WESTCHESTER, Ill., Aug. 2 /PRNewswire-FirstCall/ -- TreeHouse
Foods, Inc. (NYSE:THS) today announced that net income from
continuing operations rose 42.9% to $0.30 per diluted share for the
quarter ended June 30, 2007 compared to the second quarter of 2006.
The results for the quarter included a $0.01 benefit from the sale
of closed facilities, while last year's results of $0.21 included
$0.04 relating to costs associated with a closed facility and
acquisition related accounting adjustments. Excluding these unusual
items in 2007 and 2006, second quarter 2007 results increased 16%
to $0.29 per share compared to $0.25 per share last year due to
higher revenues. Commenting on the results, Sam K. Reed, Chairman
and CEO, said, "Second quarter results finished at the high end of
our expectations as we began to see the results of our pricing and
cost containment programs. We showed good progress in margin
improvement and expect that quarter over quarter progress will
continue over the balance of the year despite the ongoing pressures
of our key input costs." 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 $29.9 million in the quarter compared to
$26.6 million in the same period last year. The 12.4% increase is
due to the addition of the Soup and Infant Feeding (SIF) business
for a full quarter and improved operating margins in the legacy
business. Net sales for the second quarter of 2007 totaled $256.0
million, an increase of 10.3% over the second quarter of 2006,
reflecting growth from the Company's acquisition of its SIF
business effective April 24, 2006 and the acquisition of San
Antonio Farms and DeGraffenreid, LLC in the second quarter of 2007.
Excluding the SIF business and the second quarter 2007
acquisitions, revenues decreased 1.0%. Pickle revenues declined by
4.1%, while non-dairy powdered creamer sales increased 8.0% over
the same period last year due to both volume increases and higher
selling prices. SIF revenues increased by 43.6% over the second
quarter of 2006 because the current year includes a full three
months of sales, while last year included only a partial quarter.
Other product sales increased 14.5% as aseptic sales improvement
offset lower refrigerated product sales and the results included
one month of San Antonio Farms. Gross margin for the second quarter
of 20.9% was flat compared to the prior year but improved 80 basis
points on a sequential basis from the first quarter due to improved
pricing. Operating costs were flat compared to last year at $34.5
million as higher costs associated with a full quarter of the SIF
business were offset by lower stock option and other
benefit-related expenses. As a percent of revenues, operating
expense decreased from 14.9% last year to 13.4% in the second
quarter of 2007. Net interest expense in the quarter was $4.0
million compared to $3.3 million last year due to higher bank debt
used to fund the SIF and San Antonio Farms acquisitions. Commenting
further on the results, Mr. Reed said, "We began the year with high
input costs that put pressure on our margins. We have since been
successful in our pricing programs and continue to manage our
internal controllable costs as evidenced by the continued
improvement in operating costs to revenue. The improvement in
margins from first quarter to second quarter was encouraging,
especially in light of our expectation that most of the pricing
programs will be realized during the key fourth quarter shipping
season." SEGMENT RESULTS TreeHouse's measure of segment performance
is adjusted gross margin. Adjusted gross margin is gross profit
less delivery and commission costs. Pickle segment net sales were
$94.3 million for the second quarter, a decrease of 4.1% from the
second quarter last year, despite the acquisition of DeGraffenreid,
LLC, due to continued softness in both foodservice and retail
channels. Adjusted gross margins declined in the quarter from 13.1%
last year to 11.2% this year as a result of significantly higher
sweetener, vinegar and packaging costs, which were not offset by
higher prices. Margins did increase slightly from the first quarter
of 2007 as pricing is beginning to be realized in this category.
Powder segment sales increased by 8.0% compared to the same quarter
a year ago due to higher selling prices and increased sales
volumes. Adjusted gross margins in the quarter improved to 19.4%
compared to 18.5% last year and 17.2% in the first quarter of 2007,
reflecting a pass through of higher input costs, especially nonfat
dry milk. SIF, acquired on April 24, 2006, had revenues for the
second quarter of $61.3 million compared to $42.7 million in the
partial quarter last year. Adjusted gross margins for the quarter
were 15.8% compared to 10.2% last year due to cost reduction
programs in 2007 and last year's inclusion of an unfavorable
purchase accounting adjustment to opening inventories. ACQUISITION
ACTIVITY In April, the Company acquired 49% of the voting stock of
Santa Fe Ingredients, a New Mexico based chile processing company
supplying leading packaged food companies with industrial green
chiles and jalapeno peppers. The terms of the transaction have not
been disclosed as we believe the amounts involved are not material
to TreeHouse. On May 7, 2007 the Company acquired DeGraffenreid,
LLC, a leading processor and distributor of pickles and related
products to the foodservice industry, from Bell-Carter Foods, Inc.
for $10 million plus an adjustment for working capital. The company
is located in Springfield, Missouri and has annual sales of
approximately $23 million. The purchase included all of the
company's working capital and production equipment. Concurrent with
the acquisition of assets, TreeHouse entered into a lease for the
land and buildings used in the operation of the acquired business.
Due to the small size of the company and first year integration
activities, the Company estimates this transaction will be neutral
to earnings in 2007. On May 31, 2007 the Company completed its
acquisition of San Antonio Farms from Silver Ventures, Inc. for
$88.8 million. San Antonio Farms is a producer of Mexican sauces
for the retail, foodservice and industrial markets. The transaction
was financed through borrowings under the Company's existing $500
million credit facility. For the 12 months ending March 31, 2007,
San Antonio Farms had revenues of $45.3 million. TreeHouse expects
that San Antonio Farms will generate partial year operating
earnings of approximately $0.02 per share in 2007 before one-time
acquisition and integration expenses of approximately $0.03 per
share. Earnings for the full year 2008 are expected to be $0.05 per
share with no unusual items anticipated. The Company also announced
on June 25, 2007 that they had entered into a definitive agreement
with E.D. Smith Income Fund (JAM-UN.TO) (the "Fund") to acquire
substantially all of the assets of the Fund for approximately $203
million plus the assumption of existing debt and transaction costs.
It is anticipated that the unitholders of E.D. Smith Income Fund
will receive up to CDN$9.15 per unit, subject to a holdback to
cover certain contingencies associated with a potential tax
liability and wind-up costs. Headquartered in Winona, Ontario, E.D.
Smith is a leading manufacturer of high-quality branded and private
label food products, which it markets and distributes to the retail
grocery and foodservice markets in Canada and the United States.
E.D. Smith's diverse portfolio includes fruit-based products, pie
fillings, ketchup, sauces, and pourable and spoonable salad
dressings. In both the U.S. and Canada, it is the private label
market leader in pourable salad dressings. For the 12 months ending
March 31, 2007, E.D. Smith had revenues of approximately $245
million. E.D. Smith headquarters will remain in Winona, Ontario.
E.D. Smith announced today that the special meeting of unitholders
to approve TreeHouse's acquisition of the operating assets of E.D.
Smith will be postponed until September 27, 2007 to provide E.D.
Smith with additional time to resolve certain tax matters. The
resolution of these tax matters will not affect the economics of
the transaction to TreeHouse, nor is it expected to result in a
meaningful delay in the consummation of the transaction. TreeHouse
expects the transaction to close early in the fourth quarter of
2007. E.D. Smith is expected to contribute approximately $0.07 per
share on an annualized basis but will only contribute $0.01 per
share of operating earnings in the fourth quarter based on the
anticipated close date of the transaction. These earnings estimates
will be reduced by one-time acquisition accounting adjustments and
integration activities of approximately $0.07 in the fourth quarter
and $0.02 in 2008. "We are extremely excited about the distribution
opportunities that exist for us with the addition of E.D. Smith,"
commented David Vermylen, President and COO of TreeHouse. "We
currently have very little distribution of TreeHouse products into
Canada, while E.D. Smith can benefit greatly from our reach across
the US retail and foodservice markets. We see great opportunities
to move our existing products across each other's distribution
networks to grow revenues and gain efficiencies in warehousing and
freight costs. Our complementary product lines will offer retail
and foodservice customers an even stronger one stop shop for shelf
stable food products." OUTLOOK FOR THE REMAINDER OF 2007 "We had a
very active second quarter, as evidenced by the acquisition
activity and our strong second quarter results. Our pricing
programs are progressing as planned, and although they are skewed
towards our seasonally strong fourth quarter, we still expect to
see similar year over year earnings improvement in the third
quarter," said Reed. "As such, we expect third quarter earnings to
be in the $0.29 to $0.32 range and are reaffirming our guidance for
full year earnings per share of $1.29 to $1.34 before the effect of
new acquisitions. Further, although the acquisitions will
contribute approximately $0.03 per share in operating earnings over
the second half of the year, one time accounting and integration
costs of $0.10 will result in dilution of about $0.07 per share in
2007." 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 income 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 before
net interest expense, income tax expense, depreciation and
amortization expense, stock option 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 different than
similar measures used by other companies. A full reconciliation
table between earnings for the three and six month periods ended
June 30, 2007 and June 30, 2006 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 5:00 p.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; infant feeding products; salsa and
Mexican sauces; 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," "will" 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, 2006 and subsequent quarterly report on
Form 10-Q 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 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.
TREEHOUSE FOODS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) Three Months Ended Six Months
Ended June 30 June 30 2007 2006 2007 2006 (unaudited) (unaudited)
Net sales $256,031 $232,118 $515,015 $404,842 Cost of sales 202,424
183,595 409,319 315,929 Gross profit 53,607 48,523 105,696 88,913
Operating expenses: Selling and distribution 21,483 18,847 42,949
32,897 General and administrative 12,096 13,791 25,622 26,614 Other
operating (income) expense - net (365) 1,006 (311) 1,952
Amortization expense 1,244 845 2,310 1,309 Total operating expenses
34,458 34,489 70,570 62,772 Operating income 19,149 14,034 35,126
26,141 Other expense: Interest expense, net 3,977 3,252 7,801 3,413
Total other expense 3,977 3,252 7,801 3,413 Income from continuing
operations before income taxes 15,172 10,782 27,325 22,728 Income
taxes 5,789 4,182 10,519 8,722 Income from continuing operations
9,383 6,600 16,806 14,006 Loss from discontinued operations, net of
tax (21) (6) (30) (13) Net income $9,362 $6,594 $16,776 $13,993
Weighted average common shares: Basic 31,202 31,145 31,202 31,121
Diluted 31,311 31,231 31,312 31,224 Basic earnings per common
share: Income from continuing operations $0.30 $0.21 $0.54 $0.45
Loss from discontinued operations, net of tax -- -- -- -- Net
income $0.30 $0.21 $0.54 $0.45 Diluted earnings per common share:
Income from continuing operations $0.30 $0.21 $0.54 $0.45 Loss from
discontinued operations, net of tax -- -- -- -- Net income $0.30
$0.21 $0.54 $0.45 Supplemental Information: Depreciation and
Amortization 8,036 6,251 15,853 10,766 Expense under FAS123R,
before tax 3,077 4,423 6,789 9,238 Segment Information: Pickle
Segment Net Sales 94,296 98,291 166,736 172,432 Adjusted Gross
Margin 10,596 12,877 18,572 24,710 Adjusted Gross Margin Percent
11.2% 13.1% 11.1% 14.3% Powder Segment Net Sales 65,642 60,775
137,456 127,613 Adjusted Gross Margin 12,710 11,226 25,044 24,385
Adjusted Gross Margin Percent 19.4% 18.5% 18.2% 19.1% Soup &
Infant Feeding Segment Net Sales 61,279 42,659 147,063 42,659
Adjusted Gross Margin 9,660 4,355 22,592 4,355 Adjusted Gross
Margin Percent 15.8% 10.2% 15.4% 10.2% The following table
reconciles our net income to adjusted EBITDA for the months ended
June 30, 2007 and 2006: TREEHOUSE FOODS, INC. RECONCILIATION OF
REPORTED INCOME TO ADJUSTED EBITDA (In thousands, except per share
data) Three Months Ended Six Months Ended June 30 June 30 2007 2006
2007 2006 (unaudited) (unaudited) Net income as reported $9,362
$6,594 $16,776 $13,993 Net Interest expense 3,977 3,252 7,801 3,413
Income taxes 5,789 4,182 10,519 8,722 Discontinued operations 21 6
30 13 Depreciation and amortization 8,036 6,251 15,853 10,766 Stock
option expense 3,077 4,423 6,789 9,238 Plant shut-down costs, asset
sales and purchase accounting (356) 1,927 (277) 2,879 Adjusted
EBITDA $29,906 $26,635 $57,491 $49,024
http://www.newscom.com/cgi-bin/prnh/20050726/CGTREELOGO
http://photoarchive.ap.org/ DATASOURCE: TreeHouse Foods, Inc.
CONTACT: TreeHouse Foods, Inc., Investor Relations,
+1-708-483-1300, ext. 1331 Web site: http://www.treehousefoods.com/
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