WESTCHESTER, Ill., Feb. 14 /PRNewswire-FirstCall/ -- TreeHouse
Foods, Inc. (NYSE:THS) today reported a substantial increase in
full year earnings compared to last year. Income from continuing
operations was $1.42 per diluted share (based on 31.4 million fully
diluted shares outstanding) for the year ended December 31, 2006,
compared to $0.39 per diluted share (based on 31.1 million fully
diluted shares outstanding) last year. On an adjusted basis, as
described below, fully diluted earnings per share totaled $1.06
compared to $0.93 last year. The reported results for this year
were benefited by the curtailment of certain post employment
benefit obligations ($0.57), partially offset by trademark
write-downs ($0.16), net costs associated with closed facilities
and purchase accounting adjustments relating the company's
acquisition of the soup and infant feeding business earlier this
year ($0.05). Last year's results included plant shutdown costs
($0.19), trademark write-downs ($0.09) and transaction costs
associated with the spin-off from Dean Foods ($0.31). These were
partially offset by gains on asset sales and legal settlements
($0.06). Excluding these unusual items in 2006 and 2005, operating
results would have been $1.06 per diluted share in 2006 compared to
$0.93 in 2005. The improvement in results were achieved despite
recording a full year of stock option expenses in 2006 compared to
only a partial year of expense in 2005 and a greater number of
fully diluted shares outstanding in 2006. Commenting on the
results, Sam K. Reed, Chairman and CEO, said, "Our 2006 results
show excellent improvement over last year and were marked by four
straight quarters of meeting or beating our earnings expectations.
We are especially pleased with our ability to focus on the business
at hand while successfully establishing TreeHouse as the market
leader in private label soup." Adjusted operating earnings before
interest, taxes, depreciation, amortization and unusual items
(Adjusted EBITDA, as defined below and reconciled to net earnings,
the most directly comparable GAAP measure, on the attached
schedule) increased to $31.5 million in the quarter compared to
$15.7 million in the same period last year. The increase is due
primarily to the addition of the soup and infant feeding business
("SIF"), but also reflects improved margins in the legacy
businesses. Full year adjusted EBITDA was $109.3 million compared
to $76.5 million last year with the bulk of the increase coming
from the addition of SIF. Net sales for the fourth quarter totaled
$282.9 million, an increase of 53.3% over the fourth quarter of
2005, reflecting growth from the acquisition of the soup and infant
feeding business effective April 24, 2006. Excluding SIF, legacy
Bay Valley sales decreased 2.4% but total company gross profit
margins increased. Gross margins for the fourth quarter were 20.3%
compared to 19.0% last year, with the increase resulting from
improved plant efficiencies and internal cost savings programs
which more than offset higher input costs. All of our product
categories had improved gross margins compared to last year's
fourth quarter. During the fourth quarter of 2006, the Company
recorded a curtailment gain as a result of transferring the post
retirement medical benefits of certain union employees from a
company funded plan to a multiemployer union sponsored plan. The
gain totaled $29.4 million ($18.1 million after tax, or $0.57 per
share) and represents the accumulated benefit obligations which
will now be administered by the union plan and paid by the company
on a "pay as you go" basis in the future. Partially offsetting the
gain on curtailment was a charge of $8.2 million ($0.16 per share)
to write down the value of the Mocha Mix trademark. Selling,
distribution, general and administrative expenses were $36.6
million in the fourth quarter of 2006, an increase from $28.2
million in the fourth quarter of 2005. The increase is due to the
addition of the SIF business ($10.7 million), offset by lower
transportation and fuel costs, and lower selling expenses ($2.3
million). Operating expenses as a percent of sales improved to
13.0% of sales in the fourth quarter of 2006 compared to 15.3% last
year. Other operating expense for the fourth quarter of 2006 was a
net gain of $21.1 million comprised primarily of the gain on
curtailment ($29.4 million) offset by the trademark write-downs
($8.2 million). Last year's quarter expense of $14.5 million was
due primarily to write-downs of trade names in our powder business
($4.7 million) and plant shutdown costs ($9.9 million). Interest
expense in the quarter was $4.4 million compared to $0.4 million
last year due to higher bank debt used to fund the SIF acquisition.
The company's effective income tax rate of 38.5% was in line with
the year to date tax rate, but higher than last year's fourth
quarter tax rate that included adjustments to opening tax accruals.
Net income from continuing operations totaled $22.4 million
compared to a loss of $5.6 million last year. Fully diluted
earnings per share for the quarter was $0.70 per share compared to
a loss of $0.18 per share last year. Excluding the gain on
curtailment ($0.57), trademark write-down ($0.16) and plant closure
costs and other acquisition costs ($0.01), the adjusted earnings
per share would have been $0.30 per share. This compares to an
adjusted earnings per share of $0.09 in 2005 after adjusting for
plant closure costs ($0.18) and trademark write-downs ($0.09). The
earnings per share in 2006 is based on 31.9 million fully diluted
shares compared to 31.1 million fully diluted shares last year.
"Our fourth quarter results continue our strong trends of margin
improvement, operating cost control and growth in EBITDA,"
commented Mr. Reed. "We experienced some sales challenges late in
the fourth quarter as both powder and soup sales saw year over year
sales weakness that appear to be weather related, as both of these
categories rebounded nicely in January 2007." SEGMENT RESULTS
Pickle segment net sales for the fourth quarter decreased by
approximately $0.7 million from the prior year as retail sales
volume declined faster than pricing and were not offset by
increased volumes from the book of business acquired from Oxford
Foods. Adjusted gross margins improved to 12.6% of sales compared
to 10.3% last year due to improved operating efficiencies and the
reduction of excess capacity following the closure of the La Junta
pickle plant earlier in the year. Adjusted gross margin is gross
profit less delivery and commission costs and is TreeHouse's
measure of segment performance. Powder segment sales increased by
0.8% compared to the same quarter a year ago. The small increase
was due to our focus on discontinuing lower margin branded powder
sales, and the unseasonably warm December weather that caused an
unusual decrease in late quarter sales. Powder sales have rebounded
in January 2007. Adjusted gross margins in the quarter improved
from 14.7% last year to 19.2% this year as we focused on higher
margin business and last year was negatively impacted by high fuel
costs and plant inefficiencies. SIF sales are the result of the
acquisition of this business on April 24, 2006. Revenues in the
quarter were $102.8 million. Adjusted gross margins for the quarter
were 12.4% compared to the full year run rate of 13.5% as seasonal
promotional spending and higher transportation costs typically
occur at year end. GUIDANCE FOR 2007 We expect that input costs
will continue to be a challenge in 2007, particularly for
sweeteners, fruit, glass and vegetable crops. Many of these
increases are driven by the volatile market for corn related
products as a significant portion of the corn crop is being
converted from food to ethanol production. TreeHouse has initiated
price increase and cost reduction programs to help offset these
cost increases. Net sales are expected to increase by 12.0% to
13.0% in 2007 due to having a full 12 months of the SIF business in
the 2007 results. Input costs are expected to continue to increase
faster than the company's ability to raise prices, but maintaining
the focus on cost savings programs should result in further gross
margin improvement in 2007. We expect income from continuing
operations, including stock option expense, to be in the range of
$1.29 to $1.34 per diluted share, based on 31.9 million fully
diluted average shares outstanding, an increase from the 2006
weighted average shares outstanding of 31.4 million shares.
Commenting on the outlook for 2007, Sam K. Reed said, "We will
continue to focus our efforts on improving our overall profit
margins through both gross profit improvement and lower operating
costs as a percent of sales. We will also pursue profitable growth,
targeting a 22% to 26% increase in adjusted earnings per share over
last year's $1.06 per share. Finally, we will invest in
acquisitions that allow us to take advantage of our existing
distribution networks, while also pursuing new sales opportunities
that match well with our existing customer base." COMPARISON OF
ADJUSTED INFORMATION TO GAAP INFORMATION The adjusted financial
results contained in this press release are from continuing
operations and are adjusted to eliminate the net expense or net
gain related to items identified below. This information is
provided in order to allow investors to make meaningful comparisons
of the Company's operating performance between periods and to view
the Company's business from the same perspective as company
management. Because the Company cannot predict the timing and
amount of charges associated with non-recurring items or facility
closings and reorganizations, management does not consider these
costs when evaluating the Company's performance, when making
decisions regarding the allocation of resources, in determining
incentive compensation for management, or in determining earnings
estimates. These costs are not recorded in any of the Company's
operating segments. Adjusted EBITDA represents net income (loss)
before interest expense, income tax expense, depreciation and
amortization expense, and non-recurring items. Adjusted EBITDA is a
performance measure and liquidity measure used by our management,
and we believe is commonly reported and widely used by investors
and other interested parties, as a measure of a company's operating
performance and ability to incur and service debt. This non-GAAP
financial information is provided as additional information for
investors and is not in accordance with or an alternative to GAAP.
These non-GAAP measures may be differ from similar measures used by
other companies. A full reconciliation table between earnings for
the three and twelve month periods ended December 31, 2006 and
December 31, 2005 calculated according to GAAP and adjusted EBITDA
is attached. Conference Call Webcast A webcast to discuss the
Company's financial results will be held at 10:00 a.m. (Eastern
Standard Time) today and may be accessed by visiting the "Investor
Overview" page through the "Investor Relations" menu of the
Company's 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 and its subsequent quarterly reports
discuss 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 evaluating 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 Twelve Months Ended December 31 December 31 2006 2005
2006 2005 (unaudited) (unaudited) Net sales $282,870 $184,476
$939,396 $707,731 Cost of sales 225,395 149,423 738,818 560,094
Gross profit 57,475 35,053 200,578 147,637 Operating expenses:
Selling and distribution 21,804 15,940 74,884 60,976 General and
administrative 14,836 12,225 57,914 31,977 Management fee paid to
Dean Foods - - - 2,940 Other Operating expense, net (21,087) 14,461
(19,842) 21,423 Amortization expense 993 452 3,268 1,732 Total
operating expenses 16,546 43,078 116,224 119,048 Operating income
40,929 (8,025) 84,354 28,589 Other (income) expense: Interest
expense, net 4,445 448 12,320 1,216 Other (income) expense, net - -
- (66) Total other (income) expense 4,445 448 12,320 1,150 Income
from continuing operations before income taxes 36,484 (8,473)
72,034 27,439 Income taxes 14,057 (2,866) 27,333 15,174 Income
(loss) from continuing operations 22,427 (5,607) 44,701 12,265
Income (loss) from discontinued operations, net of tax 178 (41) 155
(689) Net income $22,605 $(5,648) $44,856 $11,576 Weighted average
common shares: Basic 31,202 31,088 31,158 30,905 Diluted 31,886
31,196 31,396 31,108 Basic earnings per common share: Income from
continuing operations $0.72 $(0.18) $1.43 $0.40 Loss from
discontinued operations, net of tax - - 0.01 (0.02) Net income
$0.72 $(0.18) $1.44 $0.38 Diluted earnings per common share: Income
from continuing operations $0.70 $(0.18) $1.42 $0.39 Income (loss)
from discontinued operations, net of tax 0.01 - 0.01 (0.02) Net
income (loss) $0.71 $(0.18) $1.43 $0.37 Supplemental Information:
Depreciation and Amortization 6,633 4,254 24,651 16,941 Expense
under FAS123R, before tax 4,799 4,814 18,794 9,618 Segment
Information: Pickle Segment Net Sales 75,353 76,095 326,313 320,143
Adjusted Gross Margin 9,480 7,829 42,874 41,467 Adjusted Gross
Margin Percent 12.6% 10.3% 13.1% 13.0% Powder Segment Net Sales
75,912 75,302 267,385 263,769 Adjusted Gross Margin 14,574 11,090
50,822 41,058 Adjusted Gross Margin Percent 19.2% 14.7% 19.0% 15.6%
Soup & Infant Feeding Segment Net Sales 102,794 - 224,189 -
Adjusted Gross Margin 12,720 - 30,375 - Adjusted Gross Margin
Percent 12.4% - 13.5% - The following table reconciles our net
earnings to adjusted EBITDA for the three and twelve months ended
December 31, 2006 and 2005: TREEHOUSE FOODS, INC. RECONCILIATION OF
REPORTED EARNINGS TO ADJUSTED EBITDA (In thousands, except per
share data) Three Months Ended Twelve Months Ended December 31
December 31 2006 2005 2006 2005 (unaudited) (unaudited) Net
earnings as reported $22,605 $(5,648) $44,856 $11,576 Interest
Expense 4,445 448 12,320 1,216 Income taxes 14,058 (2,866) 27,334
15,174 Discontinued Operations (178) 41 (155) 689 Depreciation and
amortization 6,633 4,254 24,651 16,941 Stock option expense 4,799
4,814 18,794 9,618 Gain on curtailment of post retirement benefits
plan (29,409) - (29,409) - Acquisition integration and accounting
adjustments 230 - 1,355 - Write-down of trade names 8,200 4,669
8,200 4,669 Gains: fructose settlement, Cairo facility gain, tank
yard sale - - - (2,927) Plant shut-down costs and asset sales of
closed facilities 124 9,897 1,370 9,897 Spin related costs - 83 -
9,711 Other operating income - - - (66) Adjusted EBITDA $31,507
$15,692 $109,316 $76,498
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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