- Net sales of $843.6 million
exceeded guidance expectations and increased by 4.1% versus the
prior year.
- Net income from continuing operations of $21.7 million compares to net loss from
continuing operations of $(27.3)
million in the prior year. Adjusted EBITDA1 from
continuing operations of $76.4
million was at the high-end of the Company's guidance
range and increased by $23.3 million versus the prior year.
- Earnings (loss) per diluted share from continuing operations of
$0.38 compares to $(0.49) in the prior year. Adjusted earnings per
diluted share from continuing operations1 of
$0.42 compares to $0.05 in the prior year.
- TreeHouse raised its full year net sales outlook to 7.5% to
9.5% year-over-year growth, primarily reflecting the impact of the
coffee acquisition, and narrowed its full year adjusted
EBITDA2 outlook to $360 to
$370 million.
OAK
BROOK, Ill., Aug. 7, 2023
/PRNewswire/ -- TreeHouse Foods, Inc. (NYSE: THS) today
reported financial results for the second quarter of 2023.
"The transformative actions that we've taken have more strongly
positioned TreeHouse in higher-growth, higher-margin categories and
are reflected in our second quarter and first half results," said
Steve Oakland, Chairman, Chief
Executive Officer, and President. "We continue to leverage our
position as a private brand powerhouse in snacking and beverages
and remain focused on improved execution, which enabled us to
deliver better-than-expected net sales and a nearly 44% increase in
adjusted EBITDA from continuing operations, which was at the high
end of our guidance. Looking forward, we expect to continue to
benefit from our more focused portfolio, higher service levels and
our strategic investments in capabilities, including our recently
completed coffee acquisition. With favorable industry trends and a
clear strategy, we are confident in achieving our near- and
long-term financial goals and see a long runway for continued
growth and value creation."
SECOND QUARTER 2023 FINANCIAL RESULTS
Net Sales — Net sales for the second quarter of 2023
totaled $843.6 million compared to
$810.2 million for the same period
last year, an increase of $33.4
million, or 4.1%. The change in net sales from 2022 to 2023
was due to the following:
|
|
Three
Months
|
|
Six
Months
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
Pricing
|
|
11.2 %
|
|
13.9 %
|
Volume/mix
|
|
(7.2)
|
|
(3.9)
|
Total change in organic
net sales1
|
|
4.0 %
|
|
10.0 %
|
Acquisition
|
|
0.3
|
|
0.1
|
Foreign
currency
|
|
(0.2)
|
|
(0.3)
|
Total change in net
sales
|
|
4.1 %
|
|
9.8 %
|
The net sales increase of 4.1% was primarily driven by favorable
pricing to recover commodity inflation. This was partially offset
by decreased volume as a result of the Company's ability to fulfill
certain customer orders earlier than planned in the first quarter
of 2023 due to service improvements. Additionally, declines in food
and beverage consumption trends, the exit of lower margin business,
and distribution losses contributed to the decrease.
Gross Profit — Gross profit as a percentage of net sales was
15.7% in the second quarter of 2023, compared to 13.7% in the
second quarter of 2022, an increase of 2.0 percentage points. The
increase is primarily due to the Company's pricing actions to
recover commodity and freight inflation experienced in prior
periods. This was partially offset by increased costs to invest in
the supply chain to improve service levels, which included
increased costs for labor and manufacturing plant maintenance.
Total Operating Expenses — Total operating expenses were
$103.3 million in the second quarter
of 2023 compared to $136.7 million in
the second quarter of 2022, a decrease of $33.4 million. The decrease is primarily due to
$11.9 million of TSA income, lower
professional fees for strategic growth initiatives, lower retention
bonus expense, and lower freight costs.
Total Other (Income) Expense — Total other expense of
$6.1 million in the second quarter of
2022 decreased by $7.2 million to be
total other income of $1.1 million in
the second quarter of 2023. The decrease was primarily due to
$10.7 million of interest income
received from the Company's Note Receivable and favorable currency
exchange rate impacts between the U.S. and Canada. This was partially offset by rising
interest rates, which led to interest expense, higher costs with
selling receivables in the Company's Receivables Sales Program, and
higher costs in our pension plans. Additionally, offsetting was a
less favorable change in non-cash mark-to-market impacts from
hedging activities, largely driven by interest rate swaps.
Income Taxes — Income taxes were recognized at an effective rate
of 29.1% in the second quarter of 2023 compared to 14.2% recognized
in the second quarter of 2022. The change in the Company's
effective tax rate is primarily driven by the estimated amount of
annual pre-tax earnings.
Net Income (Loss) from Continuing Operations and Adjusted EBITDA
— Net income from continuing operations for the second quarter of
2023 was $21.7 million, compared to
net loss from continuing operations of $27.3
million for the same period of the previous year. Adjusted
EBITDA1 from continuing operations was $76.4 million in the second quarter of
2023, compared to $53.1 million
in the second quarter of 2022, an increase of $23.3 million. The increase is primarily due
to the Company's pricing actions to recover commodity and freight
inflation experienced in prior periods and lower freight costs.
This was partially offset by increased costs to invest in the
supply chain to improve service levels, which included increased
costs for labor and manufacturing plant maintenance.
Discontinued Operations — Net income (loss) from discontinued
operations was $1.6 million of income
in the second quarter of 2023 compared to a $2.1 million loss in the second quarter of 2022,
an increase of $3.7 million. The
increase is primarily a result of the divestiture of a significant
portion of the Meal Preparation business on October 3, 2022 and a favorable loss on disposal
adjustment of $1.0 million during the
first quarter of 2023 as the purchase price was finalized.
Net Cash Used in Operating Activities from Continuing Operations
— Net cash used in operating activities from continuing operations
was $49.8 million in the first six
months of 2023 compared to $70.7
million in the first six months of 2022, a decrease in cash
used of $20.9 million. The cash flow
improvement was primarily attributable to higher cash earnings
reflecting the Company's pricing actions to recover commodity and
freight inflation experienced in prior periods. This was partially
offset by a decrease in cash flows from the Receivables Sales
Program and payment timing in accounts payable.
OUTLOOK2
TreeHouse today updated its previously-issued full year 2023
guidance:
- Net sales growth is now expected to be 7.5% to 9.5%
year-over-year, which represents a range of $3.71 to $3.78
billion.
-
- The increase primarily reflects the volume from the acquisition
of the Northlake, Texas coffee facility that closed in
June 2023.
- The Company narrowed its adjusted EBITDA range to $360 to $370
million, up approximately 27% year-over-year at the
midpoint.
- Net interest expense is now expected to be $27 million to $32
million, due to increased usage of the Revolving Credit
Facility to fund the aforementioned coffee acquisition and
investment in inventory to service customers.
With regard to the cadence for the remainder of the year:
- TreeHouse expects third quarter revenue in the range of
$950 to $970
million, representing approximately 10% year-over-year
growth at the midpoint, primarily driven by volume/mix, including
the volume from the coffee acquisition.
- The Company anticipates third quarter adjusted EBITDA in the
range of $81 to $89 million, representing approximately 11%
year-over-year growth at the midpoint.
- Full year adjusted EBITDA guidance reflects the following
expectations for the fourth quarter:
-
- Sequential and year-over-year improvement in gross margin
primarily driven by TMOS and supply chain savings initiatives.
- Approximately $5 million to
$7 million in temporary operating
expenses in the fourth quarter resulting from the expected wind
down of substantial portions of the transition services agreement
related to the Meal Preparation divestiture.
________________________________________________
1 Adjusted earnings per diluted share from continuing
operations, adjusted EBIT, adjusted EBITDA, adjusted EBITDAS,
adjusted net income (loss), free cash flow and organic net sales
are non-GAAP financial measures. See "Comparison of Adjusted
Information to GAAP Information" for the definitions of the
Non-GAAP measures, information concerning certain items affecting
comparability, and reconciliations of GAAP to Non-GAAP
measures.
2 The Company is not able to reconcile prospective
adjusted EBITDA from continuing operations or adjusted EBITDA
margin from continuing operations, which are Non-GAAP financial
measures, to the most comparable GAAP financial measures without
unreasonable effort due to the inherent uncertainty and difficulty
of predicting the occurrence, financial impact, and timing of
certain items impacting GAAP results. These items include, but
are not limited to, mark-to-market adjustments of derivative
contracts, foreign currency exchange on the re-measurement of
intercompany notes, or other non-recurring events or transactions
that may significantly affect reported GAAP results.
CONFERENCE CALL WEBCAST
A webcast to discuss the Company's second quarter earnings will
be held at 8:30 a.m. (Eastern Time)
today. The live audio webcast and a supporting slide deck will be
available on the Company's website at
www.treehousefoods.com/investors/investor-overview/default.aspx
DISCONTINUED OPERATIONS
On October 3, 2022, the Company
completed the sale of a significant portion of the Company's Meal
Preparation business, including pasta, pourable and spoonable
dressing, preserves, red sauces, syrup, dry blends and baking, dry
dinners, pie filling, pita chips and other sauces (the
"Transaction"). Beginning in the third quarter of 2022, the
business of the Transaction is presented as discontinued
operations, and, as such, has been excluded from continuing
operations for all periods presented.
COMPARISON OF ADJUSTED INFORMATION TO GAAP
INFORMATION
The Company has included in this release measures of financial
performance that are not defined by GAAP ("Non-GAAP"). A Non-GAAP
financial measure is a numerical measure of financial performance
that excludes or includes amounts so as to be different than the
most directly comparable measure calculated and presented in
accordance with GAAP in the Company's Condensed Consolidated
Balance Sheets, Condensed Consolidated Statements of Operations,
Condensed Consolidated Statements of Comprehensive Income (Loss),
Condensed Consolidated Statements of Stockholders' Equity, and the
Condensed Consolidated Statements of Cash Flows. As described
further below, the Company believes these measures provide useful
information to the users of the financial statements.
For each of these Non-GAAP financial measures, the Company
provides a reconciliation between the most directly comparable GAAP
measure and the Non-GAAP measure, an explanation of why management
believes the Non-GAAP measure provides useful information to
financial statement users, and any additional purposes for which
management uses the Non-GAAP measure. This Non-GAAP financial
information is provided as additional information for the financial
statement users 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.
Organic Net Sales
Organic net sales is defined as net sales excluding the impacts
of acquisitions, divestitures, and foreign currency. This
information is provided in order to allow investors to make
meaningful comparisons of the Company's sales between periods and
to view the Company's business from the same perspective as Company
management.
Adjusted Earnings Per Diluted Share from Continuing
Operations, Adjusting for Certain Items Affecting
Comparability
Adjusted earnings (loss) per diluted share from continuing
operations ("adjusted diluted EPS") reflects adjustments to GAAP
earnings (loss) per diluted share from continuing operations to
identify items that, in management's judgment, significantly affect
the assessment of earnings results between periods. This
information is provided in order to allow investors to make
meaningful comparisons of the Company's earnings performance
between periods and to view the Company's business from the same
perspective as Company management. As the Company cannot predict
the timing and amount of charges that include, but are not limited
to, items such as divestiture, acquisition, integration, and
related costs, mark-to-market adjustments on derivative contracts,
foreign currency exchange impact on the re-measurement of
intercompany notes, growth, reinvestment, and restructuring
programs, and other items that may arise from time to time that
would impact comparability, management does not consider these
costs when evaluating the Company's performance, when making
decisions regarding the allocation of resources, in determining
incentive compensation, or in determining earnings estimates. The
reconciliation of the GAAP measure of diluted earnings (loss) per
share from continuing operations as presented in the Condensed
Consolidated Statements of Operations, excluding certain items
affecting comparability, to adjusted diluted earnings (loss) per
share from continuing operations is presented in the attached
tables.
Adjusted Net Income (Loss) from Continuing Operations,
Adjusted EBIT from Continuing Operations, Adjusted EBITDA from
Continuing Operations, Adjusted EBITDAS from Continuing Operations,
Adjusted Net Income (Loss) Margin from Continuing Operations,
Adjusted EBIT Margin from Continuing Operations, Adjusted EBITDA
Margin from Continuing Operations, and Adjusted EBITDAS Margin from
Continuing Operations, Adjusting for Certain Items Affecting
Comparability
Adjusted net income (loss) from continuing operations represents
GAAP net income (loss) from continuing operations as reported in
the Condensed Consolidated Statements of Operations adjusted for
items that, in management's judgment, significantly affect the
assessment of earnings results between periods as outlined in the
adjusted diluted EPS from continuing operations section above. This
information is provided in order to allow investors to make
meaningful comparisons of the Company's earnings performance
between periods and to view the Company's business from the same
perspective as Company management. This measure is also used as a
component of the Board of Directors' measurement of the Company's
performance for incentive compensation purposes and is the basis of
calculating the adjusted diluted EPS from continuing operations
metric outlined above.
Adjusted EBIT from continuing operations represents adjusted net
income (loss) from continuing operations before interest expense,
interest income, and income tax expense. Adjusted EBITDA from
continuing operations represents adjusted net income (loss) from
continuing operations before interest expense, interest income,
income tax expense, and depreciation and amortization expense.
Adjusted EBITDAS from continuing operations represents adjusted
EBITDA from continuing operations before non-cash stock-based
compensation expense. Adjusted EBIT from continuing operations,
adjusted EBITDA from continuing operations, and adjusted EBITDAS
from continuing operations are performance measures commonly used
by management to assess operating performance and incentive
compensation, and the Company believes they are commonly reported
and widely used by investors and other interested parties as a
measure of a company's operating performance between periods and as
a component of our debt covenant calculations.
Adjusted net income (loss) margin from continuing operations,
adjusted EBIT margin from continuing operations, adjusted EBITDA
margin from continuing operations, and adjusted EBITDAS margin from
continuing operations are calculated as the respective metric
defined above as a percentage of net sales as reported in the
Condensed Consolidated Statements of Operations.
The attached table reconciles the Company's net income (loss)
from continuing operations as presented in the Condensed
Consolidated Statements of Operations, the relevant GAAP measure,
to Adjusted net income (loss) from continuing operations, Adjusted
EBIT from continuing operations, Adjusted EBITDA from continuing
operations, and Adjusted EBITDAS from continuing operations for the
three and six months ended June 30,
2023 and 2022. Given the inherent uncertainty regarding
adjusted items in any future period, a reconciliation of
forward-looking financial measures to the most directly comparable
GAAP measure is not feasible.
Free Cash Flow from Continuing Operations
In addition to measuring the Company's cash flow generation and
usage based upon the operating, investing, and financing
classifications included in the Condensed Consolidated Statements
of Cash Flows, we also measure free cash flow from continuing
operations, which represents net cash used in operating activities
from continuing operations less capital expenditures. The Company
believes free cash flow is an important measure of operating
performance because it provides management and investors a measure
of cash generated from operations that is available for mandatory
payment obligations and investment opportunities such as funding
acquisitions, repaying debt, repurchasing public debt, and
repurchasing common stock. A reconciliation between the relevant
GAAP measure of cash used in operating activities from continuing
operations for the six months ended June 30,
2023 and 2022 calculated according to GAAP and free cash
flow from continuing operations is presented in the attached
tables.
ABOUT TREEHOUSE FOODS
TreeHouse Foods, Inc. is a leading private label food and
beverage manufacturer in North
America. Our purpose is to engage and delight - one customer
at a time. Through our customer focus and category experience, we
strive to deliver excellent service and build capabilities and
insights to drive mutually profitable growth for TreeHouse and for
our customers. Our purpose is supported by investment in depth,
capabilities and operational efficiencies which are aimed to
capitalize on the long-term growth prospects in the categories in
which we operate.
Additional information, including TreeHouse's most recent
statements on Forms 10-Q and 10-K, may be found at TreeHouse's
website, http://www.treehousefoods.com.
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements and other information are
based on our beliefs, as well as assumptions made by us, using
information currently available. The words "believe," "estimate,"
"project," "expect," "anticipate," "plan," "intend," "foresee,"
"should," "would," "could," and similar expressions, as they relate
to us, are intended to identify forward-looking statements. Such
statements reflect our current views with respect to future events
and are subject to certain risks, uncertainties, and assumptions.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those described herein as anticipated,
believed, estimated, expected, or intended. We do not intend to
update these forward-looking statements following the date of this
press release.
Such forward-looking statements, because they relate to future
events, are by their very nature subject to many important factors
that could cause actual results to differ materially from those
contemplated by the forward-looking statements contained in this
press release and other public statements we make. Such factors
include, but are not limited to: risks related to the impact that
the divestiture of a significant portion of our Meal Preparation
Business or any such divestiture might have on the Company's
operations; disruptions or inefficiencies in our supply chain
and/or operations; loss of key suppliers; raw material and
commodity costs due to inflation; labor strikes or work stoppages;
multiemployer pension plans; labor shortages and increased
competition for labor; success of our growth, reinvestment, and
restructuring programs; our level of indebtedness and related
obligations; disruptions in the financial markets; interest rates;
changes in foreign currency exchange rates; collectibility of our
note receivable, customer concentration and consolidation;
competition; our ability to execute on our business strategy; our
ability to continue to make acquisitions and execute on
divestitures or effectively manage the growth from acquisitions;
impairment of goodwill or long lived assets; changes and
developments affecting our industry, including customer
preferences; the outcome of litigation and regulatory proceedings
to which we may be a party; product recalls; changes in laws and
regulations applicable to us; shareholder activism; disruptions in
or failures of our information technology systems; changes in
weather conditions, climate changes, and natural disasters; and
other risks that are set forth in the Risk Factors section, the
Legal Proceedings section, the Management's Discussion and Analysis
of Financial Condition and Results of Operations section, and other
sections of this Quarterly Report on Form 10-Q, our Annual Report
on Form 10-K for the year ended December 31,
2022, and from time to time in our filings with the
Securities and Exchange Commission ("SEC"). 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 press release. TreeHouse 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 BALANCE SHEETS
|
(Unaudited, in
millions, except per share data)
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
16.9
|
|
$
43.0
|
Receivables,
net
|
|
163.5
|
|
158.8
|
Inventories
|
|
673.4
|
|
589.5
|
Prepaid expenses and
other current assets
|
|
21.4
|
|
23.2
|
Total current
assets
|
|
875.2
|
|
814.5
|
Property, plant, and
equipment, net
|
|
725.6
|
|
666.5
|
Operating lease
right-of-use assets
|
|
200.5
|
|
184.4
|
Goodwill
|
|
1,824.6
|
|
1,817.6
|
Intangible assets,
net
|
|
279.5
|
|
296.0
|
Note receivable,
net
|
|
424.1
|
|
427.0
|
Other assets,
net
|
|
50.9
|
|
47.9
|
Total
assets
|
|
$
4,380.4
|
|
$
4,253.9
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
526.5
|
|
$
618.7
|
Accrued
expenses
|
|
164.9
|
|
208.5
|
Current portion of
long-term debt
|
|
0.5
|
|
0.6
|
Total current
liabilities
|
|
691.9
|
|
827.8
|
Long-term
debt
|
|
1,594.5
|
|
1,394.0
|
Operating lease
liabilities
|
|
172.4
|
|
159.1
|
Deferred income
taxes
|
|
110.5
|
|
108.7
|
Other long-term
liabilities
|
|
76.2
|
|
77.3
|
Total
liabilities
|
|
2,645.5
|
|
2,566.9
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Preferred stock, par
value $0.01 per share, 10.0 shares authorized, none
issued
|
|
—
|
|
—
|
Common stock, par
value $0.01 per share, 90.0 shares authorized, 56.4 and 56.1 shares
outstanding as of June 30, 2023 and December 31, 2022,
respectively
|
|
0.6
|
|
0.6
|
Treasury
stock
|
|
(133.3)
|
|
(133.3)
|
Additional paid-in
capital
|
|
2,212.5
|
|
2,205.4
|
Accumulated
deficit
|
|
(263.5)
|
|
(302.0)
|
Accumulated other
comprehensive loss
|
|
(81.4)
|
|
(83.7)
|
Total stockholders'
equity
|
|
1,734.9
|
|
1,687.0
|
Total liabilities and
stockholders' equity
|
|
$
4,380.4
|
|
$
4,253.9
|
TREEHOUSE FOODS,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited, in
millions, except per share data)
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
|
$
843.6
|
|
$
810.2
|
|
$
1,738.4
|
|
$
1,582.8
|
Cost of
sales
|
|
710.8
|
|
699.2
|
|
1,453.3
|
|
1,373.1
|
Gross profit
|
|
132.8
|
|
111.0
|
|
285.1
|
|
209.7
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
39.9
|
|
54.8
|
|
84.9
|
|
115.9
|
General and
administrative
|
|
54.1
|
|
56.1
|
|
107.5
|
|
109.0
|
Amortization
expense
|
|
12.1
|
|
11.9
|
|
24.1
|
|
23.8
|
Other operating
(income) expense, net
|
|
(2.8)
|
|
13.9
|
|
(0.2)
|
|
43.0
|
Total operating
expenses
|
|
103.3
|
|
136.7
|
|
216.3
|
|
291.7
|
Operating income
(loss)
|
|
29.5
|
|
(25.7)
|
|
68.8
|
|
(82.0)
|
Other (income)
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
19.2
|
|
17.0
|
|
37.0
|
|
33.7
|
Interest
income
|
|
(10.8)
|
|
(0.1)
|
|
(25.4)
|
|
(4.2)
|
(Gain) loss on foreign
currency exchange
|
|
(3.3)
|
|
1.1
|
|
(3.0)
|
|
—
|
Other (income)
expense, net
|
|
(6.2)
|
|
(11.9)
|
|
3.5
|
|
(63.6)
|
Total other (income)
expense
|
|
(1.1)
|
|
6.1
|
|
12.1
|
|
(34.1)
|
Income (loss) before
income taxes
|
|
30.6
|
|
(31.8)
|
|
56.7
|
|
(47.9)
|
Income tax expense
(benefit)
|
|
8.9
|
|
(4.5)
|
|
15.8
|
|
(6.8)
|
Net income (loss) from
continuing operations
|
|
21.7
|
|
(27.3)
|
|
40.9
|
|
(41.1)
|
Net income (loss) from
discontinued operations
|
|
1.6
|
|
(2.1)
|
|
(2.4)
|
|
8.7
|
Net income
(loss)
|
|
$
23.3
|
|
$
(29.4)
|
|
$
38.5
|
|
$
(32.4)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share - basic:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
0.38
|
|
$
(0.49)
|
|
$
0.73
|
|
$
(0.74)
|
Discontinued
operations
|
|
0.03
|
|
(0.04)
|
|
(0.04)
|
|
0.16
|
Earnings (loss) per
share basic (1)
|
|
$
0.41
|
|
$
(0.53)
|
|
$
0.68
|
|
$
(0.58)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share - diluted:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
0.38
|
|
$
(0.49)
|
|
$
0.72
|
|
$
(0.74)
|
Discontinued
operations
|
|
0.03
|
|
(0.04)
|
|
(0.04)
|
|
0.16
|
Earnings (loss) per
share diluted (1)
|
|
$
0.41
|
|
$
(0.53)
|
|
$
0.68
|
|
$
(0.58)
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
56.4
|
|
56.0
|
|
56.3
|
|
55.9
|
Diluted
|
|
56.8
|
|
56.0
|
|
56.8
|
|
55.9
|
|
(1) The sum of
the individual per share amounts may not add due to
rounding.
|
TREEHOUSE FOODS,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited, in
millions)
|
|
|
|
Six Months
Ended
June 30,
|
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
(loss)
|
|
$
38.5
|
|
$
(32.4)
|
Net (loss) income from
discontinued operations
|
|
(2.4)
|
|
8.7
|
Net income (loss) from
continuing operations
|
|
40.9
|
|
(41.1)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
71.5
|
|
71.8
|
Stock-based
compensation
|
|
13.1
|
|
9.1
|
Unrealized gain on
derivative contracts
|
|
(3.5)
|
|
(62.3)
|
Deferred TSA
income
|
|
(12.3)
|
|
—
|
Other
|
|
(1.7)
|
|
(0.8)
|
Changes in operating
assets and liabilities, net of acquisitions and
divestitures:
|
|
|
|
|
Receivables
|
|
(3.3)
|
|
(4.2)
|
Inventories
|
|
(50.3)
|
|
(118.3)
|
Prepaid expenses and
other assets
|
|
8.0
|
|
(9.4)
|
Accounts
payable
|
|
(86.3)
|
|
94.0
|
Accrued expenses and
other liabilities
|
|
(25.9)
|
|
(9.5)
|
Net cash used in
operating activities - continuing operations
|
|
(49.8)
|
|
(70.7)
|
Net cash provided by
operating activities - discontinued operations
|
|
—
|
|
44.1
|
Net cash used in
operating activities
|
|
(49.8)
|
|
(26.6)
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property,
plant, and equipment
|
|
(52.6)
|
|
(39.0)
|
Additions to intangible
assets
|
|
(2.1)
|
|
(4.4)
|
Proceeds from sale of
fixed assets
|
|
—
|
|
4.8
|
Acquisitions, net of
cash acquired
|
|
(102.2)
|
|
—
|
Net cash used in
investing activities - continuing operations
|
|
(156.9)
|
|
(38.6)
|
Net cash used in
investing activities - discontinued operations
|
|
(15.2)
|
|
(23.4)
|
Net cash used in
investing activities
|
|
(172.1)
|
|
(62.0)
|
Cash flows from
financing activities:
|
|
|
|
|
Borrowings under
Revolving Credit Facility
|
|
1,544.3
|
|
48.0
|
Payments under
Revolving Credit Facility
|
|
(1,344.8)
|
|
(48.0)
|
Payments on financing
lease obligations
|
|
(0.3)
|
|
(0.7)
|
Payment of deferred
financing costs
|
|
—
|
|
(1.6)
|
Payments on Term
Loans
|
|
—
|
|
(14.3)
|
Payments related to
stock-based award activities
|
|
(6.0)
|
|
(3.3)
|
Net cash provided by
(used in) financing activities - continuing operations
|
|
193.2
|
|
(19.9)
|
Net cash used in
financing activities - discontinued operations
|
|
—
|
|
(0.2)
|
Net cash provided by
(used) in financing activities
|
|
193.2
|
|
(20.1)
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
2.6
|
|
(0.8)
|
Net decrease in cash
and cash equivalents
|
|
(26.1)
|
|
(109.5)
|
Add: Cash and cash
equivalents of discontinued operations, beginning of
period
|
|
—
|
|
4.1
|
Less: Cash and cash
equivalents of discontinued operations, end of period
|
|
—
|
|
(4.1)
|
Cash and cash
equivalents, beginning of period
|
|
43.0
|
|
304.5
|
Cash and cash
equivalents, end of period
|
|
$
16.9
|
|
$
195.0
|
|
|
|
|
|
|
|
Six Months
Ended
June 30,
|
|
|
2023
|
|
2022
|
Supplemental cash
flow disclosures:
|
|
|
|
|
Interest
paid
|
|
$
45.3
|
|
$
26.6
|
Net income taxes
paid
|
|
16.7
|
|
1.2
|
|
|
|
|
|
Non-cash investing
activities:
|
|
|
|
|
Accrued purchase of
property and equipment
|
|
$
12.3
|
|
$
21.2
|
Accrued other
intangible assets
|
|
0.2
|
|
1.4
|
Right-of-use assets
obtained in exchange for lease obligations
|
|
32.2
|
|
43.0
|
Note receivable
purchase price adjustment reduction
|
|
(5.1)
|
|
—
|
Note receivable
increase from paid in kind interest
|
|
2.2
|
|
—
|
Deferred payment from
acquisition of seasoned pretzel capability
|
|
4.0
|
|
—
|
The reconciliation of adjusted diluted EPS from continuing
operations, excluding certain items affecting comparability, to the
relevant GAAP measure of diluted EPS from continuing operations as
presented in the Condensed Consolidated Statements of Operations,
is as follows:
TREEHOUSE FOODS,
INC.
|
RECONCILIATION OF
DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS TO
ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING
OPERATIONS
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Diluted EPS from
continuing operations (GAAP)
|
|
|
|
$ 0.38
|
|
$
(0.49)
|
|
$ 0.72
|
|
$
(0.74)
|
Growth, reinvestment,
and restructuring programs
|
|
(1)
|
|
0.16
|
|
0.25
|
|
0.42
|
|
0.79
|
Divestiture,
acquisition, integration, and related costs
|
|
(2)
|
|
0.08
|
|
0.13
|
|
0.15
|
|
0.18
|
Shareholder
activism
|
|
(3)
|
|
—
|
|
0.02
|
|
0.01
|
|
0.03
|
Tax
indemnification
|
|
(4)
|
|
—
|
|
—
|
|
0.01
|
|
—
|
Foreign currency (gain)
loss on re-measurement of intercompany notes
|
|
(5)
|
|
(0.04)
|
|
0.01
|
|
(0.05)
|
|
(0.01)
|
Mark-to-market
adjustments
|
|
(6)
|
|
(0.17)
|
|
(0.20)
|
|
(0.06)
|
|
(1.11)
|
Central services and
conveyed employee costs
|
|
(7)
|
|
—
|
|
0.39
|
|
—
|
|
0.78
|
Litigation
matter
|
|
(8)
|
|
—
|
|
—
|
|
—
|
|
0.01
|
Taxes on adjusting
items
|
|
|
|
0.01
|
|
(0.06)
|
|
(0.10)
|
|
(0.05)
|
Adjusted diluted EPS
from continuing operations (Non-GAAP)
|
|
|
|
$ 0.42
|
|
$ 0.05
|
|
$ 1.10
|
|
$
(0.12)
|
During the three and six months ended June 30, 2023 and 2022, the Company entered into
transactions that affected the year-over-year comparison of its
financial results from continuing operations as follows:
(1)
|
The Company's growth,
reinvestment, and restructuring activities are part of an
enterprise-wide transformation to improve long-term growth and
profitability for the Company.
|
|
|
(2)
|
Divestiture,
acquisition, integration, and related costs represent costs
associated with completed and potential divestitures, completed and
potential acquisitions, and the related integration of the
acquisitions.
|
|
|
(3)
|
The Company incurred
fees related to shareholder activism which include directly
applicable third-party advisory and professional service
fees.
|
|
|
(4)
|
Tax indemnification
represents the non-cash write off of indemnification assets that
were recorded in connection with acquisitions from prior
years. These write-offs arose as a result of the related
uncertain tax position being released due to the statute of
limitation lapse or settlement with taxing authorities.
|
|
|
(5)
|
The Company has foreign
currency denominated intercompany loans and incurred foreign
currency gains/losses to re-measure the loans at quarter end. These
amounts are non-cash and the loans are eliminated in
consolidation.
|
|
|
(6)
|
The Company's
derivative contracts are marked-to-market each period. The non-cash
unrealized changes in fair value recognized in Other (income)
expense, net within the Condensed Consolidated Statements of
Operations are treated as Non-GAAP adjustments. As the contracts
are settled, realized gains and losses are recognized, and only the
mark-to-market impacts are treated as Non-GAAP
adjustments.
|
|
|
(7)
|
As a result of the sale
of a significant portion of the Meal Preparation business, the
Company identified two items affecting comparability – 1) central
service costs and 2) conveyed employee costs.
1) The Company has
historically provided central services to the Meal Preparation
business including, but not limited to, IT and financial shared
services, procurement and order processing, customer service,
warehousing, logistics, and customs. These costs were historically
incurred by TreeHouse and include employee and non-employee
expenses to support the services. There were no costs for the three
and six months ended June 30, 2023. For three and six months ended
June 30, 2022, central service costs were approximately
$13.4 million and $26.8 million, respectively.
2) Conveyed employee
costs represent compensation costs for employees that were not
historically dedicated to the sold business and transferred to the
buyer after the sale. There were no costs for the three and six
months ended June 30, 2023. For the three and six months ended June
30, 2022, conveyed employee costs were approximately
$8.3 million and $16.7 million, respectively.
|
|
|
(8)
|
During the six months
ended June 30, 2022, the Company recognized $0.4 million
incremental expense for the settlement payment of the $9.0 million
accrual related to a litigation matter challenging wage and hour
practices at three former manufacturing facilities in
California.
|
The tax impact on adjusting items is calculated based upon the
tax laws and statutory tax rates applicable in the tax jurisdiction
of the underlying Non-GAAP adjustments.
The following table reconciles the Company's net income (loss)
from continuing operations to adjusted net income (loss) from
continuing operations, adjusted EBIT from continuing operations,
adjusted EBITDA from continuing operations, and adjusted EBITDAS
from continuing operations for the three and six months ended
June 30, 2023 and 2022:
TREEHOUSE FOODS,
INC.
|
RECONCILIATION OF
NET INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED NET INCOME
(LOSS), ADJUSTED EBIT, ADJUSTED EBITDA, AND ADJUSTED EBITDAS FROM
CONTINUING OPERATIONS
|
(Unaudited, in
millions)
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income (loss) from
continuing operations (GAAP)
|
|
|
|
$ 21.7
|
|
$
(27.3)
|
|
$ 40.9
|
|
$
(41.1)
|
Growth, reinvestment,
and restructuring programs
|
|
(1)
|
|
8.9
|
|
13.9
|
|
24.2
|
|
44.0
|
Divestiture,
acquisition, integration, and related costs
|
|
(2)
|
|
4.8
|
|
7.2
|
|
8.6
|
|
10.2
|
Shareholder
activism
|
|
(3)
|
|
—
|
|
1.1
|
|
0.3
|
|
1.7
|
Tax
indemnification
|
|
(4)
|
|
0.1
|
|
—
|
|
0.3
|
|
—
|
Foreign currency (gain)
loss on re-measurement of intercompany notes
|
|
(5)
|
|
(2.5)
|
|
0.4
|
|
(2.7)
|
|
(0.4)
|
Mark-to-market
adjustments
|
|
(6)
|
|
(9.4)
|
|
(11.5)
|
|
(3.5)
|
|
(62.3)
|
Central services and
conveyed employee costs
|
|
(7)
|
|
—
|
|
21.7
|
|
—
|
|
43.5
|
Litigation
matter
|
|
(8)
|
|
—
|
|
—
|
|
—
|
|
0.4
|
Less: Taxes on
adjusting items
|
|
|
|
0.2
|
|
(2.8)
|
|
(5.9)
|
|
(2.5)
|
Adjusted net income
(loss) from continuing operations (Non-GAAP)
|
|
|
|
23.8
|
|
2.7
|
|
62.2
|
|
(6.5)
|
Interest
expense
|
|
|
|
19.2
|
|
17.0
|
|
37.0
|
|
33.7
|
Interest
income
|
|
|
|
(10.8)
|
|
(0.2)
|
|
(25.4)
|
|
(4.3)
|
Income taxes
|
|
|
|
8.9
|
|
(4.5)
|
|
15.8
|
|
(6.8)
|
Add: Taxes on adjusting
items
|
|
|
|
(0.2)
|
|
2.8
|
|
5.9
|
|
2.5
|
Adjusted EBIT from
continuing operations (Non-GAAP)
|
|
|
|
40.9
|
|
17.8
|
|
95.5
|
|
18.6
|
Depreciation and
amortization
|
|
|
|
35.5
|
|
35.3
|
|
71.5
|
|
71.8
|
Adjusted EBITDA from
continuing operations (Non-GAAP)
|
|
|
|
76.4
|
|
53.1
|
|
167.0
|
|
90.4
|
Stock-based
compensation expense
|
|
(9)
|
|
3.5
|
|
3.6
|
|
8.5
|
|
6.9
|
Adjusted EBITDAS from
continuing operations (Non-GAAP)
|
|
|
|
$ 79.9
|
|
$ 56.7
|
|
$
175.5
|
|
$ 97.3
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
margin from continuing operations
|
|
|
|
2.6 %
|
|
(3.4) %
|
|
2.4 %
|
|
(2.6) %
|
Adjusted net income
(loss) margin from continuing operations
|
|
|
|
2.8 %
|
|
0.3 %
|
|
3.6 %
|
|
(0.4) %
|
Adjusted EBIT margin
from continuing operations
|
|
|
|
4.8 %
|
|
2.2 %
|
|
5.5 %
|
|
1.2 %
|
Adjusted EBITDA margin
from continuing operations
|
|
|
|
9.1 %
|
|
6.6 %
|
|
9.6 %
|
|
5.7 %
|
Adjusted EBITDAS margin
from continuing operations
|
|
|
|
9.5 %
|
|
7.0 %
|
|
10.1 %
|
|
6.1 %
|
|
|
|
|
Location in
Condensed
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
|
|
Consolidated
Statements of Operations
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
(unaudited, in
millions)
|
(1)
|
|
Growth, reinvestment,
and restructuring programs
|
|
Other operating
(income) expense, net
|
|
$ 8.9
|
|
$
13.9
|
|
$ 24.2
|
|
$ 44.0
|
(2)
|
|
Divestiture,
acquisition, integration, and related costs
|
|
General and
administrative
|
|
4.6
|
|
6.6
|
|
7.7
|
|
8.5
|
|
|
|
|
Other operating
(income) expense, net
|
|
0.2
|
|
0.1
|
|
0.9
|
|
0.1
|
|
|
|
|
Cost of
sales
|
|
—
|
|
0.5
|
|
—
|
|
1.6
|
(3)
|
|
Shareholder
activism
|
|
General and
administrative
|
|
—
|
|
1.1
|
|
0.3
|
|
1.7
|
(4)
|
|
Tax
indemnification
|
|
Other (income) expense,
net
|
|
0.1
|
|
—
|
|
0.3
|
|
—
|
(5)
|
|
Foreign currency (gain)
loss on re-measurement of intercompany notes
|
|
(Gain) loss on foreign
currency exchange
|
|
(2.5)
|
|
0.4
|
|
(2.7)
|
|
(0.4)
|
(6)
|
|
Mark-to-market
adjustments
|
|
Other (income) expense,
net
|
|
(9.4)
|
|
(11.5)
|
|
(3.5)
|
|
(62.3)
|
(7)
|
|
Central services and
conveyed employee costs
|
|
Cost of
sales
|
|
—
|
|
4.9
|
|
—
|
|
9.9
|
|
|
|
|
General and
administrative
|
|
—
|
|
16.8
|
|
—
|
|
33.6
|
(8)
|
|
Litigation
matter
|
|
General and
administrative
|
|
—
|
|
—
|
|
—
|
|
0.4
|
(9)
|
|
Stock-based
compensation expense included as an adjusting item
|
|
Other operating
(income) expense, net
|
|
2.4
|
|
1.7
|
|
4.6
|
|
2.2
|
TREEHOUSE FOODS,
INC.
|
RECONCILIATION OF
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS TO
FREE CASH FLOW FROM CONTINUING OPERATIONS
|
(Unaudited, in
millions)
|
|
|
|
Six Months
Ended
June
30,
|
|
|
2023
|
|
2022
|
|
|
|
Cash flow used in
operating activities from continuing operations
|
|
$
(49.8)
|
|
$
(70.7)
|
Less: Capital
expenditures
|
|
(54.7)
|
|
(43.4)
|
Free cash flow from
continuing operations
|
|
$
(104.5)
|
|
$
(114.1)
|
View original
content:https://www.prnewswire.com/news-releases/treehouse-foods-inc-reports-second-quarter-2023-results-301894199.html
SOURCE TreeHouse Foods, Inc.