OAK BROOK, Ill., Nov. 4, 2011 /PRNewswire/ -- TreeHouse Foods,
Inc. (NYSE: THS) today reported third quarter earnings of
$0.82 per fully diluted share
compared to $0.68 per fully diluted
share reported for the third quarter of last year. The
Company reported adjusted earnings per share, as described below,
of $0.85 compared to $0.69 in the prior year.
The reported results for the third quarter of 2011 included
several unusual items that affected the quarterly comparison.
The first item relates to costs of $0.05 per share associated with the consolidation
of facilities, including the Springfield,
Missouri plant closing and the integration of freight and
warehouse operations into a consolidated distribution network.
The remaining items are comprised of a $0.01 per share expense associated with the
integration of Sturm Foods and S.T. Specialty Foods, a $0.01 per share gain on the mark-to-market
adjustment of the Company's swap agreements, and a $0.02 per share non-cash gain on an intercompany
note. Excluding all of these items, adjusted earnings per share was
$0.85 in the third quarter of 2011,
compared to $0.69 reported in the
third quarter of 2010.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30
|
|
September
30
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
Diluted EPS as
reported
|
$ 0.82
|
|
$ 0.68
|
|
$ 1.75
|
|
$ 1.75
|
|
Facility consolidation
costs
|
0.05
|
|
0.02
|
|
0.14
|
|
0.02
|
|
Acquisition and
integration costs
|
0.01
|
|
0.01
|
|
0.02
|
|
0.22
|
|
Mark-to-market adjustment
on swap agreements
|
(0.01)
|
|
(0.03)
|
|
(0.03)
|
|
(0.06)
|
|
(Gain) loss on
intercompany note translation
|
(0.02)
|
|
0.01
|
|
(0.01)
|
|
0.01
|
|
Curtailment of post
retirement benefits plan
|
-
|
|
-
|
|
-
|
|
(0.05)
|
|
Infant feeding
charges
|
-
|
|
-
|
|
-
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
Adjusted EPS
|
$ 0.85
|
|
$ 0.69
|
|
$ 1.87
|
|
$ 1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"We achieved all of the financial, operational and strategic
objectives that we set out for the quarter, and I am pleased that
we improved gross margins sequentially in all of our segments.
The aggressive pricing actions taken earlier this year to
offset higher input costs began to yield results, and we remain
confident that margins will continue their recovery as the balance
of the year unfolds," said Sam K.
Reed, Chairman, President and Chief Executive Officer.
Adjusted operating earnings before interest, taxes,
depreciation, amortization, non-cash stock based compensation, and
unusual items, or Adjusted EBITDA (reconciled to net income, the
most directly comparable GAAP measure, appears on the attached
schedule), was $83.4 million in the
quarter compared to $72.1 million in
the same period last year. The increase is primarily due to
an increase in sales from both the legacy business as well as the
acquisition of S.T. Specialty Foods.
Net sales for the third quarter totaled $528.1 million compared to $464.2 million last year. Sales for the
North American Retail Grocery segment increased 15.8% (4.9%
excluding acquisitions) as sales of private label foods continued
to show growth as both consumers and retailers maintained their
emphasis on value products. Sales for the Food Away From Home
segment decreased 4.7% compared to last year (4.9% decrease
excluding acquisitions) due to exiting unprofitable processed
pickle businesses, while the Industrial and Export segment showed
strong growth of 28.0%.
Selling, distribution, general and administrative expenses were
$62.3 million for the quarter, an
increase of 14.7% from $54.3 million
in the third quarter of 2010. The increase was due primarily
to the growth of the Company. As a percent of sales, these
expenses were relatively flat compared to the prior year at 11.8%
in 2011 vs. 11.7% in 2010. The Company incurred approximately
$2.9 million in incremental new
systems implementation expenses that were partially offset by lower
incentive compensation and acquisition costs in the third
quarter.
Other operating expense in the quarter totaled $1.7 million compared to $1.1 million in the prior year. The third
quarter of 2011 expenses are primarily related to the previously
announced closure of the Springfield,
Missouri pickle plant and other costs associated with the
consolidation of the Company's distribution network. The
third quarter of 2010 included $1.1
million in costs associated with the streamlining of the
infant feeding business in order to better align its cost structure
and exiting a third party warehouse.
Interest expense in the quarter was $12.6
million compared to $12.9
million last year. The decrease was primarily due to
the expiration of an interest rate swap contract that locked in a
portion of floating rate debt at a higher fixed interest rate,
offset by an increase in debt resulting from the S.T. Specialty
Foods acquisition and higher borrowing costs.
Income tax expense increased in the quarter to $14.7 million due to higher levels of income.
The Company's third quarter effective income tax rate was
32.6% compared to last year's third quarter rate of 32.4%.
Net income for the quarter totaled $30.4
million compared to $24.9
million last year. Fully diluted earnings per share
from continuing operations for the quarter were $0.82 per share compared to $0.68 per share last year. Excluding
unusual items, adjusted earnings per share from continuing
operations for the third quarter of 2011 was $0.85 compared to last year's third quarter
adjusted earnings per share of $0.69.
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, powdered drinks, hot cereals, macaroni and cheese,
skillet dinners and aseptic products.
- 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. The non-dairy creamer is either repackaged into
single serve packages for the foodservice industry or is used 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 third quarter
increased by 15.8% to $369.5 million
from $319.2 million during the same
quarter last year, primarily due to the S.T. Specialty Foods
acquisition. Unit volume (excluding acquisitions and branded
infant feeding) in the retail channel increased 1.0% compared to
last year. Dressings, non-dairy creamer, jams and spreads and
hot cereals sales were up significantly over last year with
powdered drinks and Mexican sauces also showing good sales growth.
Direct operating income margin decreased from 19.1% last year
to 17.5% in the current year as volume increases and pricing
actions were offset by higher freight, input and warehouse start up
costs. However, on a sequential basis, direct operating margin
improved 210 bps from the second quarter of 2011 as the Company's
pricing actions were implemented and incremental new business was
realized.
Food Away From Home segment sales for the third quarter
decreased 4.7% from last year to $79.5
million due to lower volumes, primarily in pickles, as the
Company exited certain unprofitable processed pickle businesses.
Excluding the exited pickle business, legacy unit volume
increased 2.8%. As a result of this strategy direct operating
income increased to $13.6 million in
the quarter compared to $12.8 million
last year despite the decline in sales.
Industrial and Export segment sales for the third quarter
increased 28.0%, primarily driven by increased pricing and volume
of non-dairy powdered creamer and a favorable product mix.
Direct operating income increased to $13.5 million compared to $8.7 million from last year as a result of the
increased volume.
OUTLOOK FOR 2011
With regard to the balance of the year, Sam K. Reed said, "We made great strides in
correcting our course over the last quarter. We fully expect
to continue our strong margin recovery as we enter the holiday
season, and use our Big Wins to drive top line growth. We
expect to finish the year by delivering the strongest quarterly
results in our history. Therefore, we are re-confirming our
previously issued full year guidance range of adjusted earnings to
between $2.90 and $3.00 per
share."
"We have momentum as we look forward, and we continue to have
faith and confidence in our original vision. We see 2012 as a
year of strategic expansion, driven internally by organic growth
and externally by strategic acquisitions. The opportunity for
TreeHouse to continue its role as a leading consolidator within the
private label space remains strong and vibrant. As always, we
are focused on strategy, category dynamics and go-to-market
synergies as we evaluate potential acquisition candidates," said
Mr. Reed.
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 unusual 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 stock based compensation expense,
and unusual 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 net income for the three and
nine month periods ended September 30,
2011 and 2010 calculated according to GAAP and Adjusted
EBITDA is attached. Given the inherent uncertainty regarding
unusual 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; 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.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September
30
|
|
September
30
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
528,050
|
|
$
464,242
|
|
$
1,514,183
|
|
$
1,307,561
|
|
Cost of sales
|
|
|
402,518
|
|
354,005
|
|
1,158,285
|
|
1,002,396
|
|
Gross profit
|
|
|
125,532
|
|
110,237
|
|
355,898
|
|
305,165
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
|
34,932
|
|
28,740
|
|
106,750
|
|
86,423
|
|
General and
administrative
|
|
|
27,376
|
|
25,561
|
|
87,221
|
|
79,123
|
|
Other operating
expense (income), net
|
|
|
1,733
|
|
1,103
|
|
5,731
|
|
861
|
|
Amortization
expense
|
|
|
8,839
|
|
7,040
|
|
25,207
|
|
18,774
|
|
Total
operating expenses
|
|
|
72,880
|
|
62,444
|
|
224,909
|
|
185,181
|
|
Operating
income
|
|
|
52,652
|
|
47,793
|
|
130,989
|
|
119,984
|
|
Other expense
(income):
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
12,610
|
|
12,867
|
|
39,931
|
|
31,473
|
|
(Gain) loss on
foreign currency exchange
|
|
|
(5,620)
|
|
(46)
|
|
(5,065)
|
|
(2,116)
|
|
Other income,
net
|
|
|
547
|
|
(1,838)
|
|
(170)
|
|
(3,044)
|
|
Total other
expense (income)
|
|
|
7,537
|
|
10,983
|
|
34,696
|
|
26,313
|
|
Income before income
taxes
|
|
|
45,115
|
|
36,810
|
|
96,293
|
|
93,671
|
|
Income taxes
|
|
|
14,725
|
|
11,943
|
|
31,750
|
|
30,833
|
|
Net income
|
|
|
$
30,390
|
|
$
24,867
|
|
$
64,543
|
|
$
62,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,967
|
|
35,421
|
|
35,721
|
|
34,870
|
|
Diluted
|
|
|
36,911
|
|
36,373
|
|
36,894
|
|
35,935
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.84
|
|
$
0.70
|
|
$
1.81
|
|
$
1.80
|
|
Diluted
|
|
|
$
0.82
|
|
$
0.68
|
|
$
1.75
|
|
$
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
$21,333
|
|
$18,145
|
|
$61,680
|
|
$50,642
|
|
Stock-based compensation
expense, before tax
|
|
|
$3,124
|
|
$4,019
|
|
$12,573
|
|
$11,817
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$369,547
|
|
$319,174
|
|
$1,073,874
|
|
$888,254
|
|
Direct Operating
Income
|
|
|
$64,706
|
|
$60,863
|
|
$181,799
|
|
$154,955
|
|
Direct Operating Income
Percent
|
|
|
17.5%
|
|
19.1%
|
|
16.9%
|
|
17.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Away
From Home
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$79,454
|
|
$83,330
|
|
$232,857
|
|
$237,099
|
|
Direct Operating
Income
|
|
|
$13,555
|
|
$12,775
|
|
$33,903
|
|
$34,917
|
|
Direct Operating Income
Percent
|
|
|
17.1%
|
|
15.3%
|
|
14.6%
|
|
14.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
and Export
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$79,049
|
|
$61,738
|
|
$207,452
|
|
$182,208
|
|
Direct Operating
Income
|
|
|
$13,511
|
|
$8,663
|
|
$37,088
|
|
$31,658
|
|
Direct Operating Income
Percent
|
|
|
17.1%
|
|
14.0%
|
|
17.9%
|
|
17.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the Company's net income to
adjusted EBITDA for the three and nine months ended September 30, 2011 and 2010:
TREEHOUSE
FOODS, INC.
|
|
RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September
30
|
|
September
30
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net income as
reported
|
|
|
$ 30,390
|
|
$ 24,867
|
|
$ 64,543
|
|
$ 62,838
|
|
Interest expense,
net
|
|
|
12,610
|
|
12,867
|
|
39,931
|
|
31,473
|
|
Income taxes
|
|
|
14,725
|
|
11,943
|
|
31,750
|
|
30,833
|
|
Depreciation and
amortization
|
|
|
21,333
|
|
18,145
|
|
61,680
|
|
50,642
|
|
Stock-based compensation
expense
|
|
|
3,124
|
|
4,019
|
|
12,573
|
|
11,817
|
|
(Gain) loss on
intercompany note translation
|
|
|
(994)
|
|
479
|
|
(274)
|
|
507
|
|
Mark-to-market adjustment
on swap agreements
|
|
|
(948)
|
|
(1,465)
|
|
(1,701)
|
|
(3,175)
|
|
Acquisition and
integration costs
|
|
|
600
|
|
704
|
|
1,133
|
|
12,274
|
|
Curtailment of post
retirement benefits plan
|
|
|
-
|
|
-
|
|
-
|
|
(2,357)
|
|
Infant feeding
charges
|
|
|
-
|
|
-
|
|
-
|
|
4,552
|
|
Facility consolidation
costs
|
|
|
2,588
|
|
491
|
|
7,567
|
|
784
|
|
|
|
|
|
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Adjusted EBITDA
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$ 83,428
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$ 72,050
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$ 217,202
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$ 200,188
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SOURCE TreeHouse Foods, Inc.