(Source: PRNewswire)
WESTCHESTER, Ill., Aug. 6 /PRNewswire-FirstCall/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported a significant increase in second quarter earnings compared to last year driven by higher sales in its North American Retail Grocery business and overall improved gross margins. Earnings for the quarter were $0.58 per fully- diluted share compared to $0.26 per fully diluted share in the second quarter of last year. On an adjusted basis, as described below, fully-diluted earnings per share improved 61.3% to $0.50 compared to $0.31 last year. Improved gross margins across nearly all product categories contributed to the improvement.
The reported results for the second quarter included two unusual items that affected year over year comparisons. The first relates to a gain of $0.03 in the quarter on the mark to market adjustment on an interest rate swap that was not in place in the second quarter of 2008. The second item relates to the adjustment of the intercompany loan with E.D. Smith to reflect current exchange rates. This non- cash adjustment increased reported earnings by $0.05 per share in 2009 but had an insignificant effect on the second quarter results of 2008. Excluding these two items results in adjusted earnings per share on a fully diluted basis of $0.50 in 2009 compared to $0.31 in 2008.
ITEMS AFFECTING DILUTED EPS COMPARABILITY:
__ THREE MONTHS ENDED__ SIX MONTHS ENDED
June 30__ June 30
__ 2009__ 2008__ 2009__ 2008
(unaudited)__ (unaudited)
--------------- ---------------
Diluted EPS as reported__ $0.58__ $0.26__ $0.97__ $0.33
Plant closing costs__ - 0.02__ 0.01__ 0.26
Integration costs__ - 0.01__ - 0.01
Mark to market adjustment on
interest rate swap__ (0.03)__ - (0.03)__ -
(Gain) loss on intercompany
note translation__ (0.05)__ - (0.04)__ 0.03
Non-cash adjustment to value
of license and other__ - 0.02__ - 0.02
------ ------ ------ ------
Adjusted diluted EPS__ $0.50__ $0.31__ $0.91__ $0.65
======__ ======__ ======__ ======
Commenting on the results, Sam K. Reed, Chairman and CEO, said, "We delivered outstanding results in the second quarter and I am proud of our operating teams. We built upon momentum from the first quarter and continued to generate strong growth and expand margins. Our key categories showed unit sales growth and our initiatives to improve operating margins paid off nicely."
Adjusted operating earnings before interest, taxes, depreciation, amortization and other non-cash or unusual items (Adjusted EBITDA, reconciled to net income, the most directly comparable GAAP measure, appears on the attached schedule) increased 24.7% to $43.8 million in the quarter compared to $35.1 million in the same period last year. The increase is the result of sales growth and improved gross margins in the quarter.
Net sales for the second quarter totaled $372.6 million compared to $367.4 million last year. Excluding currency effects, sales increased by 3.8%. Retail grocery sales increased 5.8% despite year over year currency pressures as the Company's private label offerings continue to realize share gains across most product categories. The Food Away From Home segment sales were down only 2.1% compared to last year as new products and increased distribution points offset the negative trends in the food away from home marketplace. Total gross margins for the quarter improved by 275 basis points to 21.4% compared to 18.7% last year and 125 basis points better than the gross margin achieved in the first quarter of 2009. The improvement was due to carry over pricing and productivity gains, along with last year's margins being adversely impacted by very high input costs. The margin improvement was evident in most product categories, led by pickles, non-dairy creamer, salad dressings and soup.
Selling, distribution, general and administrative expenses were $48.4 million for the quarter, an increase of 8.3% from $44.7 million in the second quarter of 2008. The increase was due principally to higher incentive compensation expense reflecting the better than planned performance in 2009.
Other operating expense for the quarter was $0.2 million compared to $0.9 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 larger expense was due to timing of the then closed facility.
Interest expense in the quarter was $4.8 million compared to $7.6 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. Other, net income of $1.2 million for the quarter primarily represents the mark-to-market adjustment on an interest rate swap. The Company's second quarter effective income tax rate of 34.6% was higher than last year's tax rate of 30.2% 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 $18.4 million compared to $8.3 million last year. Fully-diluted earnings per share for the quarter were $0.58 per share compared to $0.26 per share last year. Excluding unusual items, adjusted earnings per share from continuing operations for the second quarter of 2009 were $0.50, compared to last year's second quarter adjusted earnings per share of $0.31.
SEGMENT RESULTS
The Company has three reportable segments:
1. 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
soup, broths, gravies, jams, spreads, salad dressings, sauces, nondairy
powdered creamer, salsa, aseptic products and baby food.
2.
