.2, the payment of the Deferred Stock Units will be made in a single lump sum distribution. It is
intended that amounts credited to each Annual Subaccount shall be considered a separate payment
under Section 409A of the Code.
5.3
Form of Payment.
The Deferred Stock Units shall be distributed in Common Shares on a
one-for-one basis. Fractional shares shall be rounded down to the nearest whole Common Share, and
such fractional amount shall be paid in cash.
5 .4
Designation of Beneficiary.
Each Director participating in this Plan shall designate a
beneficiary or beneficiaries to whom distribution shall be made in the event of the death of the
Director before his or her entire Deferred Compensation Account is distributed and, in such case,
the balance of the Directors Deferred Compensation Account shall be distributed to the beneficiary
or beneficiaries in a single lump sum distribution as soon as is reasonably practicable, but not
later than sixty (60) days following the Directors death, even if the Director elected
distribution in installments. If there is no designated beneficiary, or no designated beneficiary
surviving at a Directors death the Directors beneficiary shall be his or her estate. Beneficiary
designations shall be made in writing. A Director may designate a new beneficiary
4
or beneficiaries at any time by delivering a new election to the Corporate Secretary of the
Company.
5.5
Taxes.
In the event any taxes are required by law to be withheld or paid from any
distributions made pursuant to the Plan, the Company (or any trustee, if applicable) shall deduct
such amounts from such distributions and shall transmit the withheld amounts to the appropriate
taxing authority.
5.6
Delayed Payments Pursuant to Code Section 409A
. Notwithstanding any provision of
the Plan to the contrary, in accordance with and subject to the provisions of Code Section 409A and
Treasury regulation 1.409A-1(h)(2)(ii), and to the extent that a payment to a Director meets the
requirements of that Code Section and regulation, in no event shall any amount be paid to a
Director before a date at least twelve (12) months after the day on which the Directors term
expires or the Director performs services for the Company (the Delayed Distribution Date), and no
amount payable to the Director on the Delayed Distribution Date will be paid to the Director if,
after the expiration of the Directors term and before the Delayed Distribution Date, the Director
performs services for the Company as a Director, an independent contractor or an employee.
ARTICLE VI
FUNDING; CREDITORS AND INSOLVENCY
6.1
Funding Mechanism for Deferred Stock Units.
The Company shall be entitled, but not
obligated, to establish a grantor trust or similar funding mechanism to fund the Companys obligations under this Plan; provided, however, that any funds contained therein shall
remain subject to the claims of the Companys general creditors. The funding mechanism shall
constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan
maintained for the purpose of providing compensation for a select group of management for purposes
of Title I of the Employee Retirement Income Securities Act of 1974.
6.2
Claims of the Companys Creditors.
The Companys obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay benefits in the
future. All Deferred Stock Units (and any corresponding assets held in a trust established for the
Plan), and any payment to be made pursuant to the Plan, shall be subject to the claims of the
general creditors of the Company, including judgment creditors and bankruptcy creditors. Neither
any Director, nor his or her beneficiaries, nor his or her heirs, successors or assigns, shall have
any secured interest in or, claim on any property or assets of the Company (or of any trust). The
rights of a Director or his or her beneficiaries to his or her Deferred Compensation Account and to
the Deferred Stock Units (and to any assets held in trust) shall be no greater than the rights of
an unsecured creditor of the Company.
ARTICLE VII
ADMINISTRATION
7. 1.
Powers of the Committee.
The Committee shall administer the Plan and resolve all
questions of interpretation arising under the Plan. The Committee shall have no discretion with
respect to Plan contributions or distributions, but shall act in an administrative capacity only.
5
7.2
Indemnity of Committee.
The Company shall indemnify the members of the Committee against
all claims, losses, damages, expenses and liabilities arising from any action or failure to act
with respect to the Plan to the extent provided in the Code of Regulations of the Company and any
applicable indemnification agreement between the Company and such member.
ARTICLE VIII
MISCELLANEOUS
8 1.
Term of Plan.
The Company reserves the right to amend the Plan or terminate the Plan at any time; provided, however, that no amendment or termination shall affect the rights of
Directors to amounts previously credited to their Deferred Compensation Accounts or to additional
credits of Deferred Stock Units pursuant to Section 4.3 hereof; and provided further, that no
amendment or termination shall apply to the then current plan year, except as permitted under
Section 409A of the Code. The Plan shall remain in effect until such time as all Deferred Stock
Units are distributed pursuant to Article V hereof.
8.2
Adjustments.
In the event that, after the effective date of the Plan (as provided in
Section 8.9 below), the number of outstanding Common Shares is increased or decreased or such
shares are exchanged for a different number or kind of shares or other securities by reason of a
recapitalization, reclassification, stock split-up or combination of shares, adjustments will be
made by the Board in the number and kind of shares or other securities that are underlying Deferred
Stock Units and/or credited to Deferred Compensation Accounts hereunder and that shall be issued
under this Plan.
8.3
Assignment.
No right or interest of any Director or his or her beneficiary (or any person
claiming through or under such Director or his or her beneficiary) in any benefit or payment
herefrom shall be assignable or transferable in any manner or be subject to alienation,
anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or
subject to the debts or liabilities of such Director.
8.4.
Tax Effect.
This Plan is intended to be treated as an unfunded deferred compensation plan
under the Code. It is the intention of the Company that the amounts by which Directors elect to
have their compensation reduced pursuant to this Plan shall not be included in the gross income of
the Directors or their beneficiaries until such time as the Deferred Stock Units and amounts
credited to Directors Deferred Compensation Accounts hereunder are distributed from the Plan. If,
at any time, it is determined by the Company that the Deferred Stock Units, or amounts attributable
to Directors compensation reduction elections or Deferred Compensation Accounts are includible in
the gross income of the Directors or their beneficiaries before distribution pursuant to Article V
hereof due to a failure to comply with Section 409A of the Code, such amounts to the extent
required to be included in income shall be immediately distributed to the respective Directors or,
in the case of deceased Directors, their beneficiaries.
8.5
Governing Law.
This 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, by the internal substantive
laws of the State of Ohio.
6
8.6
Successors.
The provisions of this Plan shall bind and inure to the benefit of the
Company and its successors and assigns The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger, consolidation, purchase or
otherwise, acquire all or substantially all of the business and assets of the Company and
successors of any such corporation or other business entity.
8.7
No Right to Continued Service.
Nothing contained herein shall be construed to confer upon
any Director the right to continue to serve as a Director of the Company or in any other capacity.
8.8
Section 409A of the Code.
It is intended that the Plan (including any amendments thereto)
comply with the provisions of Section 409A of the Code so as to prevent the inclusion in gross
income of any Deferred Stock Units or any amount credited to a Directors Deferred Compensation
Account hereunder in a taxable year that is prior to the taxable year or years in which such
amounts would otherwise be actually distributed or made available to the Director. The Plan shall
be administered in a manner that will comply with Section 409A of the Code, including proposed,
temporary or final regulations or any other guidance issued by the Secretary of the Treasury and
the Internal Revenue Service with respect thereto. Any Plan provision that would cause the Plan to
fail to satisfy Section 409A of the Code shall have no force and effect.
8.9
Effective Date.
The effective date of the Plan and the Amendment and Restatement of the
Plan is January 1, 2007.
8.10
Distributions Subject to Tax
. Notwithstanding the above provisions, if, at any time, a
court or the Internal Revenue Service determines that an amount in a Participants Deferred
Compensation 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.
8.11
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.
7