OAK BROOK, Ill., Aug. 5, 2021 /PRNewswire/ -- TreeHouse
Foods, Inc. (NYSE: THS) today reported second quarter GAAP loss per
diluted share from continuing operations of $(0.09) compared to $(0.05) for the second quarter of 2020. Adjusted
earnings per diluted share from continuing
operations1 was $0.26
in the second quarter of 2021 compared to $0.58 in the second quarter of 2020.
Steve Oakland, Chief Executive
Officer and President commented, "In the second quarter, we
continued to navigate an unprecedented operating environment. We
lapped last year's heightened COVID-related demand and took actions
to offset the impact of inflation through pricing increases and to
address supply chain disruptions. While macroeconomic factors have
temporarily driven lower-than-expected consumer demand for private
brands, we outperformed private label in the majority of our
categories, as our service levels remain strong and we continue to
engage our retail partners. We have even greater resolve today to
execute on our strategy, and we continue to believe the macro
impact of government stimulus and other factors will be transitory.
As the environment normalizes and inflation translates into higher
prices, we believe the demand for private brands will return to its
pattern of historical growth."
"In addition to addressing the industry headwinds, we made solid
strategic progress in the quarter, completing the sale of the
Ready-to-eat Cereal business in June and returning $25 million in capital to shareholders in the
form of share repurchase," Mr. Oakland continued. "We remain
diligently focused on our long-term strategic objectives to build a
company that is well positioned to deliver long-term sustainable
growth and create value for our customers and shareholders."
"Second quarter adjusted earnings per diluted share was
$0.26, as lower selling, general and
administrative expenses lessened the impact of lower than
anticipated sales," said Bill
Kelley, EVP and Chief Financial Officer. "The decline in our
gross profit margin in the quarter was driven by the timing lag
between inflation and pricing initiatives. Pricing necessary to
recover our initial expectations for commodity inflation this year
has tracked according to our plans, and we anticipate the impact
will increasingly be reflected in our results as we move through
the second half of the year."
OUTLOOK2
TreeHouse revised its full year 2021 guidance ranges for
adjusted earnings per diluted share from continuing operations of
$2.00 to $2.50, reported net sales between $4.20 to $4.45
billion, and free cash flow1 of $250 - $300
million. The reduction was primarily driven by the second
quarter revenue shortfall, continued uncertainty within the
macroeconomic environment and its impact on consumer purchasing
behavior, further escalation in commodity, freight, and packaging
costs and the timing lag related to the impact of pricing actions
taken to recover higher input costs.
"Ongoing retailer support for private label and the strategic
investments we are making in our business give me confidence that
we have meaningful growth and shareholder value creation
opportunities ahead. While I am disappointed to reduce our full
year 2021 guidance, we remain focused on accelerating our strategic
journey to build depth and competitive advantage in our growth
categories," said Mr. Oakland.
"We believe we are well positioned to capitalize on the
opportunities across the private label landscape, while maintaining
a balanced capital allocation approach of investing in our
business, maintaining a strong balance sheet and returning capital
to shareholders," he continued. "The strength of our balance sheet
enables us to consider sizable, programmatic, or bolt-on accretive
acquisitions that are near-in or closely adjacent to our growth
engine categories, as we actively manage our portfolio to drive
enhanced growth and value."
TreeHouse is providing the following guidance ranges on a
continuing operations basis for the third quarter:
- Adjusted earnings per diluted share from continuing operations
of $0.45 - $0.60
- Reported net sales between $1.05
and $1.16 billion
- Interest expense between $18 and
$20 million
- Adjusted effective tax rate between 21% and 23%
1
|
Adjusted earnings per
diluted share from continuing operations, adjusted EBIT, adjusted
EBITDA, adjusted effective tax rate, adjusted net income, 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 the
GAAP to Non-GAAP measures.
|
2
|
The Company is not
able to reconcile prospective adjusted earnings per diluted share
from continuing operations, adjusted effective tax rate or free
cash flow (Non-GAAP) 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, the impact of the COVID-19
pandemic, or other non-recurring events or transactions that may
significantly affect reported GAAP results.
|
SECOND QUARTER 2021 FINANCIAL RESULTS
Net sales for the second quarter of 2021 totaled $1,003.2 million compared to $1,041.9 million for the same period last year, a
decrease of 3.7%. The change in net sales from 2020 to 2021 was due
to the following:
|
|
Three
Months
|
|
Six
Months
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
Volume/mix excluding
acquisitions and divestitures
|
|
(7.4)
|
%
|
|
(6.1)
|
%
|
Pricing
|
|
0.1
|
|
|
(0.1)
|
|
Total change in
organic net sales1
|
|
(7.3)
|
%
|
|
(6.2)
|
%
|
Volume/mix related to
divestitures
|
|
(0.3)
|
|
|
(1.0)
|
|
Acquisition
|
|
3.2
|
|
|
3.6
|
|
Foreign
currency
|
|
0.7
|
|
|
0.5
|
|
Total change in net
sales
|
|
(3.7)
|
%
|
|
(3.1)
|
%
|
Organic net sales decreased 7.3% in the second quarter of 2021
compared to 2020 driven by:
- Volume/mix excluding acquisitions and divestitures was
unfavorable 7.4% year-over-year primarily reflecting the lap of
significant COVID-19 related retail grocery volume in the second
quarter of 2020 and reduced private label retail grocery demand in
the second quarter of 2021 as a result of the macro environment,
including government stimulus and higher disposable income, which
has impacted consumer purchasing behavior in favor of branded
retail grocery. These reductions in volume/mix were partially
offset by increased demand for food-away-from-home, distribution
gains, and new product sales.
- Pricing was slightly favorable driven by pricing actions to
cover commodity and freight cost inflation.
Additionally, volume/mix related to the divestiture of the two
In-Store Bakery facilities was unfavorable 0.3%. This was more than
offset by the favorable impact of the inclusion of the business
from the pasta acquisition of 3.2% and favorable foreign exchange
of 0.7% resulting in a year-over-year decrease in reported net
sales of 3.7%.
Gross profit as a percentage of net sales was 16.6% in the
second quarter of 2021, compared to 18.4% in the second quarter of
2020, a decrease of 1.8 percentage points. The decrease is
primarily due to the unfavorable fixed cost absorption impact of
lower volume from reduced COVID-19 related retail grocery demand,
commodity inflation, unfavorable channel mix, and warehouse
overflow storage costs. This was partially offset by favorable
volume/mix from the inclusion of the business from the pasta
acquisition and lower costs necessary to respond to the COVID-19
pandemic, such as increased production shifts, supplemental pay,
protective equipment for employees, and additional sanitation
measures.
Total operating expenses as a percentage of net sales were 16.2%
in the second quarter of 2021 compared to 15.9% in the second
quarter of 2020, an increase of 0.3 percentage points. The increase
is primarily attributable to the execution of strategic growth
initiatives and integration costs associated with the recent pasta
acquisition. This was offset by lower employee incentive
compensation expense during the second quarter of 2021 and
non-recurring litigation expense during the second quarter of
2020.
Total other expense decreased by $3.4
million to $10.7 million in
the second quarter of 2021 compared to $14.1
million in the second quarter of 2020. The decrease was
primarily attributed to lower interest expense as a result of debt
refinancing completed in the first quarter of 2021 and third
quarter of 2020. This was partially offset by lower favorable
currency exchange rate impacts between the U.S. and Canadian dollar
currency during the second quarter of 2021 when compared to the
second quarter of 2020.
Income taxes were recognized at an effective rate of 21.2% in
the second quarter of 2021 compared to 123.2% recognized in the
second quarter of 2020. The change in the Company's effective tax
rate is primarily the result of a benefit recognized in 2020 due to
the enactment of the CARES Act, a tax benefit recognized in 2020
due to a cross-border intercompany financing structure, and a
change in the amount of non-deductible executive compensation.
Net loss from continuing operations for the second quarter of
2021 was $5.2 million, compared to
$2.6 million for the same period of
the previous year. Adjusted EBITDA1 from continuing
operations was $96.7 million in
the second quarter of 2021, a 23.0% decrease compared to the second
quarter of 2020. The decrease in adjusted EBITDA was primarily due
to the unfavorable fixed cost absorption impact of lower volume
from reduced COVID-19 related retail grocery demand, commodity
inflation, unfavorable channel mix, and warehouse overflow storage
costs. This was partially offset by favorable volume/mix from the
inclusion of the business from the pasta acquisition and lower
employee incentive compensation expense.
Net income from discontinued operations increased $12.5 million in the second quarter of 2021
compared to the second quarter of 2020. The increase is primarily
due to the completion of the sale of the Ready-to-eat Cereal
business resulting in the recognition of a pre-tax gain of
$18.4 million. This was
partially offset by the related tax expense from the gain on sale
and lower Ready-to-eat Cereal volume due to a partial period from
its sale on June 1, 2021.
Cash used in operating activities of continuing operations was
$44.0 million in the first six months
of 2021 compared to cash provided by operating activities of
$123.3 million in the first six
months of 2020, a decrease in cash provided of $167.3 million. The decrease was primarily
attributable to lower cash earnings, slower inventory turnover as a
result of the lap of significant COVID-19 related retail grocery
volume in the first six months of 2020, increased inventory levels
to improve service, and lower accounts payable.
The Company's three and six months 2021 and 2020 results
included certain items noted below that, in management's judgment,
affect the comparability of earnings period-over-period.
RECONCILIATION OF
DILUTED 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,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(unaudited)
|
|
(unaudited)
|
Diluted loss per
share from continuing operations (GAAP)
|
|
$
|
(0.09)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.09)
|
|
|
$
|
(0.63)
|
|
Growth, reinvestment,
restructuring programs & other
|
|
0.39
|
|
|
0.22
|
|
|
0.74
|
|
|
0.58
|
|
Loss on
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
0.26
|
|
|
—
|
|
COVID-19
|
|
0.08
|
|
|
0.25
|
|
|
0.24
|
|
|
0.16
|
|
Acquisition,
integration, divestiture, and related costs
|
|
0.12
|
|
|
0.02
|
|
|
0.21
|
|
|
0.02
|
|
Shareholder
activism
|
|
0.01
|
|
|
—
|
|
|
0.05
|
|
|
—
|
|
Tax
indemnification
|
|
0.01
|
|
|
0.02
|
|
|
0.01
|
|
|
0.03
|
|
Foreign currency
(gain) loss on re-measurement of intercompany notes
|
|
(0.02)
|
|
|
(0.11)
|
|
|
(0.05)
|
|
|
0.15
|
|
Mark-to-market
adjustments
|
|
(0.11)
|
|
|
(0.07)
|
|
|
(0.49)
|
|
|
1.06
|
|
Litigation
matters
|
|
—
|
|
|
0.16
|
|
|
—
|
|
|
0.16
|
|
Taxes on adjusting
items
|
|
(0.13)
|
|
|
0.14
|
|
|
(0.25)
|
|
|
(0.58)
|
|
Adjusted diluted EPS
from continuing operations (Non-GAAP)
|
|
$
|
0.26
|
|
|
$
|
0.58
|
|
|
$
|
0.63
|
|
|
$
|
0.95
|
|
SECOND QUARTER 2021 SEGMENT RESULTS
|
Three Months Ended
June 30,
|
|
Meal
Preparation
|
|
Snacking &
Beverages
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(unaudited,
dollars in millions)
|
Net sales
|
$
|
647.6
|
|
|
$
|
667.7
|
|
|
$
|
355.6
|
|
|
$
|
374.2
|
|
Direct operating
income
|
65.2
|
|
|
102.3
|
|
|
36.9
|
|
|
52.5
|
|
Direct operating
income percent
|
10.1
|
%
|
|
15.3
|
%
|
|
10.4
|
%
|
|
14.0
|
%
|
The change in net
sales by segment from the second quarter of 2020 to the second
quarter of 2021 was due to the following:
|
|
|
Three Months Ended
June 30,
|
|
Meal
Preparation
|
|
Snacking &
Beverages
|
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|
(unaudited,
dollars in millions)
|
2020 Net
sales
|
$
|
667.7
|
|
|
|
|
$
|
374.2
|
|
|
|
Volume/mix excluding
acquisitions and divestitures
|
(56.7)
|
|
|
(8.5)
|
%
|
|
(20.5)
|
|
|
(5.5)
|
%
|
Pricing
|
(0.7)
|
|
|
(0.1)
|
|
|
2.0
|
|
|
0.5
|
|
Volume/mix related to
divestitures
|
—
|
|
|
—
|
|
|
(2.9)
|
|
|
(0.7)
|
|
Acquisition
|
32.7
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
Foreign
currency
|
4.6
|
|
|
0.7
|
|
|
2.8
|
|
|
0.7
|
|
2021 Net
sales
|
$
|
647.6
|
|
|
(3.0)
|
%
|
|
$
|
355.6
|
|
|
(5.0)
|
%
|
|
|
|
|
|
|
|
|
Volume/mix related to
divestitures
|
|
|
—
|
|
|
|
|
0.7
|
|
Acquisition
|
|
|
(4.9)
|
|
|
|
|
—
|
|
Foreign
currency
|
|
|
(0.7)
|
|
|
|
|
(0.7)
|
|
Percent change in
organic net sales
|
|
|
(8.6)
|
%
|
|
|
|
(5.0)
|
%
|
Meal Preparation
Net sales in the Meal Preparation segment decreased $20.1 million, or 3.0%, in the second quarter of
2021 compared to the second quarter of 2020. The decrease in net
sales primarily reflects the lap of significant COVID-19 related
retail grocery volume in the second quarter of 2020 and reduced
private label retail grocery demand in the second quarter of 2021
as a result of the macro environment, including government stimulus
and higher disposable income, which has impacted consumer
purchasing behavior in favor of branded retail grocery. This was
partially offset by the favorable impact of the inclusion of the
business from the pasta acquisition, increased demand for
food-away-from-home, and distribution gains. Organic net sales in
the Meal Preparation segment decreased by 8.6% year-over-year.
Direct operating income as a percentage of net sales decreased
5.2 percentage points in the second quarter of 2021 compared to the
second quarter of 2020. This decrease was due to commodity and
freight cost inflation, unfavorable channel mix, and the
unfavorable fixed cost absorption impact of lower volume from
reduced COVID-19 related retail grocery demand. This was partially
offset by favorable volume/mix from the inclusion of the business
from the pasta acquisition.
Snacking & Beverages
Net sales in the Snacking & Beverages segment decreased
$18.6 million, or 5.0%, in the second
quarter of 2021 compared to the second quarter of 2020. The
decrease in net sales primarily reflects the lap of significant
COVID-19 related retail grocery volume in the second quarter of
2020. This was partially offset by distribution gains which
outpaced distribution losses, new product sales, and favorable
pricing actions to cover commodity and freight cost inflation.
Organic net sales in the Snacking & Beverages segment decreased
by 5.0% year-over-year.
Direct operating income as a percentage of net sales decreased
3.6 percentage points in the second quarter of 2021 compared to the
second quarter of 2020. The decrease was due to the unfavorable
fixed cost absorption impact of lower volume from reduced COVID-19
related retail grocery demand, commodity and freight cost
inflation, warehouse overflow storage costs, and increased labor
costs due to a tighter labor market.
YEAR TO DATE 2021 SEGMENT RESULTS
|
Six Months Ended
June 30,
|
|
Meal
Preparation
|
|
Snacking &
Beverages
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(unaudited,
dollars in millions)
|
Net sales
|
$
|
1,326.1
|
|
|
$
|
1,341.3
|
|
|
$
|
734.4
|
|
|
$
|
785.5
|
|
Direct operating
income
|
145.7
|
|
|
188.6
|
|
|
78.6
|
|
|
100.6
|
|
Direct operating
income percent
|
11.0
|
%
|
|
14.1
|
%
|
|
10.7
|
%
|
|
12.8
|
%
|
The change in net
sales from the first six months of 2020 to the first six months of
2021 was due to the following:
|
|
|
Six Months Ended
June 30,
|
|
Meal
Preparation
|
|
Snacking &
Beverages
|
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|
(unaudited,
dollars in millions)
|
2020 Net
sales
|
$
|
1,341.3
|
|
|
|
|
$
|
785.5
|
|
|
|
Volume/mix excluding
acquisitions and divestitures
|
(93.8)
|
|
|
(7.0)
|
%
|
|
(34.2)
|
|
|
(4.4)
|
%
|
Pricing
|
(1.9)
|
|
|
(0.1)
|
|
|
0.1
|
|
|
—
|
|
Volume/mix related to
divestitures
|
—
|
|
|
—
|
|
|
(21.4)
|
|
|
(2.7)
|
|
Acquisition
|
73.6
|
|
|
5.5
|
|
|
—
|
|
|
—
|
|
Foreign
currency
|
6.9
|
|
|
0.5
|
|
|
4.4
|
|
|
0.6
|
|
2021 Net
sales
|
$
|
1,326.1
|
|
|
(1.1)
|
%
|
|
$
|
734.4
|
|
|
(6.5)
|
%
|
|
|
|
|
|
|
|
|
Volume/mix related to
divestitures
|
|
|
—
|
|
|
|
|
2.7
|
|
Acquisition
|
|
|
(5.5)
|
|
|
|
|
—
|
|
Foreign
currency
|
|
|
(0.5)
|
|
|
|
|
(0.6)
|
|
Percent change in
organic net sales
|
|
|
(7.1)
|
%
|
|
|
|
(4.4)
|
%
|
CONFERENCE CALL WEBCAST
A webcast to discuss the Company's second quarter earnings will
be held at 8:00 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
ACQUISITION
On December 11, 2020, the Company
completed the acquisition of the majority of the U.S. branded pasta
portfolio as well as a manufacturing facility in St. Louis, Missouri of Riviana Foods, Inc., a
subsidiary of Ebro Foods, S.A. The pasta acquisition was accounted
for under the acquisition method of accounting and the results of
operations were included in our Condensed Consolidated Financial
Statements from the date of acquisition in the Meal Preparation
segment.
DISCONTINUED OPERATIONS
Beginning in the third quarter of 2019, the Company determined
that its Ready-to-eat Cereal business met the discontinued
operations criteria and, as such, the business has been excluded
from continuing operations and segment results for all periods
presented. On June 1, 2021, the
Company completed the sale of its Ready-to-eat Cereal business.
DIVESTITURE
On January 10, 2020, the Company
entered into a definitive agreement to sell two of its In-Store
Bakery facilities located in Fridley,
Minnesota and Lodi,
California. These two facilities were included within the
Snacking & Beverages reporting segment. On April 17, 2020, the Company completed the sale of
these facilities.
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. The Company
believes these measures provide useful information to the users of
the financial statements as we also have included these measures in
other communications and publications.
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 the net sales associated with the pasta acquisition from Riviana
Foods, foreign currency, and the net sales associated with the
divestiture of the In-Store Bakery facilities, which closed on
April 17, 2020. 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 Effective Tax Rate, Adjusting for Certain Items
Affecting Comparability
Adjusted effective tax rate represents the GAAP effective tax
rate adjusted to exclude the effect of items excluded from adjusted
net income, such as growth, reinvestment, and restructuring
programs and mark-to-market impacts. This information is provided
in order to allow investors to make meaningful, consistent
comparisons of the Company's effective tax rate and to view the
Company's effective tax rate from the same perspective as Company
management.
Adjusted Earnings Per Diluted Share from Continuing
Operations, Adjusting for Certain Items Affecting
Comparability
Adjusted earnings per diluted share from continuing operations
("adjusted diluted EPS") reflects adjustments to GAAP 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 acquisition,
integration, divestiture, 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, the impact of the
COVID-19 pandemic, 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 loss per share from
continuing operations as presented in the Condensed Consolidated
Statements of Operations, excluding certain items affecting
comparability, to adjusted diluted earnings per share from
continuing operations is presented above.
Adjusted Net Income from Continuing Operations, Adjusted EBIT
from Continuing Operations, Adjusted EBITDA from Continuing
Operations, Adjusted Net Income Margin from Continuing Operations,
Adjusted EBIT Margin from Continuing Operations and Adjusted EBITDA
Margin from Continuing Operations, Adjusting for Certain Items
Affecting Comparability
Adjusted net income from continuing operations represents GAAP
net 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 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 from continuing operations before interest expense, interest
income, and income tax expense. Adjusted EBITDA from continuing
operations represents adjusted EBIT from continuing operations
before depreciation and amortization expense and non-cash
stock-based compensation expense. Effective January 1, 2021, non-cash stock-based
compensation expense was added as an adjustment to our calculation
of Adjusted EBITDA in order to better reflect our core operating
performance. Prior period amounts have been recast to conform to
this presentation. Adjusted EBIT from continuing operations and
adjusted EBITDA from continuing operations are performance measures
commonly used by management to assess operating performance, 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.
Adjusted net income margin from continuing operations, adjusted
EBIT margin from continuing operations and adjusted EBITDA 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 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.
A full reconciliation between the relevant GAAP measure of
reported net loss from continuing operations for the three and six
month periods ended June 30, 2021 and
2020 calculated according to GAAP, adjusted net income from
continuing operations, adjusted EBIT from continuing operations,
and adjusted EBITDA from continuing operations is presented in the
attached tables. 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) provided by
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 outstanding senior debt, and repurchasing common
stock. A reconciliation between the relevant GAAP measure of cash
(used in) provided by operating activities from continuing
operations for the six months ended June 30,
2021 and 2020 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 manufacturer and distributor
of private label packaged foods and beverages in North America. We have approximately 40
production facilities across North
America and Italy, and our
vision is to be the undisputed solutions leader for custom brands
for our customers. Our extensive product portfolio includes
snacking, beverages, and meal preparation products, available in
shelf stable, refrigerated, frozen, and fresh formats. We have a
comprehensive offering of packaging formats and flavor profiles,
and we also offer clean label, organic, and preservative-free
ingredients across almost our entire portfolio. Our purpose is to
make high quality food and beverages affordable to all.
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 "anticipate," "believe,"
"estimate," "project," "expect," "intend," "plan," "should," 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 of the
ongoing COVID-19 outbreak on our business, suppliers, consumers,
customers and employees; the 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; customer concentration
and consolidation; raw material and commodity costs; competition;
disruptions or inefficiencies in our supply chain and/or
operations, including from the ongoing COVID-19 outbreak; our
ability to continue to make acquisitions in accordance with our
business strategy or effectively manage the growth from
acquisitions; changes and developments affecting our industry,
including consumer 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; disruptions in or
failures of our information technology systems; costs associated
with shareholder activism, labor strikes or work stoppages; 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 our Annual Report on Form 10-K for the year ended
December 31, 2020, 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,
2021
|
|
December 31,
2020
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
17.4
|
|
|
$
|
364.6
|
|
Receivables,
net
|
|
259.7
|
|
|
308.8
|
|
Inventories
|
|
713.7
|
|
|
598.6
|
|
Prepaid expenses and
other current assets
|
|
93.1
|
|
|
86.1
|
|
Assets of discontinued
operations
|
|
—
|
|
|
70.7
|
|
Total current
assets
|
|
1,083.9
|
|
|
1,428.8
|
|
Property, plant, and
equipment, net
|
|
1,041.8
|
|
|
1,070.0
|
|
Operating lease
right-of-use assets
|
|
151.0
|
|
|
160.7
|
|
Goodwill
|
|
2,184.6
|
|
|
2,178.7
|
|
Intangible assets,
net
|
|
586.4
|
|
|
615.0
|
|
Other assets,
net
|
|
33.7
|
|
|
32.5
|
|
Total
assets
|
|
$
|
5,081.4
|
|
|
$
|
5,485.7
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
591.7
|
|
|
$
|
627.7
|
|
Accrued
expenses
|
|
292.4
|
|
|
340.6
|
|
Current portion of
long-term debt
|
|
16.0
|
|
|
15.7
|
|
Liabilities of
discontinued operations
|
|
—
|
|
|
6.7
|
|
Total current
liabilities
|
|
900.1
|
|
|
990.7
|
|
Long-term
debt
|
|
1,916.9
|
|
|
2,199.0
|
|
Operating lease
liabilities
|
|
131.0
|
|
|
144.5
|
|
Deferred income
taxes
|
|
154.3
|
|
|
158.3
|
|
Other long-term
liabilities
|
|
120.6
|
|
|
128.2
|
|
Total
liabilities
|
|
3,222.9
|
|
|
3,620.7
|
|
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, 55.7 and
55.9 shares outstanding, respectively
|
|
0.6
|
|
|
0.6
|
|
Treasury
stock
|
|
(133.3)
|
|
|
(108.3)
|
|
Additional paid-in
capital
|
|
2,181.5
|
|
|
2,179.9
|
|
Accumulated
deficit
|
|
(133.3)
|
|
|
(143.2)
|
|
Accumulated other
comprehensive loss
|
|
(57.0)
|
|
|
(64.0)
|
|
Total stockholders'
equity
|
|
1,858.5
|
|
|
1,865.0
|
|
Total liabilities and
stockholders' equity
|
|
$
|
5,081.4
|
|
|
$
|
5,485.7
|
|
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,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net sales
|
|
$
|
1,003.2
|
|
|
$
|
1,041.9
|
|
|
$
|
2,060.5
|
|
|
$
|
2,126.8
|
|
Cost of
sales
|
|
837.1
|
|
|
850.7
|
|
|
1,713.3
|
|
|
1,740.7
|
|
Gross
profit
|
|
166.1
|
|
|
191.2
|
|
|
347.2
|
|
|
386.1
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
|
62.9
|
|
|
63.0
|
|
|
131.6
|
|
|
128.1
|
|
General and
administrative
|
|
56.3
|
|
|
73.7
|
|
|
119.6
|
|
|
137.3
|
|
Amortization
expense
|
|
18.0
|
|
|
17.4
|
|
|
36.4
|
|
|
34.9
|
|
Other operating
expense, net
|
|
24.8
|
|
|
11.8
|
|
|
44.5
|
|
|
30.3
|
|
Total operating
expenses
|
|
162.0
|
|
|
165.9
|
|
|
332.1
|
|
|
330.6
|
|
Operating
income
|
|
4.1
|
|
|
25.3
|
|
|
15.1
|
|
|
55.5
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
18.5
|
|
|
26.2
|
|
|
43.6
|
|
|
51.0
|
|
Loss on extinguishment
of debt
|
|
—
|
|
|
—
|
|
|
14.4
|
|
|
—
|
|
(Gain) loss on foreign
currency exchange
|
|
(1.3)
|
|
|
(6.5)
|
|
|
(2.6)
|
|
|
7.9
|
|
Other (income)
expense, net
|
|
(6.5)
|
|
|
(5.6)
|
|
|
(33.9)
|
|
|
58.4
|
|
Total other
expense
|
|
10.7
|
|
|
14.1
|
|
|
21.5
|
|
|
117.3
|
|
(Loss) income before
income taxes
|
|
(6.6)
|
|
|
11.2
|
|
|
(6.4)
|
|
|
(61.8)
|
|
Income tax (benefit)
expense
|
|
(1.4)
|
|
|
13.8
|
|
|
(1.6)
|
|
|
(26.4)
|
|
Net loss from
continuing operations
|
|
(5.2)
|
|
|
(2.6)
|
|
|
(4.8)
|
|
|
(35.4)
|
|
Net income from
discontinued operations
|
|
13.6
|
|
|
1.1
|
|
|
14.7
|
|
|
2.7
|
|
Net income
(loss)
|
|
$
|
8.4
|
|
|
$
|
(1.5)
|
|
|
$
|
9.9
|
|
|
$
|
(32.7)
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share - basic:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.09)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.09)
|
|
|
$
|
(0.63)
|
|
Discontinued
operations
|
|
0.24
|
|
|
0.02
|
|
|
0.26
|
|
|
0.05
|
|
Earnings (loss) per
share basic (1)
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.18
|
|
|
$
|
(0.58)
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share - diluted:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.09)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.09)
|
|
|
$
|
(0.63)
|
|
Discontinued
operations
|
|
0.24
|
|
|
0.02
|
|
|
0.26
|
|
|
0.05
|
|
Earnings (loss) per
share diluted (1)
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.18
|
|
|
$
|
(0.58)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
56.0
|
|
|
56.5
|
|
|
55.8
|
|
|
56.4
|
|
Diluted
|
|
56.0
|
|
|
56.5
|
|
|
55.8
|
|
|
56.4
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
$
|
53.8
|
|
|
$
|
49.6
|
|
|
$
|
107.3
|
|
|
$
|
99.4
|
|
|
|
(1)
|
The sum of the
individual per share amounts may not add due to
rounding.
|
The following table reconciles the Company's net loss from
continuing operations to adjusted net income from continuing
operations, adjusted EBIT from continuing operations, and adjusted
EBITDA from continuing operations for the three and six months
ended June 30, 2021 and 2020:
TREEHOUSE FOODS,
INC. RECONCILIATION OF NET LOSS FROM CONTINUING
OPERATIONS TO ADJUSTED NET INCOME, ADJUSTED EBIT AND ADJUSTED
EBITDA FROM CONTINUING OPERATIONS (Unaudited, in
millions)
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net loss from
continuing operations (GAAP)
|
|
|
|
$
|
(5.2)
|
|
|
$
|
(2.6)
|
|
|
$
|
(4.8)
|
|
|
$
|
(35.4)
|
|
Growth, reinvestment,
restructuring programs & other
|
|
(1)
|
|
22.2
|
|
|
12.5
|
|
|
41.7
|
|
|
33.0
|
|
Loss on
extinguishment of debt
|
|
(2)
|
|
—
|
|
|
—
|
|
|
14.4
|
|
|
—
|
|
COVID-19
|
|
(3)
|
|
4.5
|
|
|
14.4
|
|
|
13.3
|
|
|
9.3
|
|
Acquisition,
integration, divestiture, and related costs
|
|
(4)
|
|
6.5
|
|
|
1.2
|
|
|
11.8
|
|
|
1.1
|
|
Shareholder
activism
|
|
(5)
|
|
1.0
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
Tax
indemnification
|
|
(6)
|
|
0.2
|
|
|
0.9
|
|
|
0.2
|
|
|
1.7
|
|
Foreign currency
(gain) loss on re-measurement of intercompany notes
|
|
(7)
|
|
(1.3)
|
|
|
(6.5)
|
|
|
(2.8)
|
|
|
8.4
|
|
Mark-to-market
adjustments
|
|
(8)
|
|
(6.2)
|
|
|
(4.3)
|
|
|
(27.8)
|
|
|
59.8
|
|
Litigation
matters
|
|
(9)
|
|
—
|
|
|
9.0
|
|
|
—
|
|
|
9.0
|
|
Less: Taxes on
adjusting items
|
|
|
|
(6.9)
|
|
|
8.4
|
|
|
(13.8)
|
|
|
(33.2)
|
|
Adjusted net income
from continuing operations (Non-GAAP)
|
|
|
|
14.8
|
|
|
33.0
|
|
|
35.3
|
|
|
53.7
|
|
Interest
expense
|
|
|
|
18.5
|
|
|
26.2
|
|
|
43.6
|
|
|
51.0
|
|
Interest
income
|
|
|
|
—
|
|
|
—
|
|
|
(4.1)
|
|
|
(4.0)
|
|
Income taxes
(excluding COVID-19 tax benefit)
|
|
|
|
(1.4)
|
|
|
18.8
|
|
|
(1.6)
|
|
|
(15.4)
|
|
Add: Taxes on
adjusting items
|
|
|
|
6.9
|
|
|
(8.4)
|
|
|
13.8
|
|
|
33.2
|
|
Adjusted EBIT from
continuing operations (Non-GAAP)
|
|
|
|
38.8
|
|
|
69.6
|
|
|
87.0
|
|
|
118.5
|
|
Depreciation and
amortization
|
|
|
|
53.8
|
|
|
49.6
|
|
|
107.3
|
|
|
99.4
|
|
Stock-based
compensation expense
|
|
(10)
|
|
4.1
|
|
|
6.4
|
|
|
8.6
|
|
|
14.3
|
|
Adjusted EBITDA from
continuing operations (Non-GAAP)
|
|
|
|
$
|
96.7
|
|
|
$
|
125.6
|
|
|
$
|
202.9
|
|
|
$
|
232.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
margin from continuing operations
|
|
|
|
1.5
|
%
|
|
3.2
|
%
|
|
1.7
|
%
|
|
2.5
|
%
|
Adjusted EBIT margin
from continuing operations
|
|
|
|
3.9
|
%
|
|
6.7
|
%
|
|
4.2
|
%
|
|
5.6
|
%
|
Adjusted EBITDA
margin from continuing operations
|
|
|
|
9.6
|
%
|
|
12.1
|
%
|
|
9.8
|
%
|
|
10.9
|
%
|
|
|
|
|
Location in
Condensed
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
|
|
Consolidated
Statements of Operations
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(unaudited, in
millions)
|
(1)
|
|
|
Growth, reinvestment,
restructuring programs & other
|
|
Other operating
expense, net
|
|
$
|
22.2
|
|
|
$
|
11.5
|
|
|
$
|
41.8
|
|
|
$
|
30.0
|
|
|
|
|
|
General and
administrative
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
1.0
|
|
|
|
|
|
Cost of
sales
|
|
—
|
|
|
0.4
|
|
|
(0.1)
|
|
|
1.0
|
|
|
|
|
|
Selling and
distribution
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
1.0
|
|
(2)
|
|
|
Loss on
extinguishment of debt
|
|
Loss on
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
14.4
|
|
|
—
|
|
(3)
|
|
|
COVID-19
|
|
Cost of
sales
|
|
4.5
|
|
|
17.8
|
|
|
13.3
|
|
|
18.7
|
|
|
|
|
|
General and
administrative
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
—
|
|
|
(5.0)
|
|
|
—
|
|
|
(11.0)
|
|
(4)
|
|
|
Acquisition,
integration, divestiture, and related costs
|
|
General and
administrative
|
|
3.8
|
|
|
0.9
|
|
|
7.7
|
|
|
0.8
|
|
|
|
|
|
Cost of
sales
|
|
0.1
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
|
|
|
|
Other operating
expense, net
|
|
2.6
|
|
|
0.3
|
|
|
2.7
|
|
|
0.3
|
|
(5)
|
|
|
Shareholder
activism
|
|
General and
administrative
|
|
1.0
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
(6)
|
|
|
Tax
indemnification
|
|
Other (income)
expense, net
|
|
0.2
|
|
|
0.9
|
|
|
0.2
|
|
|
1.7
|
|
(7)
|
|
|
Foreign currency
(gain) loss on re-measurement of intercompany notes
|
|
(Gain) loss on
foreign currency exchange
|
|
(1.3)
|
|
|
(6.5)
|
|
|
(2.8)
|
|
|
8.4
|
|
(8)
|
|
|
Mark-to-market
adjustments
|
|
Other (income)
expense, net
|
|
(6.2)
|
|
|
(4.3)
|
|
|
(27.8)
|
|
|
59.8
|
|
(9)
|
|
|
Litigation
matters
|
|
General and
administrative
|
|
—
|
|
|
9.0
|
|
|
—
|
|
|
9.0
|
|
(10)
|
|
|
Stock-based
compensation expense included as an adjusting item
|
|
Other operating
expense, net
|
|
0.4
|
|
|
0.6
|
|
|
0.8
|
|
|
0.6
|
|
TREEHOUSE FOODS,
INC. CASH FLOW KEY METRICS
(Unaudited, in millions)
|
|
|
|
Six Months
Ended
June
30,
|
|
|
2021
|
|
2020
|
Net Cash Flows
Provided By (Used In):
|
|
|
|
|
Operating activities
of continuing operations
|
|
$
|
(44.0)
|
|
|
$
|
123.3
|
|
Investing activities
of continuing operations
|
|
(48.3)
|
|
|
(24.6)
|
|
Financing activities
of continuing operations
|
|
(333.0)
|
|
|
(9.1)
|
|
Cash flows from
discontinued operations
|
|
78.5
|
|
|
0.1
|
|
|
TREEHOUSE FOODS,
INC. RECONCILIATION OF NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS TO FREE CASH FLOW
FROM CONTINUING OPERATIONS (Unaudited, in
millions)
|
|
|
|
Six Months
Ended
June
30,
|
|
|
2021
|
|
2020
|
|
|
|
Cash flow (used in)
provided by operating activities from continuing
operations
|
|
$
|
(44.0)
|
|
|
$
|
123.3
|
|
Less: Capital
expenditures
|
|
(61.7)
|
|
|
(56.6)
|
|
Free cash flow from
continuing operations
|
|
$
|
(105.7)
|
|
|
$
|
66.7
|
|
View original
content:https://www.prnewswire.com/news-releases/treehouse-foods-inc-reports-second-quarter-2021-results-301348902.html
SOURCE TreeHouse Foods, Inc.