WESTCHESTER, Ill., Aug. 5 /PRNewswire-FirstCall/ -- TreeHouse Foods,
Inc. (NYSE: THS) today reported an increase in second quarter
earnings compared to last year driven by the addition of Sturm
Foods and improved margins throughout all segments of the business.
Earnings for the quarter were $0.60 per fully-diluted share compared to
$0.58 per fully-diluted share in the
second quarter of last year. On an adjusted basis, as
described below, fully-diluted earnings per share improved 40% to
$0.70 compared to $0.50 last year.
The reported results for the second quarter included unusual
items that affected year over year comparisons. The first
relates to charges of $0.04 in the
quarter to reflect acquisition and integration costs associated
with the purchase of Sturm Foods in March
2010. In addition, TreeHouse had non-cash
mark-to-market gains on an interest rate swap agreement of
$0.02 in 2010 and $0.03 in 2009, and non-cash foreign currency
adjustments on an intercompany note of $0.01 in 2010 and $0.05 in 2009. Finally, during the quarter
the Company recorded a charge of $0.09 to reflect the streamlining of the infant
feeding business in order to better align its cost structure.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months Ended
|
|
|
June 30
|
|
June 30
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
Diluted EPS as
reported
|
$ 0.60
|
|
$ 0.58
|
|
$ 1.07
|
|
$ 0.97
|
|
Plant closing costs
|
-
|
|
-
|
|
-
|
|
0.01
|
|
Acquisition and integration
costs
|
0.04
|
|
-
|
|
0.21
|
|
-
|
|
Mark-to-market adjustment on
interest rate swap
|
(0.02)
|
|
(0.03)
|
|
(0.03)
|
|
(0.03)
|
|
(Gain) loss on intercompany note
translation
|
(0.01)
|
|
(0.05)
|
|
-
|
|
(0.04)
|
|
Curtailment of post retirement
benefits plan
|
-
|
|
|
|
(0.05)
|
|
|
|
Infant feeding
charges
|
0.09
|
|
-
|
|
0.09
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted EPS
|
$ 0.70
|
|
$ 0.50
|
|
$ 1.29
|
|
$ 0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commenting on the second quarter results, Sam K. Reed, Chairman and CEO, said, "Our legacy
businesses posted solid operating performance in the quarter, and
we are very pleased with the addition of Sturm Foods. Our
relentless focus on attacking the center of the P&L is paying
off as we continued to improve productivity and achieved purchasing
savings, driving year over year gross margin improvement of 240
basis points."
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 64.6% to $72.1 million in
the quarter compared to $43.8 million
in the same period last year. The increase is primarily due
to higher sales resulting from the acquisition of Sturm Foods in
the first quarter of 2010.
Net sales for the second quarter totaled $446.2 million compared to $372.6 million last year, which represents an
increase of 19.8%. Excluding the acquisition of Sturm Foods,
sales would have decreased by 1.1% due to lower sales in the
Industrial and Export segment. Retail Grocery sales increased
30.4% (up 1.1% excluding acquisitions) primarily due to the
acquisition of Sturm Foods, and despite lower branded baby food
volumes. Sales within the Food Away From Home segment
increased 7.0% (up 1.7% excluding Sturm Foods) despite economic
conditions that continue to strain the food away from home
marketplace. Industrial and Export sales were down 5.4% (down
12.5% excluding acquisitions) due to a combination of lower unit
sales of bulk powder and lower pricing on pass through sales
contracts. Total gross margins for the quarter improved by
240 basis points to 23.8% compared to 21.4%, with all three
operating segments showing strong margin improvement. The
improvement was due to productivity gains and purchasing savings as
the Company's focus on cost control continues to reap strong
benefits.
During the second quarter of 2010 the Company recorded a charge
of $4.6 million ($2.7 million in gross profit and $1.9 million in other operating expense), within
its infant feeding business to eliminate the cost of excess
inventory and equipment, and to reduce plant staffing. These
actions are expected to better align the cost structure of the
business with recent volume trends.
Selling, distribution, general and administrative expenses were
$56.0 million for the quarter, an
increase of 15.7% from $48.4 million
in the second quarter of 2009. The increase was due primarily
to the growth of the Company, however, these costs decreased as a
percent of net sales to 12.5% in the quarter compared to 13.0% last
year.
Interest expense in the quarter was $11.8
million compared to $4.8
million last year as debt increased from $402.5 million last year to $887.3 million at June 30,
2010 resulting primarily from the issuance of senior
unsecured notes in connection with the funding of the Sturm Foods
acquisition. Other income, net of $1.0
million for the quarter, primarily represents the
mark-to-market adjustment on an interest rate swap. The
Company's second quarter effective income tax rate of 32.9% was
lower than last year's tax rate of 34.6% due to deductions
associated with the acquisition of Sturm Foods.
Net income for the quarter totaled $21.7
million compared to $18.4
million last year. Fully-diluted earnings per share
for the quarter were $0.60 per share
compared to $0.58 per share last
year. Excluding unusual items, adjusted earnings per share
from continuing operations for the second quarter of 2010 were
$0.70, compared to last year's second
quarter adjusted earnings per share of $0.50.
SEGMENT RESULTS
The Company has three reportable segments:
- 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, non-dairy powdered
creamer, salsa, aseptic products, infant feeding products, powdered
drinks and hot cereals.
- Food Away From Home – This segment sells primarily pickle
products, non-dairy powdered creamers, Mexican sauces, aseptic
products, hot cereals and refrigerated products and sauces to
foodservice customers, including restaurant chains and food
distribution companies, within the United
States and Canada.
- 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 it 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 outside North America.
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, brokerage fees, as well as direct selling and
marketing expenses. General sales and administrative
expenses, including restructuring charges, are not allocated to
TreeHouse's business segments as these costs are managed at the
corporate level.
North American Retail Grocery net sales for the second quarter
increased by 30.4% to $307.5 million
from $235.9 million due to the
acquisition of Sturm Foods. Excluding the acquisition, net
sales increased 1.1% from the same quarter last year as favorable
exchange rates offset slightly lower unit volumes. Unit sales
(excluding Sturm Foods) in the retail channel were down 0.7% in
total; however, excluding infant feeding, unit sales were up 0.7%
compared to last year. While the Company continued to
experience softness in its soup category, sales of salad dressing,
pickles, and salsa all showed unit sales growth. Direct
operating income improved to 17.0% from 15.2% last year due to
continued improvements in pickle margins and the ongoing benefit of
last year's salad dressing plant expansion.
Food Away From Home segment sales increased 7.0% from last year
to $80.3 million due primarily to the
acquisition of Sturm Foods. Excluding Sturm Foods, unit sales
decreased 1.3% as the market continues to be challenged, but a
positive mix of sales contributed to the revenue increase.
Direct operating income rose to 15.7% from 10.8% driven by
improved productivity at the segment's aseptic plant.
Industrial and Export segment net sales decreased 5.4%, driven
by a volume decline of 2.4% and lower pricing on cost pass through
contracts. Net sales in the quarter for this segment totaled
$58.4 million compared to
$61.7 million last year.
Despite the sales decline, direct operating income increased
to $11.2 million from $9.9 million last year due to productivity
improvements.
OUTLOOK FOR 2010
"We delivered excellent results in the first half, particularly
given the challenging dynamics of the current retail environment,"
said Sam K. Reed. "Our success
is directly related to consumers' continued desire to find value
through the right combination of price and quality. Private
label continues to be a cornerstone of retailers' strategy to be
innovative and responsive within a highly competitive marketplace."
With regard to the 2010 outlook, Mr. Reed continued, "Although
industry volumes have been challenged of late, we believe we are
positioned to continue to outperform market trends, and are
therefore raising our full year 2010 guidance from $2.65 to $2.70 in adjusted earnings per share, to
$2.70 to $2.75."
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, non-cash recurring items, and non-recurring
items. Adjusted EBITDA is a performance measure and liquidity
measure used by the Company's 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 six month
periods ended June 30, 2010 and 2009
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 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;
powdered drinks, hot cereals, salsa and Mexican sauces; jams and
pie fillings; 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, powdered drinks and hot cereals 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, 2009 and,
from time to time, its other filings with the Securities and
Exchange Commission, 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
|
|
Six Months Ended
|
|
|
|
|
|
June 30
|
|
June 30
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
446,195
|
|
$
372,605
|
|
$
843,319
|
|
$
728,001
|
|
|
Cost of sales
|
|
|
340,045
|
|
292,761
|
|
648,391
|
|
576,446
|
|
|
Gross profit
|
|
|
106,150
|
|
79,844
|
|
194,928
|
|
151,555
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
|
30,887
|
|
28,517
|
|
57,683
|
|
54,298
|
|
|
General and
administrative
|
|
|
25,084
|
|
19,863
|
|
53,562
|
|
35,636
|
|
|
Other operating expense,
net
|
|
|
2,019
|
|
183
|
|
(242)
|
|
425
|
|
|
Amortization
expense
|
|
|
7,287
|
|
3,321
|
|
11,734
|
|
6,579
|
|
|
Total
operating expenses
|
|
|
65,277
|
|
51,884
|
|
122,737
|
|
96,938
|
|
|
Operating income
|
|
|
40,873
|
|
27,960
|
|
72,191
|
|
54,617
|
|
|
Other (income)
expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
11,779
|
|
4,839
|
|
18,606
|
|
9,337
|
|
|
Interest income
|
|
|
-
|
|
(18)
|
|
|
|
(18)
|
|
|
Gain on currency
exchange
|
|
|
(2,170)
|
|
(3,864)
|
|
(2,070)
|
|
(1,804)
|
|
|
Other, net
|
|
|
(993)
|
|
(1,153)
|
|
(1,206)
|
|
(1,265)
|
|
|
Total other
(income) expense
|
|
|
8,616
|
|
(196)
|
|
15,330
|
|
6,250
|
|
|
Income before income
taxes
|
|
|
32,257
|
|
28,156
|
|
56,861
|
|
48,367
|
|
|
Income taxes
|
|
|
10,605
|
|
9,731
|
|
18,890
|
|
17,210
|
|
|
Net income
|
|
|
$
21,652
|
|
$
18,425
|
|
$
37,971
|
|
$
31,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,814
|
|
31,616
|
|
34,465
|
|
31,586
|
|
|
Diluted
|
|
|
35,994
|
|
31,752
|
|
35,588
|
|
32,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.62
|
|
$
0.58
|
|
$
1.10
|
|
$
0.99
|
|
|
Diluted
|
|
|
$
0.60
|
|
$
0.58
|
|
$
1.07
|
|
$
0.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
$18,380
|
|
$11,529
|
|
$32,497
|
|
$22,977
|
|
|
Stock-based compensation
expense, before tax
|
|
|
$4,444
|
|
$3,159
|
|
$7,798
|
|
$6,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
|
North American Retail
Grocery
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$307,526
|
|
$235,853
|
|
$569,105
|
|
$466,535
|
|
|
Direct Operating
Income
|
|
|
$52,218
|
|
$35,928
|
|
$94,119
|
|
$70,233
|
|
|
Direct Operating Income
Percent
|
|
|
17.0%
|
|
15.2%
|
|
16.5%
|
|
15.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Away From
Home
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$80,269
|
|
$75,029
|
|
$153,747
|
|
$141,782
|
|
|
Direct Operating
Income
|
|
|
$12,608
|
|
$8,097
|
|
$22,120
|
|
$15,103
|
|
|
Direct Operating Income
Percent
|
|
|
15.7%
|
|
10.8%
|
|
14.4%
|
|
10.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and
Export
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$58,400
|
|
$61,723
|
|
$120,467
|
|
$119,684
|
|
|
Direct Operating
Income
|
|
|
$11,158
|
|
$9,930
|
|
$22,990
|
|
$16,610
|
|
|
Direct Operating Income
Percent
|
|
|
19.1%
|
|
16.1%
|
|
19.1%
|
|
13.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the Company's net income to
adjusted EBITDA for the three and six months ended June 30, 2010 and 2009:
TREEHOUSE FOODS,
INC.
|
|
RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
|
(In thousands, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months Ended
|
|
|
|
|
June 30
|
|
June 30
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net income as
reported
|
|
|
$ 21,652
|
|
$ 18,425
|
|
$ 37,971
|
|
$ 31,157
|
|
Interest expense
|
|
|
11,779
|
|
4,839
|
|
18,606
|
|
9,337
|
|
Interest income
|
|
|
-
|
|
(18)
|
|
-
|
|
(18)
|
|
Income taxes
|
|
|
10,605
|
|
9,731
|
|
18,890
|
|
17,210
|
|
Depreciation and
amortization
|
|
|
18,380
|
|
11,529
|
|
32,497
|
|
22,977
|
|
Stock-based compensation
expense
|
|
|
4,444
|
|
3,159
|
|
7,798
|
|
6,059
|
|
(Gain) loss on intercompany note
translation and other
|
|
|
(737)
|
|
(3,069)
|
|
27
|
|
(2,337)
|
|
Mark-to-market adjustment on
interest rate swap
|
|
|
(1,019)
|
|
(1,178)
|
|
(1,710)
|
|
(1,206)
|
|
Acquisition and integration
costs
|
|
|
2,293
|
|
-
|
|
11,570
|
|
-
|
|
Curtailment of post retirement
benefits plan
|
|
|
-
|
|
-
|
|
(2,357)
|
|
-
|
|
Infant feeding
charges
|
|
|
4,552
|
|
-
|
|
4,552
|
|
-
|
|
Net plant shut-down
costs
|
|
|
155
|
|
386
|
|
293
|
|
666
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$ 72,104
|
|
$ 43,804
|
|
$ 128,137
|
|
$ 83,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE TreeHouse Foods, Inc.
Copyright g. 5 PR Newswire