US: Treehouse hails growth, but financing weighs on bottom line
TreeHouse sees mixed Q1
TreeHouse Foods booked a mixed first-quarter as sales growth boosted operating profit but financing costs weighed on the bottom line.
TreeHouse said today (8 May) that sales in the three months to end-March rose to US$618.9m, up from $540.1m in the comparable period of last year. Operating profit was also up at $50.3m, compared to $44.4m last year.
However, net profit sank to $14.3m from $22.9m as higher costs and the extinguishment of debt dented the result. The higher Canadian dollar also impacted profitability.
Sam Reed, chairman, president and CEO commented: "Our first quarter double-digit sales growth exceeded our expectations and reflects strong private label performance, particularly in the traditional supermarket channel; continued expansion of our single serve beverage platform; as well as the contributions from the Cains Foods and Associated Brands acquisitions."
|TreeHouse Foods, Inc. Reports First Quarter 2014 Results and Enters Into New $1.2 Billion Financing Structure|
-First quarter adjusted EPS increased 8.1% from prior year to $0.80 in 2014
-Total net sales grew 14.6%, driven by acquisitions; All segments posted improvement
-North American Retail Grocery volume/mix grew 5.9% in the first quarter
-Company reaffirmed full year guidance of adjusted earnings per share of $3.50-$3.60
-TreeHouse entered into new $1.2 billion credit facility consisting of $900 million revolving credit facility and $300 million term loan
OAK BROOK, Ill., May 8, 2014 /PRNewswire/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported first quarter earnings of $0.38 per fully diluted share compared to $0.62 per fully diluted share reported for the first quarter of last year. The Company reported that adjusted earnings per share increased 8.1% in the first quarter to $0.80 compared to $0.74 in the prior year, excluding the items described below.
The Company's 2014 first quarter results included four items noted below that affected the year-over-year quarterly comparison. The first item is a $0.32 per share expense related to the refinancing of the Company's high yield notes. The second item is a $0.05 per share expense for acquisition, integration and related costs. The third item is a $0.03 per share loss on the foreign currency translation of an intercompany note. The last item is a $0.02 per share expense related to the previously announced restructuring of the Company's soup operations.
"We are off to an excellent start in 2014," said Sam K. Reed, Chairman, President and Chief Executive Officer. "Our first quarter double-digit sales growth exceeded our expectations and reflects strong private label performance, particularly in the traditional supermarket channel; continued expansion of our single serve beverage platform; as well as the contributions from the Cains Foods and Associated Brands acquisitions. Despite the negative impact of both the Canadian exchange rate and the carryover of unfavorable manufacturing variances in the quarter, I am very proud of the progress we have made and the focus our operating team has demonstrated in simplifying our operations, generating distribution system savings and delivering value for our customers."
Adjusted operating earnings before interest, taxes, depreciation, amortization, and non-cash stock based compensation, or Adjusted EBITDA (reconciliation to net income, the most directly comparable GAAP (generally accepted accounting principles in the United States) measure, appears on the attached schedule), was $80.6 million in the first quarter, a 4.9% increase compared to the prior year. Adjusted EBITDA was higher due to the acquisitions of Cains Foods and Associated Brands.
Net sales for the first quarter totaled $618.9 million compared to $540.1 million last year, an increase of 14.6% largely due to sales from acquisitions (Cains Foods and Associated Brands) and improved volume/mix, partially offset by unfavorable foreign exchange. Compared to last year, sales in the first quarter for the North American Retail Grocery segment increased 17.2%, sales for the Food Away From Home segment increased 8.4%, and sales for the Industrial and Export segment increased 7.8%.
Total reported gross margins increased to 21.5% in the first quarter this year from 21.1% last year. The increase was mainly due to favorable sales mix, partly offset by lower margins from Cains Foods and Associated Brands, and the impact of unfavorable foreign exchange.
Selling, distribution, general and administrative expenses were $71.8 million for the first quarter, an increase of 19.9% from $59.9 million last year. The increase was in line with management's expectations, and was due primarily to additional expenses associated with the Cains Foods and Associated Brands acquisitions and higher staffing levels.
Other expense was $30.3 million for the first quarter, an increase of $19.2 million from $11.0 million last year. The increase was driven by the redemption of the Company's $400 million 7.75% high yield notes due 2018 (the "2018 Notes") by issuing new $400 million 4.875% high yield notes due 2022. In connection with the extinguishment of the 2018 Notes, the Company incurred a loss of $16.7 million. The remainder of the increase was due to the impact of foreign exchange rates.
Income tax expense decreased in the first quarter to $5.7 million. The Company's first quarter effective income tax rate decreased to 28.5% from the 2013 first quarter rate of 31.1% due to the settlement of unrecognized tax benefits associated with the Company's 2011 examination by the United States Internal Revenue Service.
Net income for the first quarter totaled $14.3 million compared to $23.0 million last year.
Original source: TreeHouse Foods
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