HIGHLIGHTS WESTCHESTER, Ill., Feb. 12 /PRNewswire-FirstCall/ --
TreeHouse Foods, Inc. (NYSE:THS) today reported a substantial
increase in adjusted quarterly and full year earnings compared to
last year, after one-time items. On an adjusted basis, as described
below, fully-diluted earnings per share from continuing operations
in the fourth quarter improved 22.2% to $0.55 compared to $0.45
last year. For the full year, adjusted earnings per share from
continuing operations increased 22.7% to $1.62 compared to $1.32
last year. The 22.7% improvement in results was due primarily to
having a full year of E.D. Smith sales and profits in 2008 compared
to only 75 days in 2007. On a reported basis, income from
continuing operations was $0.22 per diluted share for the quarter
ended December 31, 2008, compared to $0.46 per diluted share last
year, reflecting unusual one-time items. For the full year,
reported earnings per share from continuing operations were $0.91
compared to $1.33 last year including unusual one-time items. The
reported results for the fourth quarter and full year included two
large mark to market items, both of which were non-cash and
non-operating. The first was the adjustment of an intercompany loan
with the Company's E.D. Smith subsidiary to reflect current
currency rates and the second was the mark to market adjustment of
an interest rate swap agreement to current LIBOR rates. The
interest rate adjustment will reverse over the remaining life of
the 32 month agreement as a non-cash, non-operating gain. In
addition, the Company reported non-recurring costs of $0.01 per
share associated with the Company's closed Portland, Oregon pickle
plant and $0.05 per share in costs associated with unfavorable
factory variances resulting from the Company's third quarter
inventory reduction programs. The reported results for last year
include the net effect of adjustments from the acquisition of the
E.D. Smith Income Trust ("E.D. Smith") totaling approximately $0.01
per share. ITEMS AFFECTING DILUTED EPS COMPARABILITY: Three Months
Ended Twelve Months Ended December 31 December 31 2008 2007 2008
2007 (unaudited) (unaudited) EPS from continuing operations as
reported $0.22 $0.46 $0.91 $1.33 Plant closing costs 0.01 0.29 Loss
on intercompany note translation 0.13 0.21 Mark to market
adjustment on interest rate swap 0.14 0.14 One time factory costs
from inventory reduction program 0.05 0.05 E.D. Smith acquisition-
related costs (0.01) 0.01 (0.01) Non-cash adjustment to value of
license and other - - 0.01 - Adjusted EPS $0.55 $0.45 $1.62 $1.32
Commenting on the results, Sam K. Reed, Chairman and CEO, said,
"The past year was the most challenging the packaged foods industry
has faced in decades, yet we overcame the extreme inflation and
volatility of input costs through targeted pricing actions and
internal cost controls. We generated top-line growth in key product
categories including soup, salsa, salad dressing and non-dairy
creamer and also expanded distribution of our E.D. Smith and San
Antonio Farms acquisitions. Despite the challenges, we exceeded our
original expectations and outperformed the food industry." Adjusted
operating earnings before interest, taxes, depreciation,
amortization and unusual items (Adjusted EBITDA, reconciled to net
income, the most directly comparable GAAP measure, appears on the
attached schedule) decreased slightly to $44.8 million in the
fourth quarter compared to $46.2 million in the same period last
year. The small decrease in the quarter reflected the negative
effect of Canadian currency rates on E.D. Smith cross border
transactions. Full year Adjusted EBITDA was $157.0 million compared
to $137.6 million last year, an increase of 14.1%. Net sales for
the fourth quarter totaled $398.1 million, an increase of 7.3% over
the fourth quarter of 2007, with 3.6% coming from legacy sales and
the balance from having a full quarter of E.D. Smith sales in 2008.
Reported gross margins for the fourth quarter decreased 40 basis
points to 20.1%, but this includes the negative effect of
under-absorbed factory costs of $2.5 million associated with our
now completed inventory reduction programs. Excluding those
one-time fourth quarter costs, gross margins would have been
slightly above last year's 20.5% gross margins. After experiencing
significant margin erosion early in the year due to very high input
costs, we have now seen two quarters of margin improvement, and
have returned to last year's fourth quarter gross profit margins.
Selling, distribution, general and administrative expenses were
$43.8 million for the quarter, a decrease of 2.2% from $44.8
million in the fourth quarter of 2007. The decrease was due to
lower distribution expenses as energy costs dropped significantly
in the quarter, partially offset by higher administrative costs
associated with the growth of the Company from last year. Selling,
distribution, general and administrative expenses as a percent of
sales improved to 11.0% of sales in the fourth quarter of 2008
compared to 12.1% last year due principally to higher average
selling prices and synergies from the E.D. Smith acquisition. Other
operating expense for the fourth quarter of 2008 was $1.3 million
and primarily reflects the ongoing maintenance costs associated
with the Company's closed Portland, Oregon pickle plant. The
previously announced plant closure took place in June, 2008 in
order to better balance production capacity. Interest expense in
the quarter was $5.8 million compared to $9.2 million last year as
lower debt from strong cash flow and lower interest rates
contributed to the decline. The Company ended the quarter with
$475.2 million of long term debt compared to $620.5 million last
year, with the significant reduction coming from operating cash
flows and the Company's actions to reduce working capital during
2008. In addition, the Company received an insurance reimbursement
of $20.0 million in the quarter associated with the previously
announced fire at the Company's New Hampton, Iowa plant in the
first quarter. The Company's fourth quarter effective income tax
rate of 20.5% was significantly lower than last year's tax rate of
35.8% due to the financing structure established for the E.D. Smith
Canadian and U.S. businesses. The fourth quarter effective tax rate
was lower than the full year run rate of 27.6% due to the low level
of pre-tax earnings in the quarter resulting from the mark to
market adjustments. Net income from continuing operations for the
fourth quarter totaled $7.1 million compared to $14.3 million last
year. Fully-diluted earnings per share from continuing operations
for the quarter were $0.22 per share compared to $0.46 per share
last year. Excluding unusual items, adjusted earnings per share
from continuing operations for the fourth quarter of 2008 would
have been $0.55, compared to last year's fourth quarter adjusted
earnings per share of $0.45. SEGMENT RESULTS The Company has three
reportable segments: 1. North American Retail Grocery -- This
segment sells branded and private label products to customers
within the United States and Canada. These products include
pickles, peppers, relishes, condensed and ready to serve soup,
broths, gravies, jams, spreads, salad dressings, sauces, non-dairy
powdered creamer, salsa, aseptic products and baby food. 2. Food
Away From Home -- This segment sells to foodservice customers,
including restaurant chains and food distribution companies, within
the United States and Canada. 3. Industrial and Export -- This
segment includes the Company's co-pack business and non-dairy
powdered creamer sales to industrial customers for use in
industrial applications, including for repackaging in portion
control packages and for use as an ingredient by other food
manufacturers. Export sales are primarily to industrial customers.
The direct operating income for our segments is determined by
deducting manufacturing costs from net sales and deducting direct
operating costs such as freight to customers, commissions,
brokerage fees as well as direct selling and marketing expenses.
General sales and administrative expenses, including restructuring
charges, are not allocated to our business segments as these costs
are managed at the corporate level. North American Retail Grocery
net sales for the fourth quarter increased by 8.6% from $232.8
million to $252.8 million compared to the same quarter last year
primarily due to the acquisition of E.D. Smith and higher average
selling prices. Excluding the acquisition, net sales increased 3.1%
as pricing more than offset volume declines resulting from lower
sales of branded baby food and discontinuation of unprofitable
pickle volume. Partially offsetting the pickle and baby food
decreases were increased unit sales of salad dressing, soup, salsa,
sauces and jams. Direct operating income as a percent of sales
increased significantly from 12.0% to 13.9% due to the
rationalization of lower margin pickle customers, improved salad
dressing margins and lower transportation costs compared to 2007.
Food Away From Home segment sales were nearly flat to last year at
$69.3 million as the full quarter effect of the acquisition of E.D.
Smith offset declines in the USA region. Difficult economic
conditions have caused food consumption away from home to decrease,
however, a positive mix of quick serve, fast food customers and
increased sales of salsa mitigated the volume decrease to only 2.0%
excluding volume from E.D. Smith causing an overall decrease in
unit volumes. Overall direct operating income increased slightly to
11.3% of revenue from 10.6% last year as pricing and lower
transportation costs offset higher overall input costs. Industrial
and Export segment sales increased 11.0% from $68.5 million last
year to $76.1 million this year due to a combination of increased
volume of co-packed products and higher prices. Although pricing
was taken in all areas, the sales mix shift to lower margin co-pack
sales caused direct operating income to decrease to 11.7% of net
sales from 15.3% last year. GUIDANCE FOR 2009 We expect that 2009
will be a very good year for TreeHouse, with earnings increasing
11% to 14% to $1.80 to $1.85 per share before one-time items and
before considering potential acquisitions. We do recognize that it
will also be a year of major transition for the packaged foods
industry as rampant input cost inflation and volatility are
replaced by recession, credit crisis and consumer uncertainty. As
commodity and energy costs have settled, inflationary pressures
have given way to deflationary pressures to lower prices,
especially in product categories whose costs are largely determined
by agricultural inputs and petroleum. Additionally, grocery and
foodservice customers have already begun one-time adjustments to
their purchasing cycles to reduce their inventories, thereby
generating additional cash flow. With these factors in mind, we
expect an increase of 1% in sales revenue at TreeHouse as a
combination of pass through pricing in the industrial sector,
pickle category rationalization and a lower Canadian exchange rate
depress dollar sales. However, unit sales growth driven by our
product portfolio strategy and expanded distribution will more than
offset these revenue pressures, resulting in a small increase in
total revenues. Gross margins are expected to improve 100 basis
points or more as product mix shift, productivity gains and
procurement economics outweigh sluggish pricing and foreign
exchange swings. In aggregate, input costs should be flat as
reductions in grains, oils and energy offset increases in steel
cans, fruits and vegetables, and minor ingredients. This full year
guidance assumes first quarter earnings per share to be $0.35 to
$0.37 compared to $0.34 last year. The small improvement over last
year's first quarter earnings per share reflects the timing of
forward purchase contracts, and assumes that most of the benefit of
lower input costs will benefit the back half of the year.
Commenting on the outlook for 2009, Sam K. Reed said, "Over the
past year, we have demonstrated our ability to succeed under the
most adverse food industry conditions. We expect external cost
pressures to subside in 2009, thus allowing us to focus on real
growth, expanded distribution and productivity gains in the new
year. These same factors are the key drivers of our 11% to 14%
earnings growth forecast for 2009. We also believe that the
combination of working capital management and funds availability
under our existing line of credit will allow us to pursue further
acquisitions while other buyers are relegated to the sidelines or
burdened with higher costs of capital." COMPARISON OF ADJUSTED
INFORMATION TO GAAP INFORMATION The adjusted earnings per share
data contained in this press release reflect adjustments to
reported earnings per share data to eliminate the net expense or
net gain related to items identified in the above chart. 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 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
different from similar measures used by other companies. A full
reconciliation table between reported income from continuing
operations for the three and twelve month periods ended December
31, 2008 and December 31, 2007 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 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 non-dairy powdered coffee creamer; canned soup, salad
dressings and sauces; salsa and Mexican sauces; jams and pie
fillings under the E.D. Smith brand name; pickles and related
products; 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 and the largest manufacturer of private label salad
dressings in the United States and Canada 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, 2007 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 2008 2007
2008 2007 (unaudited) (unaudited) Net sales $398,082 $370,936
$1,500,650 $1,157,902 Cost of sales 318,236 295,073 1,208,626
917,611 Gross profit 79,846 75,863 292,024 240,291 Operating
expenses: Selling and distribution 29,058 30,228 115,731 94,636
General and administrative 14,780 14,593 61,741 53,931 Other
operating expense (income), net 1,329 (106) 13,901 (415)
Amortization expense 3,180 3,269 13,526 7,195 Total operating
expenses 48,347 47,984 204,899 155,347 Operating income 31,499
27,879 87,125 84,944 Other (income) expense: Interest expense 5,838
9,186 27,614 22,036 Interest income - (54) (107) (112) Loss (gain)
on currency exchange 9,316 (3,270) 13,040 (3,270) Other, net 7,382
(235) 7,123 (235) Total other expense 22,536 5,627 47,670 18,419
Income from continuing operations before income taxes 8,963 22,252
39,455 66,525 Income taxes 1,836 7,974 10,895 24,873 Income from
continuing operations 7,127 14,278 28,560 41,652 Loss from
discontinued operations, net of tax (336) - (336) (30) $6,791
$14,278 $28,224 $41,622 Weighted average common shares: Basic
31,522 31,203 31,341 31,203 Diluted 31,679 31,340 31,469 31,351
Basic earnings per common share: Income from continuing operations
$0.23 $0.46 $0.91 $1.33 Loss from discontinued operations, net of
tax (0.01) - (0.01) - Net income $0.22 $0.46 $0.90 $1.33 Diluted
earnings per common share: Income from continuing operations $0.22
$0.46 $0.91 $1.33 Loss from discontinued operations, net of tax
(0.01) - (0.01) - Net income $0.21 $0.46 $0.90 $1.33 Supplemental
Information: Depreciation and Amortization 10,346 10,744 45,852
34,983 Expense under FAS123R, before tax 3,398 3,358 12,193 13,580
Segment Information: North American Retail Grocery Net Sales
252,768 232,771 917,102 663,506 Direct Operating Income 35,253
27,873 114,511 85,293 Direct Operating Income Percent 13.9% 12.0%
12.5% 12.9% Food Away From Home Net Sales 69,264 69,640 294,020
254,580 Direct Operating Income 7,798 7,396 32,133 28,320 Direct
Operating Income Percent 11.3% 10.6% 10.9% 11.1% Industrial and
Export Net Sales 76,050 68,525 289,528 239,816 Direct Operating
Income 8,871 10,517 33,473 32,703 Direct Operating Income Percent
11.7% 15.3% 11.6% 13.6% The following table reconciles our net
income to adjusted EBITDA for the three and twelve months ended
December 31, 2008 and 2007: 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 2008 2007 2008 2007 (unaudited) (unaudited) Net income
as reported $6,791 $14,278 $28,224 $41,622 Interest expense 5,838
9,186 26,980 22,036 Interest income - (54) (107) (112) Income taxes
1,835 7,974 10,895 24,873 Loss from discontinued operations, net of
tax 336 - 336 30 Depreciation and amortization 10,346 10,744 45,852
34,983 Stock option expense 3,398 3,358 12,193 13,580 Gain on
foreign currency hedge transaction - (3,270) - (3,270) Acquisition
integration and accounting adjustments - 4,012 508 4,170 One time
factory costs associated with inventory reduction program 2,500
2,500 Revalue license agreement and other - - 634 - Loss on
intercompany note translation 5,925 - 9,135 - Swap mark to market
6,981 - 6,981 - Plant shut-down costs and asset sales of closed
facilities 805 - 12,905 (274) Adjusted EBITDA $44,755 $46,228
$157,036 $137,638
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 1331 Web site: http://www.treehousefoods.com/
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