WESTCHESTER, Ill., Feb. 11 /PRNewswire-FirstCall/ -- HIGHLIGHTS --
Adjusted earnings per share increased 41.8% from last year -- Net
sales increased 1.7%; retail sales up 5.1% -- Gross margins
increased 320 basis points TreeHouse Foods, Inc. (NYSE:THS) today
reported significantly higher fourth quarter earnings compared to
last year driven by sales growth in its North American Retail
Grocery and Food Away From Home businesses and gross margin
improvement in all sales channels. Earnings for the quarter were
$0.66 per fully-diluted share compared to $0.22 per fully diluted
share in the fourth quarter of last year. On an adjusted basis, as
described below, fully-diluted earnings per share improved 41.8% to
$0.78 compared to $0.55 last year. The reported results for the
fourth quarter of 2009 included a variety of unusual items that
affected the quarterly and full year comparisons. The first item
relates to a non-cash charge of $7.6 million, ($0.14 per share)
resulting from the impairment of TreeHouse's Nature's Goodness
trade name as the Company focuses its private label opportunities
in retail baby food. The second item relates to charges of $1.8
million ($0.04 per share) pertaining to acquisition costs relating
to the acquisition of Sturm Foods. The third item is the tax
benefit of $1.2 million ($0.04 per share) resulting from the
acceleration of Canadian tax deductions as a result of the transfer
of a portion of our salad dressing production from Canada to the
United States. The Company also recognized a $0.02 per share gain
on the mark to market adjustment to an interest rate swap agreement
and a $0.01 per share gain on the translation of an intercompany
note between the United States and Canada. Both of these gains in
the fourth quarter of 2009 offset losses that were recorded in
prior quarters as the Canadian dollar strengthened in 2009 versus
2008. ITEMS AFFECTING DILUTED EPS COMPARABILITY: Three Months Ended
Twelve Months Ended December 31 December 31 ----------- -----------
2009 2008 2009 2008 ---- ---- ---- ---- (unaudited) (unaudited)
Diluted EPS from continuing operations as reported $0.66 $0.22
$2.48 $0.91 Non-cash tradename impairment 0.14 0.14 - Acquisition
costs 0.04 $0.04 Canadian tax deduction timing benefit (0.04)
(0.04) 0.01 Mark to market adjustment on interest rate swap (0.02)
0.14 (0.04) 0.14 (Gain) loss on intercompany note translation
(0.01) 0.13 (0.10) 0.21 Plant closing costs and other 0.01 0.01
0.01 0.30 Gain on insurance settlement for fixed assets (0.26) One
time factory costs from inventory reduction programs 0.05 0.05 ----
---- Adjusted diluted EPS $0.78 $0.55 $2.23 $1.62 ===== ===== =====
===== Commenting on the results, Sam K. Reed, Chairman and CEO,
said, "We finished the year on an excellent note with continued
unit sales growth and further improvement in margins. Private label
continues to be fueled by both consumer preference for value and
our customers' goal to increase profitability. We see strong
momentum heading into 2010." Adjusted operating earnings before
interest, taxes, depreciation, amortization and other non-cash or
unusual items (Adjusted EBITDA, reconciled to net income, the most
directly comparable GAAP measure, appears on the attached schedule)
increased 31.0% to $58.6 million in the quarter compared to $44.8
million in the same period last year. The increase is the result of
sales growth and improved gross margins in the quarter. Net sales
for the fourth quarter totaled $404.8 million compared to $398.1
million last year, an increase of 1.7% (-0.6% excluding currency
effects). Retail grocery sales increased 5.1% (2.2% excluding
currency) compared to last year's quarter and unit sales increased
3.2%, as the Company's private label offerings continue to realize
share gains across nearly all product categories. The Food Away
From Home segment sales were up 4.2% (2.0% excluding currency) and
unit sales were up 2.1% compared to last year as new products and
increased distribution points offset the negative trends in the
food away from home marketplace. Sales in the Industrial and Export
segment declined 11.9% compared to the prior year due to lower
selling prices associated with lower commodity costs and lower unit
sales of co-packed products. Total gross margins for the quarter
improved by 320 basis points to 23.3% compared to 20.1% last year.
The improvement was due to carry over pricing compared to last
year, more favorable input costs, and internal efficiencies from
productivity gains. The margins improved principally in pickles,
non-dairy creamer, salad dressings and soup. Selling, distribution,
general and administrative expenses were $52.0 million for the
quarter, an increase of 18.7% from $43.8 million in the fourth
quarter of 2008. The increase was due principally to higher
incentive compensation expense reflecting the better than planned
performance in 2009, along with $1.8 million in costs associated
with the Sturm Foods, Inc. acquisition. Other operating expense for
the quarter was $7.7 million compared to $1.3 million in expense
last year. In the fourth quarter of 2009 the Company wrote down the
value associated with its Nature's Goodness trademark as part of
its initiative to focus on private label opportunities within
retail grocery. Last year, the Company incurred $1.3 million of
costs in the quarter primarily for the closure of the Portland,
Oregon pickle plant. Interest expense in the quarter was $4.3
million compared to $5.8 million last year as lower interest rates
and lower debt levels due to strong operating cash flows over the
past year contributed to the decline. The Company's fourth quarter
effective income tax rate of 27.1% was lower than the full year
rate of 33.4%, primarily due to the favorable impact of a Canadian
tax rate reduction enacted during the quarter and the
aforementioned acceleration of certain Canadian tax deductions.
Last year's effective tax rate was very low due to tax deductions
associated with last year's mark to market adjustments on both an
interest rate swap and an intercompany loan. Net income for the
quarter totaled $22.1 million compared to $6.8 million last year.
Fully-diluted earnings per share from continuing operations for the
quarter were $0.66 per share compared to $0.22 per share last year.
Excluding unusual items, adjusted earnings per share from
continuing operations for the fourth quarter of 2009 were $0.78,
compared to last year's fourth quarter adjusted earnings per share
of $0.55. SEGMENT RESULTS The Company has three reportable
segments: 1. North American Retail Grocery - This segment sells
private label and branded 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, nondairy powdered creamer, salsa,
aseptic products and baby food. 2. Food Away From Home - This
segment sells primarily pickle products, Mexican sauces, aseptic
and refrigerated products and sauces 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. These customers
either repackage the bulk powder into single serve packages for the
foodservice industry or use it as an ingredient in other
foodservice applications. Export sales are primarily to industrial
customers. The direct operating income for the Company's segments
is determined by deducting manufacturing costs from net sales and
deducting direct operating costs such as freight to customers,
commissions, as well as direct selling and marketing expenses.
General sales and administrative expenses, including restructuring
charges, are not allocated to the business segments as these costs
are managed at the corporate level. North American Retail Grocery
net sales for the fourth quarter increased by 5.1% (2.2% excluding
currency) to $265.7 million from $252.8 million during the same
quarter last year. Unit sales growth of 3.2% was due to strong
growth in salad dressing, salsa, pickles and soup more than
offsetting a decline in the infant feeding category. Direct
operating income margin improved to 17.2% from 13.9% last year due
to mix changes, improvements in pickle margins resulting from last
year's rationalization strategy, and savings from procurement
programs. Food Away From Home segment sales increased 4.2% (2.0%
excluding currency) from last year to $72.2 million despite the
difficult market for food away from home sales. Volumes in the
channel were up 2.1% primarily due to better sales of aseptic
cheese sauces. Direct operating income margin was up significantly
from 11.3% to 16.5% due to higher gross margins in pickles. The
Company has benefitted from an overall improvement in pickle
margins due to a very good crop year for cucumbers and a focused
effort on production efficiencies. Industrial and Export segment
sales decreased 11.9% driven primarily by pricing, and unit sales
declined 2.6%. Much of this business is industrial sales to
customers that primarily utilize non-dairy creamer for applications
in the food away from home market, and many of these customers have
pass through pricing contracts. Despite the lower sales, direct
operating income increased to $9.6 million from $8.9 million last
year as productivity improvements more than offset the sales
decline. STURM FOODS, INC. ACQUISITION On December 20, 2009,
TreeHouse announced that it would acquire Sturm Foods for a
purchase price of approximately $660 million in cash, subject to a
final working capital adjustment. With over $340 million in
revenue, Sturm is the leading manufacturer of private label sugar
free drink mixes and hot cereals in the United States. The
acquisition of Sturm will add two new large categories to our dry
grocery portfolio. As previously disclosed, the Company intends to
finance the transaction through a combination of approximately $400
million in new debt issuance, approximately $100 million in equity
stock issuance and the balance funded from borrowings under
TreeHouse's existing revolving credit facility. The closing of the
transaction is subject to customary closing conditions and is
expected to occur in the first quarter of 2010. GUIDANCE FOR 2010
TreeHouse believes that private label volume growth will continue
to outpace the overall market for retail grocery sales, and as
such, expects unit volumes to increase in the range of 2%. Pricing
is not anticipated to be a factor in revenue growth in 2010 as the
Company's input costs appear to be relatively stable. However,
should input cost inflation require pricing in order to maintain
margin neutrality, TreeHouse will react appropriately. Margins are
expected to expand by 100 basis points in 2010 through a focus on
internal efficiencies. Operating expenses are expected to rise as
the Company begins to implement new ERP systems. Overall, earnings
per share before the acquisition of Sturm Foods are expected to
increase to a range of $2.32 to $2.37 per share, and the effective
tax rate will settle at a range of 36% to 37%. TreeHouse expects to
close the Sturm transaction later in the first quarter. The Company
expects the transaction will add another $0.27 to $0.30 in EPS in
calendar year 2010. On a full year, proforma basis, it is
anticipated that Sturm will contribute $0.38 to $0.40 in earnings,
resulting in over 16% accretion before one-time items. These
estimates are dependant on a variety of factors, including the
timing of transaction closing, valuation estimates and market
conditions at the time of closing. The Company will update the
estimates after the transaction closes. Commenting on the outlook
for 2010, Sam K. Reed said, "We see 2010 as a year of opportunity.
We expect to add Sturm to the TreeHouse family and will work to
expand their base of customers throughout our North American
distribution network. We see a relatively benign cost environment
that will allow us to focus on new business opportunities while
maintaining our diligent pursuit of production and distribution
efficiencies." COMPARISON OF ADJUSTED INFORMATION TO GAAP
INFORMATION The adjusted diluted 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 management, and the Company believes
it 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 nonGAAP measures may be different from similar measures used
by other companies. A full reconciliation table between reported
income for the three and twelve month periods ended December 31,
2009 and 2008 calculated according to GAAP and Adjusted EBITDA is
attached. Given the inherent uncertainty regarding nonrecurring
items in any future period, a reconciliation of forward-looking
financial measures to the most directly comparable GAAP measure is
not feasible. CONFERENCE CALL WEBCAST A webcast to discuss the
Company's financial results will be held at 9:00 a.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, 2008 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. 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 ------------------ ------------------- 2009 2008 2009 2008
------------------ ------------------- (unaudited) (unaudited) Net
sales $404,787 $398,082 $1,511,653 $1,500,650 Cost of sales 310,490
318,236 1,185,283 1,208,626 ------- ------- --------- ---------
Gross profit 94,297 79,846 326,370 292,024 Operating expenses:
Selling and distribution 27,969 29,058 107,938 115,731 General and
administrative 24,078 14,780 80,466 61,741 Other operating (income)
expense, net 7,705 1,329 (6,224) 13,901 Amortization expense 3,427
3,180 13,381 13,526 ----- ----- ------ ------ Total operating
expenses 63,179 48,347 195,561 204,899 ------ ------ -------
------- Operating income 31,118 31,499 130,809 87,125 Other
(income) expense: Interest expense 4,286 5,838 18,430 27,614
Interest income (6) - (45) (107) (Gain) loss on currency exchange
(2,615) 9,316 (7,387) 13,040 Other, net (847) 7,382 (2,263) 7,123
---- ----- ------ ----- Total other expense 818 22,536 8,735 47,670
--- ------ ----- ------ Income before income taxes 30,300 8,963
122,074 39,455 Income taxes 8,207 1,836 40,760 10,895 ----- -----
------ ------ Income from continuing operations 22,093 7,127 81,314
28,560 ------ ----- ------ ------ Loss from discontinued operations
- (336) - (336) --- ---- --- ---- Net income $22,093 $6,791 $81,314
$28,224 ======= ====== ======= ======= Weighted average common
shares: Basic 32,530 31,522 31,982 31,341 Diluted 33,388 31,679
32,798 31,469 Net earnings per common share: Basic $0.68 $0.22
$2.54 $0.90 Diluted $0.66 $0.21 $2.48 $0.90 Supplemental
Information: ------------------------- Depreciation and
Amortization $12,411 $10,346 $47,343 $45,854 Equity Based
Compensation $3,352 $3,398 $13,303 $12,193 Segment Information:
-------------------- North American Retail Grocery Net Sales
$265,657 $252,768 $971,083 $917,102 Direct Operating Income $45,722
$35,253 $152,849 $114,511 Direct Operating Income Percent 17.2%
13.9% 15.7% 12.5% Food Away From Home Net Sales $72,163 $69,264
$292,927 $294,020 Direct Operating Income $11,941 $7,798 $36,069
$32,133 Direct Operating Income Percent 16.5% 11.3% 12.3% 10.9%
Industrial and Export Net Sales $66,967 $76,050 $247,643 $289,528
Direct Operating Income $9,559 $8,871 $36,025 $33,473 Direct
Operating Income Percent 14.3% 11.7% 14.5% 11.6% The following
table reconciles net income to adjusted EBITDA for the three and
twelve months ended December 31, 2009 and 2008: 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 ------------------
------------------- 2009 2008 2009 2008 ------------------
------------------- (unaudited) (unaudited) Net income as reported
$22,093 $6,791 $81,314 $28,224 Interest expense 4,286 5,838 18,430
26,980 Interest income (6) - (45) (107) Income taxes 8,207 1,835
40,760 10,895 Loss from discontinued operations, net of tax - 336 -
336 Depreciation and amortization 12,411 10,346 47,343 45,852
Equity based compensation 3,352 3,398 13,303 12,193 One time
factory costs associated with inventory reduction program - 2,500
2,500 Revalue license agreement - - 634 Tradename impairment 7,600
- 7,600 - Gain on insurance replacement of fixed assets - -
(13,609) - (Gain) loss on intercompany note translation and other
(463) 5,925 (4,929) 9,135 Mark to market adjustment on interest
rate Swap (875) 6,981 (2,104) 6,981 One -time acquisition costs
1,839 1,839 Acquisition integration and accounting adjustments - -
- 508 Net plant shut-down costs 172 805 885 12,905 --- --- ---
------ Adjusted EBITDA $58,616 $44,755 $190,787 $157,036 =======
======= ======== ========
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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