OAK BROOK, Ill., Feb. 10, 2011 /PRNewswire/ -- TreeHouse Foods,
Inc. (NYSE: THS) today reported significantly higher fourth quarter
earnings compared to last year, driven by acquisition growth and
margin improvements throughout its business segments.
Earnings for the quarter were $0.77 per fully-diluted share compared to
$0.66 per fully-diluted share in the
fourth quarter of last year. On an adjusted basis, as
described below, fully-diluted earnings per share improved 2.6% to
$0.80 compared to $0.78 last year.
The reported results for the fourth quarter of 2010 included
unusual items that affected the quarterly and full year
comparisons. The first item relates to acquisition and
integration costs from the acquisitions of Sturm Foods and S.T.
Specialty Foods of $3.4 million
($0.06 per share). The second
item relates to a $0.03 per share
gain on the mark to market adjustment of an interest rate swap
agreement while the third item is a $0.01 per share loss on the translation of an
intercompany note between the United
States and Canada.
The final item is an adjustment to infant feeding charges
previously disclosed.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
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Three Months
Ended
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Twelve
Months Ended
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December
31
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December
31
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2010
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|
2009
|
|
2010
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|
2009
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(unaudited)
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(unaudited)
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Diluted EPS from continuing
operations as reported
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$
0.77
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$
0.66
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$
2.51
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$
2.48
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Non-cash trade name
impairment
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-
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|
0.14
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-
|
|
0.14
|
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Acquisition and integration
costs
|
0.06
|
|
0.04
|
|
0.28
|
|
0.04
|
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Canadian tax deduction timing
benefit
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-
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|
(0.04)
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-
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(0.04)
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Mark to market adjustment on
interest rate swap
|
(0.03)
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(0.02)
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(0.08)
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(0.04)
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(Gain) loss on intercompany note
translation
|
0.01
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|
(0.01)
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|
0.02
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(0.10)
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Gain on insurance settlement for
fixed assets
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-
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-
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-
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(0.26)
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Curtailment of post retirement
benefits plan
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-
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-
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(0.05)
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-
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Product
rationalization
|
(0.01)
|
|
0.01
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|
0.10
|
|
0.01
|
|
|
|
|
|
|
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|
Adjusted diluted EPS
|
$
0.80
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|
$
0.78
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$
2.78
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$
2.23
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Commenting on the results, Sam K.
Reed, Chairman and CEO, said, "We had an outstanding year,
highlighted by the strategic acquisitions of Sturm Foods and S.T.
Specialty Foods, as well as solid core operating performance from
our legacy businesses. Our fourth quarter results surpassed
our expectations, and we are eager to build on this momentum in
2011. Our new information system went live successfully on
February 1, thanks to the hard work
of our implementation teams. We are already seeing the
benefits of the work our teams put in on process improvements and
data consistency."
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 41.3% to $82.8 million in
the quarter compared to $58.6 million
in the same period last year. The increase is primarily due
to higher sales driven by the acquisition of Sturm Foods in the
first quarter of 2010.
Net sales for the fourth quarter totaled $509.5 million compared to $404.8 million last year, an increase of 25.9%.
Excluding acquisitions and retail infant feeding products,
sales would have increased by 1.8% demonstrating continued demand
for the Company's private label products in the grocery segment.
North American Retail Grocery sales increased 35.1% (up 1.0%
excluding acquisitions and infant feeding products) primarily due
to higher sales of salad dressings and sauces. Sales within
the Food Away From Home segment increased 7.9% (up 1.7% excluding
acquisitions) as conditions are beginning to improve in the food
away from home marketplace. Industrial and Export sales were
up 8.5% (up 4.8% excluding acquisitions) due to higher sales of
bulk powder.
Total gross margins for the quarter improved by 147 basis points
to 24.8% compared to 23.3% last year. North American Retail Grocery
operating income margins improved due to internal operating
efficiencies, improved product mix, and pricing. Food Away
From Home gross margins were consistent with last year's fourth
quarter at 16.5%, while Industrial and Export direct operating
income margins improved by 410 basis points to 18.4% due to
improved margins resulting from a positive mix of new contract
manufactured products.
Selling, distribution, general and administrative expenses were
$61.7 million for the quarter, an
increase of 18.7% from $52.0 million
in the fourth quarter of 2009. The increase was due primarily
to the growth of the Company, as operating expenses decreased as a
percent of net sales to 12.1% in the quarter compared to 12.8% in
last year's fourth quarter.
Other operating expense in the quarter totaled $0.3 million compared to an expense of
$7.7 million 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.
Interest expense in the quarter was $14.2
million compared to $4.3
million last year, driven by the combination of increased
debt to fund the acquisitions of Sturm Foods and S.T. Specialty
Foods, and higher borrowing rates associated with the Company's
long term bonds and recently amended and extended credit agreement.
The Company's fourth quarter effective income tax rate of 34.3%
was in line with the full year rate of 33.3%. Last year's
fourth quarter effective tax rate of 27.1% was much lower than this
year's quarterly rate primarily due to the favorable impact of a
Canadian tax rate reduction enacted during the quarter and the
acceleration of certain Canadian tax deductions.
Net income for the quarter totaled $28.1
million compared to $22.1
million last year. Fully-diluted earnings per share
from continuing operations for the quarter were $0.77 per share compared to $0.66 per share last year. Excluding
unusual items, adjusted earnings per share from continuing
operations for the fourth quarter of 2010 were $0.80, compared to last year's fourth quarter
adjusted earnings per share of $0.78.
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 soups, broths,
gravies, jams, spreads, salad dressings, sauces, nondairy powdered
creamers, salsa, aseptic products, infant feeding products,
powdered drinks, hot cereals, macaroni and cheese and skillet
dinners.
- 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, 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 35.1% to $358.9 million
from $265.7 million during the same
quarter last year primarily due to the Sturm Foods and S.T.
Specialty Foods acquisitions. Excluding acquisitions and
discontinued branded infant feeding, net sales increased 1%.
Unit sales (excluding acquisitions and branded infant
feeding) in the retail channel increased 1.3% compared to last
year. Soup sales were slightly above last year with pickles,
salsa, sauces, jams and spreads showing good unit growth.
Direct operating income margin improved to 18.5% from 17.2%
last year due to positive mix changes.
Food Away From Home segment sales increased 7.9% from last year
to $77.9 million primarily due to the
acquisition of Sturm Foods. Excluding Sturm Foods, net sales
increased 1.7% as TreeHouse continues to leverage cross selling
opportunities despite the sluggishness of the food away from home
marketplace. Direct operating income margin was consistent
with the same quarter in the prior year at 16.5%.
Industrial and Export segment sales increased 8.5% to
$72.7 million as positive sales mix
and the Sturm Foods acquisition offset a reduction in volume.
Direct operating income increased to $13.4 million from $9.6
million last year as the Company developed new contract
manufacturing opportunities with more favorable margins.
GUIDANCE FOR 2011
Private label has shown consistent growth potential, not only
due to consumers' demand for quality at a value price point, but
because customers also demand quality and differentiation from
national brands. As such, TreeHouse believes that private
label products will continue to grow at a faster rate compared to
the total food manufacturing sector. The Company expects
revenues this year to grow approximately 12% to 13% from 2010 due
to having a full year of sales from the Sturm Foods and S.T.
Specialty Foods acquisitions completed last year. On an
organic basis, the Company expects North American Retail Grocery
unit sales to increase in the range of 2% to 2.5%. Gross
margins are expected to expand by 100 basis points in 2011 through
a combination of improved sales mix and operational efficiencies.
Partially offsetting the higher gross margins will be higher
operating expenses, as TreeHouse will have both a full year of
costs from acquisitions and higher expenses resulting from its
ongoing implementation of new software systems. Overall,
earnings per share are expected to increase to a range of
$3.10 to $3.18 per share.
Commenting on the outlook for 2011, Mr. Reed said, "We are very
excited about our prospects this year. We have an array of
new products, a much improved information system, exceptional new
talent from Sturm Foods and S.T. Specialty Foods, and continued
momentum from our customers' desire to offer high quality and
differentiated products for consumers.
"We will continue our relentless focus on winning new business
and attacking the center of the P&L through productivity
improvements and procurement savings. We continue to see
strong evidence that the private label value proposition is
resonating with both customers and consumers and will continue to
do so for the foreseeable future," he continued.
VERMYLEN TO TRANSITION TO CONSULTING ROLE AS SENIOR ADVISOR
EFFECTIVE JULY 1, 2011
Mr. David B. Vermylen has
announced he will transition from President and Chief Operating
Officer of TreeHouse Foods effective on July
1, 2011. Mr. Vermylen will remain on the Board and
transition to a consulting role focusing exclusively on the
Company's strategic direction, including go-to-market and general
corporate strategies, strategic customer initiatives and
acquisition evaluation. CEO Sam K. Reed will assume the title
of President. Also effective July 1,
2011, Dennis F. Riordan,
Chief Financial Officer; Harry J.
Walsh, President of Bay Valley Foods; and Thomas E. O'Neill,
General Counsel and Chief Administrative Officer of TreeHouse Foods
will each assume the title of Executive Vice President of TreeHouse
and take on additional responsibilities in support of the
President.
"I am excited that I will continue to play an active role in the
Company's future in the three areas where I believe I add the most
value: strategy, marketing and acquisitions," said David Vermylen, President and Chief Operating
Officer. Mr. Reed continued, "David will remain an integral
partner to me, our management team and the Board. He will
oversee key strategic initiatives as we continue to grow our
product portfolio and capitalize on attractive acquisition
opportunities. The depth and breadth of our management
structure, enhanced by the creation of three Executive Vice
President positions, will ensure our ability to effectively execute
strategy and to continue to deliver shareholder value."
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 non-GAAP 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,
2010 and 2009 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; 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, 2010
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.
|
|
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CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(In
thousands, except per share data)
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
|
|
|
|
December
31
|
|
December
31
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
509,463
|
|
$
404,787
|
|
$
1,817,024
|
|
$
1,511,653
|
|
|
Cost of sales
|
|
|
383,294
|
|
310,490
|
|
1,385,690
|
|
1,185,283
|
|
|
Gross profit
|
|
|
126,169
|
|
94,297
|
|
431,334
|
|
326,370
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
|
33,697
|
|
27,969
|
|
120,120
|
|
107,938
|
|
|
General and
administrative
|
|
|
28,003
|
|
24,078
|
|
107,126
|
|
80,466
|
|
|
Other operating
(income) expense, net
|
|
|
322
|
|
7,705
|
|
1,183
|
|
(6,224)
|
|
|
Amortization
expense
|
|
|
7,578
|
|
3,427
|
|
26,352
|
|
13,381
|
|
|
Total
operating expenses
|
|
|
69,600
|
|
63,179
|
|
254,781
|
|
195,561
|
|
|
Operating
income
|
|
|
56,569
|
|
31,118
|
|
176,553
|
|
130,809
|
|
|
Other (income)
expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
14,218
|
|
4,286
|
|
45,691
|
|
18,430
|
|
|
Interest income
|
|
|
-
|
|
(6)
|
|
-
|
|
(45)
|
|
|
(Gain) loss on
currency exchange
|
|
|
542
|
|
(2,615)
|
|
(1,574)
|
|
(7,387)
|
|
|
Other, net
|
|
|
(920)
|
|
(847)
|
|
(3,964)
|
|
(2,263)
|
|
|
Total other
expense
|
|
|
13,840
|
|
818
|
|
40,153
|
|
8,735
|
|
|
Income before income
taxes
|
|
|
42,729
|
|
30,300
|
|
136,400
|
|
122,074
|
|
|
Income taxes
|
|
|
14,648
|
|
8,207
|
|
45,481
|
|
40,760
|
|
|
Net income
|
|
|
$
28,081
|
|
$
22,093
|
|
$
90,919
|
|
$
81,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,489
|
|
32,530
|
|
35,079
|
|
31,982
|
|
|
Diluted
|
|
|
36,664
|
|
33,388
|
|
36,172
|
|
32,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.79
|
|
$
0.68
|
|
$
2.59
|
|
$
2.54
|
|
|
Diluted
|
|
|
$
0.77
|
|
$
0.66
|
|
$
2.51
|
|
$
2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
$19,136
|
|
$12,411
|
|
$69,778
|
|
$47,343
|
|
|
Equity Based
Compensation
|
|
|
$4,021
|
|
$3,352
|
|
$15,838
|
|
$13,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$358,872
|
|
$265,657
|
|
$1,247,126
|
|
$971,083
|
|
|
Direct Operating
Income
|
|
|
$66,518
|
|
$45,722
|
|
$221,473
|
|
$152,849
|
|
|
Direct Operating Income
Percent
|
|
|
18.5%
|
|
17.2%
|
|
17.8%
|
|
15.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Away
From Home
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$77,899
|
|
$72,163
|
|
$314,998
|
|
$292,927
|
|
|
Direct Operating
Income
|
|
|
$12,834
|
|
$11,941
|
|
$47,751
|
|
$36,069
|
|
|
Direct Operating Income
Percent
|
|
|
16.5%
|
|
16.5%
|
|
15.2%
|
|
12.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
and Export
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$72,692
|
|
$66,967
|
|
$254,900
|
|
$247,643
|
|
|
Direct Operating
Income
|
|
|
$13,398
|
|
$9,559
|
|
$45,056
|
|
$36,025
|
|
|
Direct Operating Income
Percent
|
|
|
18.4%
|
|
14.3%
|
|
17.7%
|
|
14.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net income to adjusted EBITDA for
the three and twelve months ended December
31, 2010 and 2009:
TREEHOUSE
FOODS, INC.
|
|
RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
|
|
December
31
|
|
December
31
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
Net income as
reported
|
|
$
28,081
|
|
$ 22,093
|
|
$
90,919
|
|
$ 81,314
|
|
Interest expense,
net
|
|
14,218
|
|
4,280
|
|
45,691
|
|
18,385
|
|
Income taxes
|
|
14,648
|
|
8,207
|
|
45,481
|
|
40,760
|
|
Depreciation and
amortization
|
|
19,136
|
|
12,411
|
|
69,778
|
|
47,343
|
|
Equity based
compensation
|
|
4,021
|
|
3,352
|
|
15,838
|
|
13,303
|
|
Non-cash tradename
impairment
|
|
-
|
|
7,600
|
|
-
|
|
7,600
|
|
Gain on insurance
settlement for fixed assets
|
|
-
|
|
-
|
|
-
|
|
(13,609)
|
|
(Gain) loss on
intercompany note translation and other
|
|
967
|
|
(463)
|
|
1,476
|
|
(4,929)
|
|
Mark to market adjustment
on interest rate swap
|
|
(1,187)
|
|
(875)
|
|
(4,363)
|
|
(2,104)
|
|
Acquisition and
integration costs
|
|
3,398
|
|
1,839
|
|
15,672
|
|
1,839
|
|
Curtailment of post
retirement benefits plan
|
|
-
|
|
-
|
|
(2,357)
|
|
-
|
|
Product
rationalization
|
|
(450)
|
|
172
|
|
4,886
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
82,832
|
|
$ 58,616
|
|
$
283,021
|
|
$ 190,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE TreeHouse Foods, Inc.