HIGHLIGHTS
- Adjusted earnings per share increased 20.6% from last year
- Net sales increased 2.2% (excluding currency exchange)
- North American retail sales increased 5.0% (12.1% excluding currency exchange)
- Gross margins increased 70 basis points
- Adjusted EPS guidance increased to $1.82 - $1.87
WESTCHESTER, Ill., May 7 /PRNewswire-FirstCall/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported a substantial increase in first quarter earnings compared to last year driven by excellent performance in its North American Retail Grocery business. Earnings for the quarter were $0.39 per fully diluted share compared to $0.07 per fully diluted share reported for the first quarter of last year. On an adjusted basis, as described below, fully-diluted earnings per share improved 20.6% to $0.41 compared to $0.34 last year. Improved gross margins across most product categories contributed to the broadly based improvement.
The reported results for the first quarter included two unusual items that affected year over year comparisons. The Company reported non-recurring costs of $0.01 per share in the first quarter of 2009 associated with the Company's closed Portland, Oregon pickle plant. Last year the Company recorded an initial charge of $0.24 per share when it announced the original closure plan. The second unusual item relates to the adjustment of an intercompany loan with E.D. Smith to reflect current exchange rates. This non-cash adjustment lowered reported earnings by $0.01 per share in 2009 and $0.03 per share in 2008. Excluding these two items results in adjusted earnings per share on a fully diluted basis of $0.41 in 2009 compared to $0.34 in 2008.
ITEMS AFFECTING DILUTED EPS COMPARABILITY:
Three Months Ended
March 31
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2009 2008
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(unaudited)
Diluted EPS as reported $0.39 $0.07
Plant closing costs 0.01 0.24
Loss on intercompany note translation 0.01 0.03
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Adjusted diluted EPS $0.41 $0.34
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Commenting on the results, Sam K. Reed, Chairman and CEO, said, 'We finished the quarter with sales growth in local currencies, margin improvement and lower operating costs. While our sales growth was constrained by challenges in the food away from home industry, our retail grocery segment in particular performed well across a broad array of product categories. Overall, it was a very good start to 2009.'
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 7.3% to $40.0 million in the quarter compared to $37.3 million in the same period last year. The increase is the result of improved gross margins in the quarter, despite lower revenues.
Net sales for the first quarter totaled $355.4 million compared to $360.6 million last year. Excluding currency effects, sales would have increased by 2.2%. Retail grocery sales increased 5.0% despite currency pressures as private label continues to realize share gains across most retail categories. This increase was more then offset by softness in the food away from home channel as consumers continue to gravitate towards meals at home. Gross margins for the quarter improved by 70 basis points to 20.2% compared to 19.5% last year. The improvement was due to carry over pricing and internal productivity gains. This was especially evidenced by pickle gross margins that improved over 300 basis points as a result of the category rationalization program started last year.
Selling, distribution, general and administrative expenses were $41.6 million for the quarter, a decrease of 5.4% (2.1% decrease excluding currency effects) from $43.9 million in the first quarter of 2008. The decrease was due to lower distribution expenses as energy costs dropped significantly compared to the comparable quarter last year.
Other operating expense for the quarter was $0.2 million compared to $10.9 million last year. The costs in 2009 primarily reflect the ongoing maintenance costs associated with the Company's closed Portland, Oregon pickle plant. Last year's large expense related to the initial charge to close the plant.
Interest expense in the quarter was $4.5 million compared to $7.7 million last year as lower debt levels due to strong operating cash flows over the past year and lower interest rates contributed to the decline. The Company's first quarter effective income tax rate of 37.0% was higher than last year's tax rate of 26.3% due to significantly higher US taxable income and a reduced benefit from intercompany interest expense due to lower Canadian exchange rates.
Net income for the quarter totaled $12.7 million compared to $2.1 million last year. Fully-diluted earnings per share for the quarter were $0.39 per share compared to $0.07 per share last year.
