The J. M. Smucker (SJM)
Q3 2013 Earnings Call
February 15, 2013 8:30 am ET
Executives
Sonal P. Robinson - Director of Corporate Finance, Vice President of Investor Relations and Assistant Secretary
Richard K. Smucker - Chief Executive officer and Director
Vincent C. Byrd - President, Chief Operating Officer and Director
Mark R. Belgya - Chief Financial officer and Senior Vice President
Mark T. Smucker - President Of US Retail Coffee and Director
Paul Smucker Wagstaff - Director and President of U.S. Retail Consumer Foods
Steven T. Oakland - President Of International, Foodservice And Natural Foods
Analysts
Eric R. Katzman - Deutsche Bank AG, Research Division
Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division
Edward Aaron - RBC Capital Markets, LLC, Research Division
Farha Aslam - Stephens Inc., Research Division
Ann H. Gurkin - Davenport & Company, LLC, Research Division
Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division
Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division
Charles Edward Cerankosky - Northcoast Research
Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division
David Driscoll - Citigroup Inc, Research Division
Andrew Lazar - Barclays Capital, Research Division
John J. Baumgartner - Wells Fargo Securities, LLC, Research Division
Jason English - Goldman Sachs Group Inc., Research Division
Kenneth Goldman - JP Morgan Chase & Co, Research Division
Presentation
Operator
Good morning, and welcome to the J.M. Smucker Company's Third Quarter 2013 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions] I will now turn the conference call over to Sonal Robinson, Vice President of Investor Relations. Please go ahead, Ms. Robinson.
Sonal P. Robinson
Good morning, everyone, and welcome to our third quarter earnings conference call. Thank you for joining us today. On the call with me are Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya, Chief Financial Officer; Steve Oakland, President, International, Foodservice and Natural Foods; Mark Smucker, President, U.S. Retail Coffee; and Paul Smucker Wagstaff, President, U.S. Retail Consumer Foods.
Following this introduction, I will turn the call over to Richard for opening remarks. Vince will then discuss the results for our business segments, and Mark will close with additional comments on our financial results for the quarter and our outlook for the full year.
As you may know the company will be presenting at the CAGNY Conference next Tuesday, February 19. We look forward to updating you on many of our key strategic initiatives at CAGNY. Therefore, our prepared comments today will be shorter than usual.
During this call, we may make forward-looking statements that reflect the company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates, and actual results may differ materially due to risk and uncertainties. I encourage you to read the full disclosure statement in the press release concerning forward-looking statements.
Let me also remind you that the company uses non-GAAP results for the purpose of evaluating performance internally. Additional discussion on non-GAAP information is detailed in our press release located on our website at smuckers.com. A replay of this call will also be available on the website. If you have any follow-up questions or comments after today's call, please contact me or Mark Belgya.
I will now turn the call over to Richard.
Richard K. Smucker
Thank you, Sonal, and good morning, everyone. Thank you for joining us on this call. I also look forward to seeing most of you next week at CAGNY.
We entered the important holiday season positioned for growth in many of our categories and are pleased with the continued momentum that we've seen in our company. We've -- our proven strategy of generating growth through brand building, innovation, acquisitions and productivity initiatives allowed us to deliver another quarter of sales gains and strong earnings growth. Let me summarize some of the key highlights of the quarter.
Net sales increased 6% led by our strategic growth drivers of acquisitions and product innovation. Looking briefly at our 3 segments. Coffee volume increased slightly in the quarter due to the strong performance of K-Cups. The Cafe Bustelo and Pilon brands also achieved double-digit growth during the quarter. And Folgers was modestly impacted by the canister constraint we discussed last quarter.
Consumer Foods net sales were up 4% as a result of increases for this Jif and the Smucker brands. Overall, reported volume declined slightly but was up 1% excluding the impact of the cake downsizing and some planned rationalization.
Finally, our International, Foodservice and Natural Foods segment achieved significant sales growth, reflecting a full quarter's contribution from last year's foodservice coffee acquisition. In addition, continued growth in natural beverages and a favorable sales mix also contributed to their results.
Non-GAAP earnings per share grew 20% driven by 3 main factors: first, the substantial increase in coffee segment profit, reflecting the timing of lower commodity costs; second, profit growth across the International, Foodservice and Natural Food segment and the impact of the share repurchases over the last 12 months; lastly, cash from operations continued to be strong in the quarter and increased to $684 million from the first 9 months of the year, an increase of 46%.
During the third quarter, we completed our important Fall Bake and Holiday period. With a combination of solid merchandising programs and pricing insights gained from last year's holiday season, we are pleased with the execution of our promotional strategies. And while certain categories performed better than others, we were encouraged by the results and view the holiday period as a success.
As we look ahead, we are cautiously optimistic as to the economic environment. We are encouraged by stronger food and beverage industry demand, including total edible volume trends as measured by SymphonyIRI. These have improved sequentially from the 52- to the 12- to the 4-week period. We have seen a similar pattern with our consumer takeaway trends improving over these same periods.
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