management’S diScuSSion and analYSiS The J. M. Smucker Company Net Sales 2013 Compared to 2012 Year Ended April 30, 2013 Increase 2012 (Decrease) % Net sales $5,897.7 $5,525.8 $ 371.9 7% Adjust for certain noncomparable items: Acquisition (237.1) — (237.1) (4) Divestiture — (8.0) 8.0 — Foreign exchange 2.3 — 2.3 — Net sales adjusted for the noncomparable impact of acquisition, divestiture, and foreign exchange (1) $5,662.9 $5,517.8 $ 145.1 3% (1) Net sales adjusted for the noncomparable impact of acquisition, divestiture, and foreign exchange is a non-GAAP measure used in evaluating performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis. Net sales for 2012 increased $700.1, or 15 percent, compared to 2011, driven primarily by the impact of higher realized prices and acquisitions. The acquisitions of the Sara Lee foodservice business and the coffee brands and business operations of Rowland Coffee Roasters, Inc. (“Rowland Coffee”) contributed $124.2 and $115.3, respectively, to 2012 net sales. Excluding acquisitions, the Europe’s Best divestiture, and the impact of foreign exchange, net sales were up 10 percent in 2012, compared to 2011, and volume decreased 5 percent, driven by Crisco oils, Folgers coffee, Jif peanut butter, and Pillsbury flour. The volume decline resulted from lower consumer purchases due mostly to significantly higher retail prices and a competitive environment. Operating Income The following table presents the components of operating income as a percentage of net sales. Year Ended April 30, 2013 2012 2011 Net sales for 2013 increased $371.9, or 7 percent, compared to 2012, due primarily to the incremental impact of the acquired Sara Lee foodservice business and favorable sales mix. Favorable sales mix for 2013 was driven by volume growth in our coffee brands, including K-Cups®. Overall net price realization was 1 percent lower for 2013, compared to 2012, as the impact of coffee price declines taken in 2013 and 2012 more than offset the net impact of pricing actions taken on peanut butter during 2013 and 2012. Overall volume, based on weight and excluding acquisition, was flat for 2013, compared to 2012. Volume gains were realized in Jif peanut butter and Folgers and Dunkin’ Donuts coffee but were offset by volume declines in Pillsbury baking mixes and Bick’s pickles. 2012 Compared to 2011 Year Ended April 30, 2012 Increase 2011 (Decrease) % Gross profit Selling, distribution, and administrative expenses: Marketing Advertising Selling Distribution General and administrative Total selling, distribution, and administrative expenses Amortization Impairment charges Other restructuring, merger and integration, and special project costs Loss on divestiture Other operating (income) expense – net Operating income Amounts may not add due to rounding. 34.4% 2.8% 2.2 3.3 2.7 5.5 16.5% 1.6 — 0.8 — (0.1) 15.4% 33.4% 2.7% 2.2 3.3 2.8 5.2 16.2% 1.6 0.1 1.3 0.2 — 14.1% 37.3% 3.4% 2.4 3.3 3.2 5.6 17.9% 1.5 0.4 1.2 — — 16.3% Net sales $5,525.8 $4,825.7 Adjust for certain noncomparable items: Acquisitions (239.5) — Divestiture — (16.7) Foreign exchange (6.5) — Net sales adjusted for the noncomparable impact of acquisitions, divestiture, and foreign exchange (1) $5,279.8 $4,809.0 $700.1 15% (239.5) (5) 16.7 — (6.5) — $470.8 10% (1) Net sales adjusted for the noncomparable impact of acquisitions, divestiture, and foreign exchange is a non-GAAP measure used in evaluating performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis. 2013 Compared to 2012 Gross profit increased $182.4, or 10 percent, in 2013, compared to 2012, and increased as a percentage of net sales from 33.4 percent to 34.4 percent over the same period. The increase in gross profit was primarily due to favorable mix, the incremental impact of the Sara Lee foodservice business, a decline in special project costs included in cost of products sold, and a $15.2 increase in the benefit of unrealized mark-to-market adjustments on derivative contracts, which was a gain of $6.6 in 2013, compared to a loss of $8.6 in 2012. Overall commodity costs were lower for 2013, compared to 2012, driven by lower green coffee costs which were partially offset by higher costs for peanuts. Lower green coffee costs were mostly offset by lower net price 26 The J. M. Smucker Company