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ManageMent’s Discussion anD analysis
The J. M. Smucker Company
Off- Bal anCe Shee T arr angeMenTS and C OnTr aCTual OBlig aTiOnS
We do not have material off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as variable interest entities. Transactions with related parties are in the ordinary course
of business, conducted on an arm’s length basis, and not material to our results of operations, financial condition, or cash flows. The following table summarizes our contractual obligations by fiscal year at April 30, 2013.
Total 2014 2015–2016 2017–2018 2019 and beyond
Long-term debt obligations, including current portion Interest payments Operating lease obligations Purchase obligations Other liabilities Total Purchase obligations in the above table include agreements that are enforceable and legally bind us to purchase goods or services. Included in this category are certain obligations related to normal, ongoing purchase obligations in which we have guaranteed payment to ensure availability of raw materials and packaging supplies. We expect to receive consideration for these purchase obligations in the form of materials. These purchase obligations do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated. Other liabilities in the above table mainly consist of projected commitments associated with our defined benefit pension plans and other postretirement benefits. The table excludes the liability for unrecognized tax benefits and tax-related net interest and penalties of approximately $31.7 under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, since we are unable to reasonably estimate the timing of cash settlements with the respective taxing authorities.
$2,017.8 652.0 104.9 1,125.5 318.0 $4,218.2
$ 50.0 94.9 24.5 1,095.5 31.4 $1,296.3
$199.0 176.1 32.7 30.0 35.8 $473.6
$ 75.0 161.2 28.2 — 23.6 $288.0
$1,693.8 219.8 19.5 — 227.2 $2,160.3
Revenue Recognition: We recognize revenue when all of the following criteria have been met: a valid customer order with a determinable price has been received; the product has been shipped and title has transferred to the customer; there is no further significant obligation to assist in the resale of the product; and collectibility is reasonably assured. Trade marketing and merchandising programs are classified as a reduction of sales. A provision for estimated returns and allowances is recognized as a reduction of sales at the time revenue is recognized. Trade Marketing and Merchandising Programs: In order to support our products, various promotional activities are conducted through retail trade, distributors, or directly with consumers, including in-store display and product placement programs, feature price discounts, coupons, and other similar activities. We regularly review and revise, when we deem necessary, estimates of costs for these promotional programs based on estimates of what will be redeemed by retail trade, distributors, or consumers. These estimates are made using various techniques including historical data on performance of similar promotional programs. Differences between estimated expenditures and actual performance are recognized as a change in estimate in a subsequent period. As the total promotional expenditures, including amounts classified as a reduction of sales, represented approximately 25 percent of net sales in 2013, the possibility exists of materially different reported results if factors such as the level and success of the promotional programs or other conditions differ from expectations. Income Taxes: The future tax benefit arising from the net deductible temporary differences and tax carryforwards is approximately $160.9 and $154.1 at April 30, 2013 and 2012, respectively. We believe that the earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating results indicate that realization is not likely, a valuation allowance has been provided.
CriTiCal aCCOunTing eSTiMaTeS and POliCieS
The preparation of financial statements in conformity with U.S. GAAP requires that we make estimates and assumptions that in certain circumstances affect amounts reported in the accompanying consolidated financial statements. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.
2013 Annual Report
33
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