OAK BROOK, Ill., Feb. 10, 2012 /PRNewswire/ -- TreeHouse Foods,
Inc. (NYSE: THS) today reported fourth quarter earnings of
$0.81 per fully diluted share
compared to $0.77 per fully diluted
share reported for the fourth quarter of last year. The
Company reported adjusted earnings per share, as described below,
of $0.85 compared to $0.80 in the prior year.
The Company's 2011 fourth quarter results included several
unusual items that affected the year-over-year quarterly
comparison. The first item relates to costs of $0.01 per share associated with the consolidation
of facilities, including the Springfield,
Missouri plant closing. The remaining items are
comprised of a $0.01 per share
expense associated with the integration of Sturm Foods, a
$0.01 per share loss on the
mark-to-market adjustment of the Company's commodity and currency
agreements, and a $0.01 per share
non-cash loss on an intercompany note. Excluding all of these
items, adjusted earnings per share was $0.85 in the fourth quarter of 2011, compared to
$0.80 reported in the fourth quarter
of 2010.
ITEMS AFFECTING DILUTED EPS
COMPARABILITY:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
|
December
31
|
|
December
31
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
Diluted EPS as
reported
|
$0.81
|
|
$0.77
|
|
$2.56
|
|
$2.51
|
|
Facility consolidation
costs
|
0.01
|
|
-
|
|
0.15
|
|
-
|
|
Acquisition and
integration costs
|
0.01
|
|
0.06
|
|
0.03
|
|
0.28
|
|
Mark-to-market
adjustments
|
0.01
|
|
(0.03)
|
|
(0.02)
|
|
(0.08)
|
|
Loss on intercompany note
translation
|
0.01
|
|
0.01
|
|
-
|
|
0.02
|
|
Curtailment of post
retirement benefits plan
|
-
|
|
-
|
|
-
|
|
(0.05)
|
|
Infant feeding
charges
|
-
|
|
(0.01)
|
|
-
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Adjusted EPS
|
$0.85
|
|
$0.80
|
|
$2.72
|
|
$2.78
|
|
|
|
|
|
|
|
|
|
"We believe that changing customer dynamics, continued consumer
weakness, as well as unseasonably warm weather, hurt our top line
in the quarter," said Sam K. Reed,
Chairman, President and Chief Executive Officer. "Having
completed a detailed review of our category margins and channels of
distribution, we believe that the shift toward alternate channels
like club, limited assortment and dollar stores had a secondary
effect on our margins in the quarter. The 290 basis point
decline in gross margins was due to higher costs in our pickle
business and operating inefficiencies at some of our plants due to
unexpected volume and mix changes."
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 $82.8 million in the
quarter, which is comparable to the same period last year.
Adjusted EBITDA is flat compared to the prior year due to
soft fourth quarter volumes, higher cucumber crop costs and an
unfavorable LIFO adjustment for pickles. Also contributing to
the fourth quarter results was a loss in margin due to higher
production costs, as the Company experienced production
inefficiencies. Additionally, the Company lost margin due to
sales mix, as the Company had higher sales of private label value
products and lower sales of the higher margin premium products,
which offset increases in pricing.
Net sales for the fourth quarter totaled $535.8 million compared to $509.5 million last year. Sales for the
North American Retail Grocery segment increased 6.5% (4.1%
excluding acquisitions) as the Company realized the benefits of
increased pricing. Sales for the Food Away From Home segment
decreased 3.7% compared to last year due to soft volumes in the
pickles category, while the Industrial and Export segment showed
growth of 8.0%.
Selling, distribution, general and administrative expenses were
$50.2 million for the quarter, a
decrease of 18.7% from $61.7 million
in the fourth quarter of 2010. The decrease was due primarily
to lower incentive compensation and acquisition costs, which were
partially offset by approximately $1.4
million in incremental new systems implementation expense.
Amortization expense increased $1.6
million in the quarter due to a full quarter impact in 2011
of the S.T. Specialty Foods acquisition in 2010 and the
amortization of capitalized costs associated with our investment in
systems.
Other operating expense in the quarter totaled $0.7 million compared to $0.3 million in the prior year, and are primarily
related to the previously announced closure of the Springfield, Missouri pickle plant.
Interest expense in the quarter was $13.1
million compared to $14.2
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 decreased in the quarter to $13.6 million due to a lower effective income tax
rate. The Company's fourth quarter effective income tax rate
was 31.4% compared to last year's fourth quarter rate of 34.3%, as
the Company had higher levels of income in a lower tax jurisdiction
as compared to prior year.
Net income for the quarter totaled $29.9
million compared to $28.1
million last year. Fully diluted earnings per share
from continuing operations for the quarter were $0.81 per share compared to $0.77 per share last year. Excluding
unusual items, adjusted earnings per share from continuing
operations for the fourth quarter of 2011 was $0.85 compared to last year's fourth quarter
adjusted earnings per share of $0.80.
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, 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 fourth quarter
increased by 6.5% to $382.3 million
from $358.9 million during the same
quarter last year, primarily due to a 4.2% increase in pricing and
a 2.4% contribution from the S.T. Specialty Foods acquisition.
Volume (excluding acquisitions) in the retail channel
decreased 4% in total pounds compared to the fourth quarter of last
year, driven primarily by an 8% decline in December volume.
This December volume decline was due to a combination of much
lower shipments in the last two weeks of the year to large
traditional grocery chains and lower sales of the Company's cold
weather products such as soup, non-dairy creamer and hot cereal due
to unseasonably warm weather. While our volume in terms of
pounds were lower by 4% in the quarter, after considering the shift
in mix to lower weight, but higher revenue per pound products like
hot beverages, our net sales were relatively flat. Direct
operating income margin in the quarter decreased from 18.5% last
year to 15.9% in the current year as pricing actions were offset by
higher production costs, LIFO adjustments, and sales mix as stated
earlier, as well as higher freight costs.
Food Away From Home segment sales for the fourth quarter
decreased 3.7% from last year to $75.0
million due to 11% lower volumes. The volume decrease
was the result of the Company's previously discussed exit of
certain unprofitable processed pickle businesses and general
softness in the pickle category. Direct operating income
decreased to $10.9 million in the
quarter compared to $12.8 million
last year due to higher costs.
Industrial and Export segment sales for the fourth quarter
increased 8.0%, primarily driven by increased pricing. Direct
operating income decreased to $11.2
million compared to $13.4
million from last year as a result of lower production
volume in the Company's co-pack business.
OUTLOOK FOR 2012
The past year was a challenging year for both the Company and
the food industry. Full assortment grocers, and in
particular, national grocery chains, experienced a decline in foot
traffic as consumers bifurcate between the value offerings of
discounters and the premium offerings of specialty grocers.
Despite the shift, private label has continued to outperform
branded food companies due to its ability to offer unique offerings
to all food retailers.
The Company expects that 2012 will be a year of moderation, but
also one that will be much less volatile. Despite indications
for higher costs primarily in the first half of the year, the
Company anticipates input costs to stabilize as the year
progresses. Although much of the Company's needed pricing is
in place for certain crop inputs, targeted increases will be
required. Therefore, the Company expects to see revenues
increase 8% to 9%, driven primarily by a combination of pricing and
2.5% to 3.5% of volume growth. Gross margin dollars are
expected to grow in line with sales, resulting in relatively flat
gross margin percentages. Operating expenses will increase
due to re-instating the incentive compensation programs that did
not pay out in 2011. For the full year, TreeHouse expects its
adjusted earnings per fully diluted share to increase by a range of
10% to 16%, to $3.00 to $3.15 per
share.
Commenting on the outlook for 2012, Mr. Reed said, "We made
substantial progress in 2011 on a variety of internal initiatives,
including the roll-out of our new systems, realignment of our
distribution centers, and investments and upgrades in our plant
capacity. The new year will be one of renewed focus on the
day to day activities of executing our sales plans, driving
internal cost savings and delivering increased shareholder value."
"While our operating teams focus on the day-to-day execution,
the TreeHouse senior team will continue its pursuit of strategic
acquisitions. In 2012, we see the food industry moderating,
the acquisition environment improving, and financing staying open
and available. This combination should allow us to find the
right additions to our TreeHouse family of products during this new
year," concluded 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
twelve month periods ended December 31,
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 creamer; canned soup, salad dressings and
sauces; powdered drink mixes; 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, powdered
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
achievements expressed or implied by these forward-looking
statements. TreeHouse's Form 10-K for the year ended December 31, 2010 and subsequent reports on Form
10-Q 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
|
|
Twelve
Months Ended
|
|
|
|
|
December
31
|
|
December
31
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
535,802
|
|
$
509,463
|
|
$
2,049,985
|
|
$
1,817,024
|
|
Cost of sales
|
|
|
418,403
|
|
383,294
|
|
1,576,688
|
|
1,385,690
|
|
Gross profit
|
|
|
117,399
|
|
126,169
|
|
473,297
|
|
431,334
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
|
35,591
|
|
33,697
|
|
142,341
|
|
120,120
|
|
General and
administrative
|
|
|
14,596
|
|
28,003
|
|
101,817
|
|
107,126
|
|
Other operating
expense (income), net
|
|
|
731
|
|
322
|
|
6,462
|
|
1,183
|
|
Amortization
expense
|
|
|
9,195
|
|
7,578
|
|
34,402
|
|
26,352
|
|
Total
operating expenses
|
|
|
60,113
|
|
69,600
|
|
285,022
|
|
254,781
|
|
Operating
income
|
|
|
57,286
|
|
56,569
|
|
188,275
|
|
176,553
|
|
Other expense
(income):
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
13,092
|
|
14,218
|
|
53,023
|
|
45,691
|
|
(Gain) loss on
foreign currency exchange
|
|
|
1,555
|
|
542
|
|
(3,510)
|
|
(1,574)
|
|
Other income,
net
|
|
|
(866)
|
|
(920)
|
|
(1,036)
|
|
(3,964)
|
|
Total other
expense (income)
|
|
|
13,781
|
|
13,840
|
|
48,477
|
|
40,153
|
|
Income before income
taxes
|
|
|
43,505
|
|
42,729
|
|
139,798
|
|
136,400
|
|
Income taxes
|
|
|
13,641
|
|
14,648
|
|
45,391
|
|
45,481
|
|
Net income
|
|
|
$
29,864
|
|
$
28,081
|
|
$
94,407
|
|
$
90,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,001
|
|
35,489
|
|
35,805
|
|
35,079
|
|
Diluted
|
|
|
37,089
|
|
36,664
|
|
36,950
|
|
36,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.83
|
|
$
0.79
|
|
$
2.64
|
|
$
2.59
|
|
Diluted
|
|
|
$
0.81
|
|
$
0.77
|
|
$
2.56
|
|
$
2.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
$21,338
|
|
$19,136
|
|
$83,018
|
|
$69,778
|
|
Stock-based compensation
expense, before tax
|
|
|
$2,534
|
|
$4,021
|
|
$15,107
|
|
$15,838
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information:
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$382,299
|
|
$358,872
|
|
$1,456,213
|
|
$1,247,126
|
|
Direct Operating
Income
|
|
|
$60,825
|
|
$66,518
|
|
$243,744
|
|
$221,473
|
|
Direct Operating Income
Percent
|
|
|
15.9%
|
|
18.5%
|
|
16.7%
|
|
17.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Away
From Home
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$75,002
|
|
$77,899
|
|
$307,819
|
|
$314,998
|
|
Direct Operating
Income
|
|
|
$10,944
|
|
$12,834
|
|
$44,808
|
|
$47,751
|
|
Direct Operating Income
Percent
|
|
|
14.6%
|
|
16.5%
|
|
14.6%
|
|
15.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
and Export
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$78,501
|
|
$72,692
|
|
$285,953
|
|
$254,900
|
|
Direct Operating
Income
|
|
|
$11,179
|
|
$13,398
|
|
$48,268
|
|
$45,056
|
|
Direct Operating Income
Percent
|
|
|
14.2%
|
|
18.4%
|
|
16.9%
|
|
17.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the Company's net income to
Adjusted EBITDA for the three and twelve months ended December 31, 2011 and 2010:
TREEHOUSE
FOODS, INC.
|
|
RECONCILIATION OF REPORTED
EARNINGS TO ADJUSTED EBITDA
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
|
|
|
December
31
|
|
December
31
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net income as
reported
|
|
|
$ 29,864
|
|
$ 28,081
|
|
$ 94,407
|
|
$ 90,919
|
|
Interest expense,
net
|
|
|
13,092
|
|
14,218
|
|
53,023
|
|
45,691
|
|
Income taxes
|
|
|
13,641
|
|
14,648
|
|
45,391
|
|
45,481
|
|
Depreciation and
amortization
|
|
|
21,338
|
|
19,136
|
|
83,018
|
|
69,778
|
|
Stock-based compensation
expense
|
|
|
2,534
|
|
4,021
|
|
15,107
|
|
15,838
|
|
Loss on intercompany note
translation
|
|
|
291
|
|
967
|
|
17
|
|
1,476
|
|
Mark-to-market
adjustments
|
|
|
894
|
|
(1,187)
|
|
(807)
|
|
(4,363)
|
|
Acquisition and
integration costs
|
|
|
507
|
|
3,398
|
|
1,640
|
|
15,672
|
|
Curtailment of post
retirement benefits plan
|
|
|
-
|
|
-
|
|
-
|
|
(2,357)
|
|
Infant feeding
charges
|
|
|
-
|
|
(450)
|
|
-
|
|
4,886
|
|
Facility consolidation
costs
|
|
|
679
|
|
-
|
|
8,246
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$ 82,840
|
|
$ 82,832
|
|
$ 300,042
|
|
$ 283,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE TreeHouse Foods, Inc.