OAK BROOK, Ill., May 5, 2011 /PRNewswire/ -- TreeHouse Foods, Inc.
(NYSE: THS) today reported an increase in first quarter earnings
compared to last year, driven by the benefit of acquisitions made
in 2010 and solid operating performance within the North American
Retail Grocery business. Earnings for the quarter were
$0.54 per fully diluted share
compared to $0.47 per fully diluted
share reported for the first quarter of last year. On an
adjusted basis, as described below, fully-diluted earnings per
share of $0.59 were equivalent to the
prior year, as higher freight costs and the Company's investment in
new computer systems and higher interest rates offset the benefits
from last year's acquisitions of Sturm Foods and S.T. Specialty
Foods.
(Logo:
http://photos.prnewswire.com/prnh/20050726/CGTREELOGO)
The reported results for the first quarter of 2011 included
three unusual items that affected the quarterly comparison.
The first item relates to costs of $0.05 per share associated with the previously
announced closure of the Company's Springfield, Missouri pickle plant. The
second item relates to a $0.01 per
share gain on the mark-to-market adjustment of an interest rate
swap agreement, and the third item is a $0.01 per share loss on the translation of an
intercompany note between the United
States and Canada.
Excluding these items, adjusted earnings per share on a fully
diluted basis were $0.59 in the first
quarter of 2011, flat compared with the $0.59 reported in the first quarter of 2010.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
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Three Months
Ended
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March
31
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2011
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2010
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(unaudited)
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Diluted EPS as
reported
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$
0.54
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$
0.47
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Acquisition and integration
costs
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-
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0.17
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Curtailment of post retirement
benefits plan
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-
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(0.05)
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Mark-to-market gain on interest
rate swap
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(0.01)
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(0.01)
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Plant closing costs
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0.05
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-
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Loss on intercompany note
translation
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0.01
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0.01
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Adjusted diluted EPS
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$
0.59
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$
0.59
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Commenting on the results, Sam K.
Reed, Chairman and CEO, said, "We had a strong start to the
year on the top line and are encouraged by our progress. Our
legacy businesses turned in very good volume growth.
Excluding discontinued branded infant feeding, our legacy
retail grocery segment realized a 4.0% increase in organic revenue
growth, its best net sales increase since its formation in 2005.
Sturm Foods and S.T. Specialty Foods, our most recent
acquisitions, reported excellent performance as well. Private
label continues to deliver value and quality to our customers and
their consumers, and we are well positioned to continue our
growth.
"While we benefited from favorable forward positions on
agricultural commodities in the first quarter, these benefits were
more than offset by a rising energy environment that drove freight
and fuel expenses significantly higher than anticipated.
However, we have aggressive plans in place to recover these
costs through price increases during the remainder of the
year."
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) increased 27.5% to
$71.5 million in the quarter compared
to $56.0 million in the same period
last year. The increase is primarily the result of additional
earnings from Sturm Foods and S.T. Specialty Foods.
Net sales for the first quarter totaled $493.5 million compared to $397.1 million last year. Sales for the
North American Retail Grocery segment increased 35.0% (1.1%
excluding acquisitions) as sales of private label foods continued
to show growth as both consumers and retailers maintain their
emphasis on value products. Sales for the Food Away From Home
segment increased 1.1% over last year (2.8% decrease excluding
acquisitions) while the Industrial and Export segment showed strong
growth of 6.3% (3.1% excluding acquisitions). Gross margins
improved in all segments as the favorable mix of sales from Sturm
Foods and S.T. Specialty Foods offset lower margins in legacy
product categories resulting from approximately $3 million in higher freight and transportation
costs in the quarter.
Selling, distribution, general and administrative expenses were
$65.5 million for the quarter, an
increase of 18.5% from $55.3 million
in the first quarter of 2010. The increase was due primarily
to the growth of the Company, and included approximately
$4.5 million in incremental new
systems implementation expenses. On February 1, 2011 the Company began using a new
ERP system for many aspects of its billing, financial and
distribution activities. The Company considers the
implementation program a great success, as evidenced by having
processed over 2 million transactions since implementation with
order fill rates and on time deliveries equal to or better than the
same statistics prior to implementation. Last year's
operating expenses included approximately $6.5 million in costs relating to the Sturm Foods
acquisition.
Other operating expense in the quarter totaled $2.7 million compared to income of $2.3 million in the prior year. The first
quarter of 2011 included approximately $2.4
million of expenses related to the previously announced
closure of the Springfield,
Missouri pickle plant. The first quarter of 2010
included a one time, non-cash gain through the settlement of
certain post retirement benefit obligations by transferring those
liabilities to a union sponsored multiemployer plan, resulting in a
reversal of previously expensed benefit costs.
Interest expense in the quarter was significantly higher than
last year, totaling $13.9 million in
the quarter compared to $6.8 million
last year. The increase was due to a 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.
Income tax expense increased in the quarter to $10.1 million due to higher levels of income.
The Company's first quarter effective income tax rate of
33.8% was comparable to last year's first quarter rate of
33.7%.
Net income for the quarter totaled $19.8
million compared to $16.3
million last year. Fully-diluted earnings per share
from continuing operations for the quarter were $0.54 per share compared to $0.47 per share last year. Excluding
unusual items, adjusted earnings per share from continuing
operations for the first quarter of 2011 of $0.59 were flat compared to last year's first
quarter adjusted earnings per share of $0.59.
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, non-dairy powdered
creamers, salsa, aseptic 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 first quarter
increased by 35.0% to $353.5 million
from $261.8 million during the same
quarter last year, primarily due to the Sturm Foods and S.T.
Specialty Foods acquisitions. Unit volume (excluding
acquisitions and branded infant feeding) in the retail channel
increased 2.9% compared to last year. Soup sales were up in
the mid single digits over last year with Mexican sauces, aseptic
sauces, hot cereals, powdered drinks, and jams and spreads showing
good sales growth. Direct operating income margin improved to
18.5% from 16.1% last year as a positive mix of higher margin sales
more than offset higher transportation costs that negatively
affected nearly all product categories.
Food Away From Home segment sales increased 1.1% from last year
to $74.2 million due to the addition
of Sturm Foods. Direct operating income improved to
$10.8 million from $9.5 million last year due to the positive mix of
new sales and the discontinued sales of low margin processed
pickles to certain customers.
Industrial and Export segment sales increased 6.3%, primarily
driven by increased pricing of non-dairy creamer and dressings as
well as the addition of Sturm Foods. Direct operating income
was $12.8 million compared to
$11.7 million from last year as
higher input costs were more than offset by the positive mix
resulting from lower sales volumes of low margin co-pack sales.
OUTLOOK FOR 2011
Commenting on the outlook for 2011, Sam
K. Reed said, "Although our first quarter results were
negatively affected by higher freight and fuel expenses and
agricultural input costs have risen beyond our earlier assumptions,
we still expect to meet our original operating earnings projections
for the year. I am reassured by the strength of our new
businesses, our outstanding first quarter revenue growth, and plans
for further pricing actions later this year.
"The early success of our systems implementation work has given
us both the resources and confidence to accelerate the conversions
of our Sturm Foods and S.T. Specialty Foods acquisitions, while
still maintaining an aggressive rollout to our plants and
distributions centers. This acceleration will require an
additional investment in 2011 of approximately $5.0 million or $0.10 per share in earnings per share in
operating expenses compared to our original plans. In
accordance with this additional investment, we are revising our
2011 full year earnings guidance to a range of $3.00 to $3.08 in adjusted earnings per
share."
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
month periods ended March 31, 2011
and 2010 calculated according to GAAP and Adjusted EBITDA is
attached. Given the inherent uncertainty regarding
non-recurring 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
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(In
thousands, except per share data)
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Three Months
Ended
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March
31
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2011
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2010
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(unaudited)
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Net sales
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$
493,513
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$
397,124
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Cost of sales
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372,587
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308,346
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Gross profit
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120,926
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88,778
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Operating
expenses:
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Selling and
distribution
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36,260
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26,796
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General and
administrative
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29,243
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28,478
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Other operating
expense (income), net
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2,650
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(2,261)
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Amortization
expense
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8,049
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4,447
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Total
operating expenses
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76,202
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57,460
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Operating
income
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44,724
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31,318
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Other (income)
expense:
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Interest expense,
net
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13,851
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6,827
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Loss on currency
exchange
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1,430
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100
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Other, net
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(492)
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(213)
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Total other
expense
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14,789
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6,714
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Income before income
taxes
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29,935
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24,604
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Income taxes
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10,127
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8,285
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Net income
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$
19,808
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$
16,319
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Weighted average common
shares:
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Basic
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35,534
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33,553
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Diluted
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36,785
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34,614
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Net earnings per common
share:
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Basic
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$0.56
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$0.49
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Diluted
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$0.54
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$0.47
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Supplemental
Information:
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Depreciation and
Amortization
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$19,836
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$14,117
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Stock-based compensation
expense, before tax
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$4,774
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$3,354
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Segment
Information:
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North
American Retail Grocery
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Net Sales
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$353,463
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$261,800
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Direct Operating
Income
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$65,521
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$42,122
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Direct Operating Income
Percent
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18.5%
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16.1%
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Food Away
From Home
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Net Sales
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$74,227
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$73,427
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Direct Operating
Income
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$10,762
|
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$9,461
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Direct Operating Income
Percent
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|
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14.5%
|
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12.9%
|
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|
|
|
|
|
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Industrial
and Export
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Net Sales
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$65,823
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$61,897
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Direct Operating
Income
|
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$12,830
|
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$11,662
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Direct Operating Income
Percent
|
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19.5%
|
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18.8%
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The following table reconciles the Company's net income to
adjusted EBITDA for the three months ended March 31, 2011 and 2010:
TREEHOUSE
FOODS, INC.
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RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
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(In
thousands)
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|
|
|
|
|
|
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|
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Three Months
Ended
|
|
|
|
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March
31
|
|
|
|
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2011
|
|
2010
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
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Net income as
reported
|
|
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$
19,808
|
|
$
16,319
|
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Interest expense,
net
|
|
|
13,851
|
|
6,827
|
|
Income taxes
|
|
|
10,127
|
|
8,285
|
|
Depreciation and
amortization
|
|
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19,836
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14,117
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Equity-based
compensation
|
|
|
4,774
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|
3,354
|
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Acquisition and
integration costs
|
|
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240
|
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9,277
|
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Loss on intercompany note
translation
|
|
|
800
|
|
764
|
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Adjustment on interest
rate swap mark-to-market
|
|
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(575)
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|
(691)
|
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Curtailment of post
retirement benefits plan
|
|
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-
|
|
(2,357)
|
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Plant closing
costs
|
|
|
2,597
|
|
138
|
|
|
|
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|
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|
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Adjusted EBITDA
|
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$
71,458
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$
56,033
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SOURCE TreeHouse Foods, Inc.