WESTCHESTER, Ill., Nov. 5, 2010 /PRNewswire-FirstCall/ -- TreeHouse
Foods, Inc. (NYSE: THS) today reported third quarter earnings of
$24.9 million compared to
$28.1 million last year.
Earnings included higher levels of depreciation, amortization
and interest expense associated with the Sturm Foods acquisition.
Earnings for the quarter were $0.68 per fully-diluted share compared to
$0.85 per fully-diluted share in the
third quarter of last year. On an adjusted basis, as
described below, fully-diluted earnings per share improved 28% to
$0.69 compared to $0.54 last year.
The reported results for the third quarter included unusual
items that affected year over year comparisons. The first
relates to charges of $0.02 in the
quarter to reflect continuing costs associated with the
Portland, Oregon pickle plant
closure. The second item relates to acquisition costs of
$0.01 in the quarter associated with
the purchase of S.T. Specialty Foods. In addition, TreeHouse
had non-cash mark-to-market gains on an interest rate swap
agreement of $0.03. Finally,
TreeHouse had non-cash foreign currency charges on an intercompany
note of $0.01 in 2010 and a gain of
$0.05 in 2009, and a $0.26 gain in 2009 resulting from the insurance
reimbursement for the replacement of fixed assets at the Company's
New Hampton, Iowa facility.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30
|
|
September
30
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
Diluted EPS as
reported
|
$0.68
|
|
$0.85
|
|
$1.75
|
|
$1.83
|
|
Gain on insurance
settlement for fixed assets
|
-
|
|
(0.26)
|
|
-
|
|
(0.26)
|
|
Plant closing
costs
|
0.02
|
|
-
|
|
0.02
|
|
0.01
|
|
Acquisition and
integration costs
|
0.01
|
|
-
|
|
0.22
|
|
-
|
|
Mark-to-market adjustment
on interest rate swap
|
(0.03)
|
|
-
|
|
(0.06)
|
|
(0.03)
|
|
(Gain) loss on
intercompany note translation
|
0.01
|
|
(0.05)
|
|
0.01
|
|
(0.09)
|
|
Curtailment of post
retirement benefits plan
|
-
|
|
-
|
|
(0.05)
|
|
-
|
|
Infant feeding
charges
|
-
|
|
-
|
|
0.09
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted
EPS
|
$0.69
|
|
$0.54
|
|
$1.98
|
|
$1.46
|
|
|
|
|
|
|
|
|
|
Commenting on the third quarter results, Sam K. Reed, Chairman and CEO, said, "Overall it
was an excellent quarter, as we delivered solid unit growth in both
our legacy businesses as well as our recent acquisitions. We
are also very pleased with our ongoing cost control efforts, as
improvements in margins and operating costs led to our strong cash
flow in the quarter."
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 49.7% to $72.1 million in
the quarter compared to $48.1 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 third quarter totaled $464.2 million compared to $378.9 million last year, and represent an
increase of 22.5%. Excluding the acquisition of Sturm Foods,
sales would have decreased by 0.2% due to slightly lower sales in
the Food Away From Home and Industrial and Export segments.
North American Retail Grocery sales increased 33.6% (up 0.8%
excluding acquisitions) primarily due to the acquisition of Sturm
Foods. Sales within the Food Away From Home segment increased
5.5% (down 0.9% excluding Sturm Foods), as conditions are beginning
to improve in the food away from home marketplace. Industrial
and Export sales were up 1.2% (down 3.2% excluding acquisitions)
due to the acquisition of Sturm Foods. Total gross margins
for the quarter improved by 240 basis points to 23.7% compared to
21.3%. The North American Retail Grocery and Food Away From
Home operating segments delivered strong margin improvement,
reflecting the benefits of the Company's operating improvement
activities across its plants and distribution network.
Selling, distribution, general and administrative expenses were
$54.3 million for the quarter
compared to $46.4 million in the
third quarter of 2009, primarily reflecting the growth of the
Company. As a percent of sales, these expenses declined to 11.7% in
the quarter compared to 12.3% last year.
Interest expense in the quarter was $12.9
million compared to $4.8
million last year as debt increased from $476.1 million last year to $876.5 million at September 30, 2010, primarily from the issuance
of new debt to fund the Sturm Foods acquisition. Other
income, net of $1.8 million for the
quarter, primarily represents the mark-to-market adjustment on an
interest rate swap. The Company's third quarter effective
income tax rate of 32.4% was lower than last year's tax rate of
35.3% due to deductions associated with the acquisition of Sturm
Foods and was consistent with the Company's 32.9% tax rate last
quarter.
Net income for the quarter totaled $24.9
million compared to $28.1
million last year. Fully-diluted earnings per share
for the quarter were $0.68 per share
compared to $0.85 per share last
year, partially reflecting the additional shares issued in
connection with the acquisition of Sturm Foods. Excluding
unusual items, adjusted earnings per share from continuing
operations for the third quarter of 2010 were $0.69, compared to last year's third quarter
adjusted earnings per share of $0.54.
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, nondairy 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 third quarter
increased by 33.6% to $319.2 million
from $238.9 million primarily due to
the acquisition of Sturm Foods. Excluding the acquisition,
net sales increased 0.8% from the same quarter last year as higher
volume and favorable exchange rates offset price reductions.
Unit sales (excluding Sturm Foods) in the retail channel were
up 2.6% in total; however, excluding infant feeding, unit sales
were up 5.6% compared to last year, with soup volume leading the
segment with an increase of 8.5% in unit volume over the same
quarter last year. Direct operating income improved to 19.1%
from 15.4% last year as the positive mix from Sturm Foods' products
and our internal efficiency programs provided additional operating
income.
Food Away From Home segment sales increased 5.5% from last year
to $83.3 million due primarily to the
acquisition of Sturm Foods. Excluding Sturm Foods, net sales
decreased 0.9% as the food away from home market continues to be
challenged, but a positive mix of pricing and foreign currency
contributed to the revenue increase. Direct operating income
rose to 15.3% from 11.4%, as last year's margin was negatively
impacted by higher than normal scrap rates.
Industrial and Export segment net sales increased 1.2%, to
$61.7 million as volume growth and
the Sturm Foods acquisition were offset by a shift in sales mix to
lower margin and lower priced co-pack business, resulting in direct
operating income decreasing to $8.7
million from $9.9 million last
year.
OUTLOOK FOR 2010
"We anticipate we will finish 2010 with great momentum, and will
ring in the new year with an expanded and much improved product
portfolio, top line growth prospects in our core private label
categories, and a solid balance sheet with available capital for
future acquisitions. We successfully refinanced our credit
facilities this past October, and although our interest rates will
increase to more market consistent rates, we expect to deliver 2010
adjusted earnings per share of $2.70 to
$2.75, in line with our previously-issued guidance."
"As we look beyond 2010, we see even greater opportunity as the
fundamental value proposition of our customer brands resonates even
more strongly with customers and consumers alike. We believe
we are very well equipped to succeed, prosper and grow in the years
to come."
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 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 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 nine month periods ended September 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;
sugar free drink mixes and sticks, instant oatmeal and hot cereals;
macaroni and cheese, skillet dinners and other value-added side
dishes and salads; 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, drink mixes and instant 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
|
|
Nine Months
Ended
|
|
|
|
|
September
30
|
|
September
30
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
464,242
|
|
$
378,865
|
|
$
1,307,561
|
|
$
1,106,866
|
|
Cost of sales
|
|
|
354,005
|
|
298,347
|
|
1,002,396
|
|
874,793
|
|
Gross profit
|
|
|
110,237
|
|
80,518
|
|
305,165
|
|
232,073
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
|
28,740
|
|
25,671
|
|
86,423
|
|
79,969
|
|
General and
administrative
|
|
|
25,561
|
|
20,752
|
|
79,123
|
|
56,388
|
|
Other operating
expense (income), net
|
|
|
1,103
|
|
(14,354)
|
|
861
|
|
(13,929)
|
|
Amortization
expense
|
|
|
7,040
|
|
3,375
|
|
18,774
|
|
9,954
|
|
Total
operating expenses
|
|
|
62,444
|
|
35,444
|
|
185,181
|
|
132,382
|
|
Operating
income
|
|
|
47,793
|
|
45,074
|
|
119,984
|
|
99,691
|
|
Other expense
(income):
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
12,867
|
|
4,786
|
|
31,473
|
|
14,105
|
|
Gain on foreign
currency exchange
|
|
|
(46)
|
|
(2,968)
|
|
(2,116)
|
|
(4,772)
|
|
Other income,
net
|
|
|
(1,838)
|
|
(151)
|
|
(3,044)
|
|
(1,416)
|
|
Total other
expense (income)
|
|
|
10,983
|
|
1,667
|
|
26,313
|
|
7,917
|
|
Income before income
taxes
|
|
|
36,810
|
|
43,407
|
|
93,671
|
|
91,774
|
|
Income taxes
|
|
|
11,943
|
|
15,343
|
|
30,833
|
|
32,553
|
|
Net income
|
|
|
$
24,867
|
|
$
28,064
|
|
$
62,838
|
|
$
59,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,421
|
|
32,280
|
|
34,870
|
|
31,797
|
|
Diluted
|
|
|
36,373
|
|
33,129
|
|
35,935
|
|
32,387
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.70
|
|
$
0.87
|
|
$
1.80
|
|
$
1.86
|
|
Diluted
|
|
|
$
0.68
|
|
$
0.85
|
|
$
1.75
|
|
$
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
$18,145
|
|
$11,955
|
|
$50,642
|
|
$34,932
|
|
Stock-based compensation
expense, before tax
|
|
|
$4,019
|
|
$3,892
|
|
$11,817
|
|
$9,951
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$319,174
|
|
$238,891
|
|
$888,254
|
|
$705,426
|
|
Direct Operating
Income
|
|
|
$60,863
|
|
$36,894
|
|
$154,955
|
|
$107,127
|
|
Direct Operating Income
Percent
|
|
|
19.1%
|
|
15.4%
|
|
17.4%
|
|
15.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Away
From Home
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$83,330
|
|
$78,982
|
|
$237,099
|
|
$220,764
|
|
Direct Operating
Income
|
|
|
$12,775
|
|
$9,025
|
|
$34,917
|
|
$24,128
|
|
Direct Operating Income
Percent
|
|
|
15.3%
|
|
11.4%
|
|
14.7%
|
|
10.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
and Export
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$61,738
|
|
$60,992
|
|
$182,208
|
|
$180,676
|
|
Direct Operating
Income
|
|
|
$8,663
|
|
$9,856
|
|
$31,658
|
|
$26,466
|
|
Direct Operating Income
Percent
|
|
|
14.0%
|
|
16.2%
|
|
17.4%
|
|
14.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the Company's net income to
adjusted EBITDA for the three and nine months ended September 30, 2010 and 2009:
TREEHOUSE
FOODS, INC.
|
|
RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September
30
|
|
September
30
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net income as
reported
|
|
|
$
24,867
|
|
$
28,064
|
|
$
62,838
|
|
$
59,221
|
|
Interest expense,
net
|
|
|
12,867
|
|
4,786
|
|
31,473
|
|
14,105
|
|
Income taxes
|
|
|
11,943
|
|
15,343
|
|
30,833
|
|
32,553
|
|
Depreciation and
amortization
|
|
|
18,145
|
|
11,955
|
|
50,642
|
|
34,932
|
|
Stock-based compensation
expense
|
|
|
4,019
|
|
3,892
|
|
11,817
|
|
9,951
|
|
Gain on insurance
settlement for fixed assets
|
|
|
-
|
|
(13,609)
|
|
-
|
|
(13,609)
|
|
(Gain) loss on
intercompany note translation
|
|
|
479
|
|
(2,319)
|
|
507
|
|
(4,656)
|
|
Mark-to-market adjustment
on interest rate swap
|
|
|
(1,465)
|
|
(23)
|
|
(3,175)
|
|
(1,229)
|
|
Acquisition and
integration costs
|
|
|
704
|
|
-
|
|
12,274
|
|
-
|
|
Curtailment of post
retirement benefits plan
|
|
|
-
|
|
-
|
|
(2,357)
|
|
-
|
|
Infant feeding
charges
|
|
|
-
|
|
-
|
|
4,552
|
|
-
|
|
Plant closing
costs
|
|
|
491
|
|
47
|
|
784
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
72,050
|
|
$
48,136
|
|
$
200,188
|
|
$
131,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE TreeHouse Foods, Inc.