TreeHouse Foods, Inc. Reports First Quarter Results, Updates 2006 Guidance for Acquisition of Soup and Infant Feeding Businesse
May 11 2006 - 8:00AM
PR Newswire (US)
WESTCHESTER, Ill., May 11 /PRNewswire-FirstCall/ -- TreeHouse
Foods, Inc. (NYSE:THS) today announced that income from continuing
operations was $0.24 per diluted share for the quarter ended March
31, 2006, compared to $0.37 per diluted share in the first quarter
of 2005. Results for the 2006 quarter include $0.10 per share of
expense recognized under Statement of Financial Accounting
Standards No. 123R, Share-Based Payment, and $0.02 relating to the
previously announced closure of the La Junta, CO pickle factory.
Net sales for the first quarter of 2006 totaled $172.7 million, an
increase of 3.8% over the first quarter of 2005. Pickle revenues
increased slightly due to the acquisition of the Oxford Foods book
of business, while both non-dairy powdered creamer and other
product sales grew 3.5% and 10.9%, respectively. Gross margin for
the first quarter was 23.4% compared to 22.7% last year as the
combination of targeted price increases and internal cost controls
offset higher energy costs. Operating expenses increased from $19.7
million during the first quarter of 2005 to $28.3 million due in
part to share based compensation expense of $4.8 million and plant
shutdown costs of $0.9 million. The remaining increase in operating
expense relates to the TreeHouse corporate infrastructure and
public company expenses which were not in the comparable period
last year, along with investing in a new operating management team
to integrate the recently acquired soup and infant feeding
businesses ("SIF"). Commenting on the first quarter results, Sam K.
Reed, Chairman and CEO, said, "We are pleased with our first
quarter performance, especially in light of the challenges our
industry faces with higher energy costs. We have sharpened our
focus on driving internal efficiencies, and we saw the benefits of
these programs in our gross margins. We also made investments in
our management team to ensure the integration of the soup and
infant feeding businesses goes as smoothly as possible." SEGMENT
RESULTS Pickle segment net sales for the first quarter increased by
approximately $0.9 million due to both higher pricing and increased
volumes from the acquired book of business from Oxford Foods. These
increases offset a baseline volume reduction of 5.8% led by a
decline in non-strategic regional brands. Adjusted gross margins in
the pickle segment improved from 14.0% to 16.0%. Adjusted gross
margin is gross profit less delivery and commission costs and is
TreeHouse's measure of segment performance. The improved margins
were the result of pricing and internal operating efficiencies that
offset significant year over year increases in container, natural
gas, corn syrup and sweeteners costs. Powder segment sales
increased $2.3 million or 3.5% in the first quarter as pricing
gains offset a small decrease in overall volume. The lower volume
was due to a warmer than usual winter, resulting in decreased
coffee consumption. Adjusted gross margins in the powder segment
increased from 17.4% to 19.7% due to improved internal efficiencies
and price increases. ACQUISITION OF SOUP & INFANT FEEDING
BUSINESSES The company completed its acquisition of the soup and
infant feeding businesses from Del Monte Foods, Inc. on April 24,
2006. The purchase price was $268.0 million plus approximately $7.0
million for working capital. The SIF businesses are expected to
generate $325.0 million in revenue on an annual basis, including
revenue from various co-packing arrangements. On an annualized
basis, SIF will generate approximately $0.10 per share in
additional net income, before the expected costs of $0.04 per share
relating to the integration of SIF into our Bay Valley Foods
operating unit. The acquisition was funded by drawing down
approximately $250 million under the company's $400 million
unsecured revolving credit agreement. The company is currently in
discussions with various banks regarding financing alternatives
that would lock in interest rates on a portion of the drawn funds
and increase total available funds for future acquisitions. The
results of SIF will be consolidated into TreeHouse effective with
the acquisition date. Therefore the full year results of TreeHouse
will include only eight months of the SIF business. We expect that
the eight month results of SIF, after considering the one-time
integration costs and seasonality of the business, will result in
an increase in total earnings per share compared to our previously
released 2006 guidance for TreeHouse of $0.05 per share. OUTLOOK
FOR THE REMAINDER OF 2006 "We are pleased with the revenue
increases in the first quarter of 2006, but we expect there will be
pressure on input costs and pricing as we move into the key selling
season for pickles," said Reed. "Rising energy prices are a risk to
our business environment, but we will continue to drive internal
efficiencies to offset these and other input cost increases to
improve our operating margins. We are optimistic that we can strike
the right balance between price and volume, and our internal
efficiencies will balance out the risk of higher input costs. As
such, we are maintaining our full year guidance of net income per
share on our base business of $0.81 to $0.86 per share and adding
$0.05 per share for the soup and infant feeding businesses,
resulting in a new range of $0.86 to $0.91 for 2006." Conference
Call Webcast A webcast to discuss the company's financial results
will be held at 10:00 a.m. (Eastern Daylight Time) today and may be
accessed by visiting the "Webcast" section of the company website
at http://www.treehousefoods.com/ . About TreeHouse Foods TreeHouse
is a food manufacturer servicing primarily the retail grocery and
foodservice channels. Its products include pickles and related
products; non-dairy powdered coffee creamer; private label soup and
infant feeding products, and other food products including aseptic
sauces, refrigerated salad dressings, and liquid non-dairy creamer.
TreeHouse believes it is the largest manufacturer of pickles and
non-dairy powdered creamer in the United States based on sales
volume. FORWARD-LOOKING STATEMENTS This press release contains
"forward-looking statements." Forward-looking statements include
all statements that do not relate solely to historical or current
facts, and can generally be identified by the use of words such as
"may," "should," "could," "expects," "seek to," "anticipates,"
"plans," "believes," "estimates," "intends," "predicts,"
"projects," "potential" or "continue" or the negative of such terms
and other comparable terminology. These statements are only
predictions. The outcome of the events described in these
forward-looking statements is subject to known and unknown risks,
uncertainties and other factors that may cause the company or its
industry's actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievement expressed or implied
by these forward-looking statements. TreeHouse's Form 10-K for the
year ended December 31, 2005 discusses some of the factors that
could contribute to these differences. You are cautioned not to
unduly rely on such forward-looking statements, which speak only as
of the date made, when evaluation the information presented in this
presentation. The company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein, to reflect any change
in its expectations with regard thereto, or any other change in
events, conditions or circumstances on which any statement is
based. FINANCIAL INFORMATION TREEHOUSE FOODS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share
data) Three Months Ended March 31 2006 2005 (unaudited) Net sales
$172,724 $166,375 Cost of sales 132,334 128,531 Gross profit 40,390
37,844 Operating expenses: Selling and distribution 14,050 14,105
General and administrative 13,769 3,721 Management fee paid to Dean
Foods - 1,470 Amortization expense 464 414 Total operating expenses
28,283 19,710 Operating income 12,107 18,134 Other (income)
expense: Interest expense, net 161 193 Other (income) expense, net
- (61) Total other (income) expense 161 132 Income from continuing
operations before income taxes 11,946 18,002 Income taxes 4,540
6,620 Income from continuing operations 7,406 11,382 Loss from
discontinued operations, net of tax (7) (339) Net income $7,399
$11,043 Weighted average common shares: Basic 31,088 30,801 Diluted
31,190 31,060 Basic earnings per common share: Income from
continuing operations $0.24 $0.37 Loss from discontinued
operations, net of tax (0.00) (0.01) Net income $0.24 $0.36 Diluted
earnings per common share: Income from continuing operations $0.24
$0.37 Loss from discontinued operations, net of tax (0.00) (0.01)
Net income $0.24 $0.36 Supplemental Information: Depreciation and
Amortization 4,515 4,131 Expense under FAS123R, before tax 4,815 -
Segment Information: Pickle Segment Net Sales 74,141 73,205
Adjusted Gross Margin 11,833 10,251 Adjusted Gross Margin Percent
16.0% 14.0% Powder Segment Net Sales 66,838 64,549 Adjusted Gross
Margin 13,159 11,203 Adjusted Gross Margin Percent 19.7% 17.4%
http://www.newscom.com/cgi-bin/prnh/20050726/CGTREELOGO
http://photoarchive.ap.org/ DATASOURCE: TreeHouse Foods, Inc.
CONTACT: Investor Relations of TreeHouse Foods, Inc.,
+1-708-483-1300 ext 1344 Web site: http://www.treehousefoods.com/
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