First Quarter Exceeds Expectations,
Demonstrating Improved Execution Across More Focused
Portfolio
TreeHouse Reaffirms 2023 Net Sales and
Adjusted EBITDA Guidance
HIGHLIGHTS
- Net sales of $894.8 million
increased 15.8% compared to the same period in 2022.
- Earnings (loss) per diluted share from continuing operations
was $0.34 compared to $(0.25) for the same period in 2022.
- Adjusted earnings per diluted share from continuing
operations1 was $0.68
compared to $(0.16) for the same
period in 2022.
- TreeHouse reaffirmed its full year 2023 guidance of net sales
growth of 6% to 8% year-over-year and adjusted EBITDA2
of $345 to $365 million.
OAK
BROOK, Ill., May 8, 2023
/PRNewswire/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported
net sales of $894.8 million which
increased 15.8% compared to the first quarter of 2022. GAAP
earnings (loss) per diluted share from continuing operations of
$0.34 compared to $(0.25) for the first quarter of 2022. Adjusted
earnings per diluted share from continuing operations1
was $0.68 in the first quarter of
2023 compared to $(0.16) in the first
quarter of 2022.
"We see a long runway for growth at TreeHouse as we invest in
opportunities to build capabilities around our strategic pillars —
world class supply chain, category leadership, strategic customer
partnerships and talent leader," said Steve
Oakland, Chairman, Chief Executive Officer, and President.
"We are off to a strong start in 2023, as we are benefiting from
the actions we took to focus our portfolio on faster growing,
higher margin private label snacking and beverage categories. We
are pleased with our team's efforts that helped drive revenue and
profit above our guidance range for the quarter."
Patrick O'Donnell, EVP and Chief
Financial Officer, said, "Along with our team's continued focus on
better execution, our first quarter revenue growth of 15.8%
reflects our pricing actions to recover inflation and earlier than
planned fulfillment of certain customer orders. We are also
encouraged by our significant year-over-year progress in
profitability in the first quarter. Although the macro environment
remains dynamic, we saw greater improvement across the supply
chain, which enabled us to strengthen service and better meet
increased customer demand. Our expectations for our first half
performance give us confidence in our ability to achieve our 2023
guidance."
OUTLOOK2
TreeHouse reaffirmed its previously-issued full year 2023
guidance:
- Net sales growth of 6% to 8% year-over-year, which represents a
range of $3.66 to $3.73 billion.
- Adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $345 to
$365 million, up approximately 24%
year-over-year at the midpoint.
With regard to the cadence for the remainder of the year:
- Revenue for the first half of the year is anticipated to be
between $1.705 billion and
$1.735 billion, which represents
growth of 7.7% to 9.6%.
- Second quarter revenue is expected in the range of $810 to $840
million, representing flat to 4% growth versus the prior
year. The Company also noted the following:
-
- Historically, the second quarter represents the Company's
seasonally lowest volume quarter of the year.
- Improvement in the supply chain in the first quarter enabled
the Company to increase production and fulfill certain customer
orders that were originally planned for shipment in the second
quarter.
- TreeHouse expects adjusted EBITDA of $65 to $80 million
in the second quarter.
- Second quarter adjusted EBITDA margin is expected to be between
7.9% to 9.4%, representing a 130 to 280 basis point improvement
versus the second quarter of 2022.
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.
FIRST QUARTER 2023 FINANCIAL RESULTS
Net Sales — Net sales for the first quarter of 2023 totaled
$894.8 million compared to
$772.6 million for the same period
last year, an increase of $122.2
million, or 15.8%. The change in net sales from 2022 to 2023
was due to the following:
|
|
Three
Months
|
|
|
(unaudited)
|
Pricing
|
|
16.7
|
Volume/mix
|
|
(0.6) %
|
Total change in organic
net sales1
|
|
16.1 %
|
Foreign
currency
|
|
(0.3)
|
Total change in net
sales
|
|
15.8 %
|
The net sales increase of 15.8% was primarily driven by
favorable pricing to recover commodity inflation and service
improvements in the majority of our categories, which allowed the
Company to capture increased demand and fulfill certain customer
orders earlier than planned. This was partially offset by the exit
of lower margin business, particularly in Pickles.
Gross Profit — Gross profit as a percentage of net sales was
17.0% in the first quarter of 2023, compared to 12.8% in the first
quarter of 2022, an increase of 4.2 percentage points. The increase
is primarily due to the Company's pricing actions to recover
commodity and freight inflation experienced in prior periods and
favorable category mix. This was partially offset by increased
costs to invest in the supply chain to improve service levels as
well as increased costs for investment in warehouse capacity.
Total Operating Expenses — Total operating expenses were
$113.0 million in the first quarter
of 2023 compared to $155.0 million in
the first quarter of 2022, a decrease of $42.0 million. The decrease is primarily due to
$13.4 million of TSA income, lower
severance and retention expense due to a non-recurring one-time
employee recognition bonus, and lower freight costs due to
declining freight rates and improved utilization of full truck load
shipments.
Total Other Expense (Income) — Total other income of
$40.2 million in the first quarter of
2022 decreased by $53.4 million to be
total other expense of $13.2 million
in the first quarter of 2023. The decrease was primarily due to a
$56.7 million unfavorable change in
non-cash mark-to-market impacts from hedging activities, largely
driven by an unfavorable change to interest rate swaps and less
favorable impacts from commodity contracts. Additionally, rising
interest rates led to higher costs with selling receivables in our
Receivables Sales Program, higher costs in our pension plans, and
higher interest expense. This was partially offset by $10.7 million of interest income received from
our Note Receivable.
Income Taxes — Income taxes were recognized at an effective rate
of 26.4% in the first quarter of 2023 compared to 14.3% recognized
in the first quarter of 2022. The change in the Company's effective
tax rate is primarily the result of changes in the amount of tax
deductible stock-based compensation and the amount of
non-deductible executive compensation.
Net Income (Loss) from Continuing Operations and Adjusted EBITDA
— Net income from continuing operations for the first quarter of
2023 was $19.2 million, compared to
net loss from continuing operations of $13.8
million for the same period of the previous year. Adjusted
EBITDA1 from continuing operations was $90.6 million in the first quarter of 2023,
compared to $37.3 million in the
first quarter of 2022, an increase of $53.3
million. The increase is primarily due to the Company's
pricing actions to recover commodity and freight inflation
experienced in prior periods, lower freight costs, and favorable
category mix. This was partially offset by increased costs to
invest in the supply chain to improve service levels and increased
costs to invest in warehouse capacity.
Discontinued Operations — Net (loss) income from discontinued
operations was a $4.0 million loss in
the first quarter of 2023 compared to $10.8
million of income in the first quarter of 2022, a decrease
of $14.8 million. The decrease is
primarily a result of the divestiture of a significant portion of
the Meal Preparation business on October 3,
2022 and an expected loss on disposal adjustment of
$4.5 million during the first quarter
of 2023.
Net Cash Used in Operating Activities from Continuing Operations
— Net cash used in operating activities from continuing operations
was $30.9 million in the first three
months of 2023 compared to $96.1
million in the first three months of 2022, a decrease in
cash used of $65.2 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. Additionally, the
Company had an increase in cash flows from the Receivables Sales
Program. This was partially offset by a decrease in cash flow
driven primarily by payment timing in accounts payable and
increases in inventory to improve service.
CONFERENCE CALL WEBCAST
A webcast to discuss the Company's first 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. 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 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 above.
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 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 income (loss) from continuing operations for the three
month periods ended March 31, 2023
and 2022 calculated according to GAAP, adjusted net income (loss)
from continuing operations, adjusted EBIT from continuing
operations, adjusted EBITDA from continuing operations, and
adjusted EBITDAS 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 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 three months ended March
31, 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 mutual 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)
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
14.6
|
|
$
43.0
|
Receivables,
net
|
|
158.4
|
|
158.8
|
Inventories
|
|
628.0
|
|
589.5
|
Prepaid expenses and
other current assets
|
|
30.8
|
|
23.2
|
Total current
assets
|
|
831.8
|
|
814.5
|
Property, plant, and
equipment, net
|
|
666.4
|
|
666.5
|
Operating lease
right-of-use assets
|
|
183.9
|
|
184.4
|
Goodwill
|
|
1,817.7
|
|
1,817.6
|
Intangible assets,
net
|
|
284.9
|
|
296.0
|
Note receivable,
net
|
|
428.1
|
|
427.0
|
Other assets,
net
|
|
41.2
|
|
47.9
|
Total
assets
|
|
$
4,254.0
|
|
$
4,253.9
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
594.7
|
|
$
618.7
|
Accrued
expenses
|
|
181.3
|
|
208.5
|
Current portion of
long-term debt
|
|
0.5
|
|
0.6
|
Total current
liabilities
|
|
776.5
|
|
827.8
|
Long-term
debt
|
|
1,432.5
|
|
1,394.0
|
Operating lease
liabilities
|
|
157.8
|
|
159.1
|
Deferred income
taxes
|
|
109.2
|
|
108.7
|
Other long-term
liabilities
|
|
73.6
|
|
77.3
|
Total
liabilities
|
|
2,549.6
|
|
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, 56.3 and 56.1
shares outstanding as of March 31, 2023 and December 31, 2022,
respectively
|
|
0.6
|
|
0.6
|
Treasury
stock
|
|
(133.3)
|
|
(133.3)
|
Additional paid-in
capital
|
|
2,207.3
|
|
2,205.4
|
Accumulated
deficit
|
|
(286.8)
|
|
(302.0)
|
Accumulated other
comprehensive loss
|
|
(83.4)
|
|
(83.7)
|
Total stockholders'
equity
|
|
1,704.4
|
|
1,687.0
|
Total liabilities and
stockholders' equity
|
|
$
4,254.0
|
|
$
4,253.9
|
TREEHOUSE FOODS, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited, in
millions, except per share data)
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Net sales
|
|
$
894.8
|
|
$
772.6
|
Cost of
sales
|
|
742.5
|
|
673.9
|
Gross profit
|
|
152.3
|
|
98.7
|
Operating
expenses:
|
|
|
|
|
Selling and
distribution
|
|
45.0
|
|
61.1
|
General and
administrative
|
|
53.4
|
|
52.9
|
Amortization
expense
|
|
12.0
|
|
11.9
|
Other operating
expense, net
|
|
2.6
|
|
29.1
|
Total operating
expenses
|
|
113.0
|
|
155.0
|
Operating income
(loss)
|
|
39.3
|
|
(56.3)
|
Other expense
(income):
|
|
|
|
|
Interest
expense
|
|
17.8
|
|
16.7
|
Interest
income
|
|
(14.6)
|
|
(4.1)
|
Loss (gain) on foreign
currency exchange
|
|
0.3
|
|
(1.1)
|
Other expense
(income), net
|
|
9.7
|
|
(51.7)
|
Total other expense
(income)
|
|
13.2
|
|
(40.2)
|
Income (loss) before
income taxes
|
|
26.1
|
|
(16.1)
|
Income tax expense
(benefit)
|
|
6.9
|
|
(2.3)
|
Net income (loss) from
continuing operations
|
|
19.2
|
|
(13.8)
|
Net (loss) income from
discontinued operations
|
|
(4.0)
|
|
10.8
|
Net income
(loss)
|
|
$
15.2
|
|
$
(3.0)
|
|
|
|
|
|
Earnings (loss) per
common share - basic:
|
|
|
|
|
Continuing
operations
|
|
$
0.34
|
|
$
(0.25)
|
Discontinued
operations
|
|
(0.07)
|
|
0.19
|
Earnings (loss) per
share basic (1)
|
|
$
0.27
|
|
$
(0.05)
|
|
|
|
|
|
Earnings (loss) per
common share - diluted:
|
|
|
|
|
Continuing
operations
|
|
$
0.34
|
|
$
(0.25)
|
Discontinued
operations
|
|
(0.07)
|
|
0.19
|
Earnings (loss) per
share diluted (1)
|
|
$
0.27
|
|
$
(0.05)
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
Basic
|
|
56.1
|
|
55.8
|
Diluted
|
|
56.7
|
|
55.8
|
|
|
(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)
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
(loss)
|
|
$
15.2
|
|
$
(3.0)
|
Net (loss) income from
discontinued operations
|
|
(4.0)
|
|
10.8
|
Net income (loss) from
continuing operations
|
|
19.2
|
|
(13.8)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
36.0
|
|
36.5
|
Stock-based
compensation
|
|
7.2
|
|
3.8
|
Unrealized loss (gain)
on derivative contracts
|
|
5.9
|
|
(50.8)
|
Deferred TSA
income
|
|
(12.3)
|
|
—
|
Other
|
|
0.8
|
|
(0.1)
|
Changes in operating
assets and liabilities, net of divestitures:
|
|
|
|
|
Receivables
|
|
0.5
|
|
(38.9)
|
Inventories
|
|
(38.3)
|
|
(34.0)
|
Prepaid expenses and
other assets
|
|
(7.1)
|
|
(7.0)
|
Accounts
payable
|
|
(20.3)
|
|
24.3
|
Accrued expenses and
other liabilities
|
|
(22.5)
|
|
(16.1)
|
Net cash used in
operating activities - continuing operations
|
|
(30.9)
|
|
(96.1)
|
Net cash provided by
operating activities - discontinued operations
|
|
—
|
|
25.5
|
Net cash used in
operating activities
|
|
(30.9)
|
|
(70.6)
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property,
plant, and equipment
|
|
(30.6)
|
|
(16.9)
|
Additions to intangible
assets
|
|
(1.4)
|
|
(2.5)
|
Proceeds from sale of
fixed assets
|
|
—
|
|
4.8
|
Net cash used in
investing activities - continuing operations
|
|
(32.0)
|
|
(14.6)
|
Net cash used in
investing activities - discontinued operations
|
|
—
|
|
(11.1)
|
Net cash used in
investing activities
|
|
(32.0)
|
|
(25.7)
|
Cash flows from
financing activities:
|
|
|
|
|
Borrowings under
Revolving Credit Facility
|
|
770.8
|
|
30.5
|
Payments under
Revolving Credit Facility
|
|
(732.8)
|
|
(30.5)
|
Payments on financing
lease obligations
|
|
(0.2)
|
|
(0.4)
|
Payment of deferred
financing costs
|
|
—
|
|
(1.6)
|
Payments on Term
Loans
|
|
—
|
|
(14.3)
|
Payments related to
stock-based award activities
|
|
(5.3)
|
|
(3.3)
|
Net cash provided by
(used in) financing activities - continuing operations
|
|
32.5
|
|
(19.6)
|
Net cash used in
financing activities - discontinued operations
|
|
—
|
|
(0.1)
|
Net cash provided by
(used) in financing activities
|
|
32.5
|
|
(19.7)
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
2.0
|
|
0.2
|
Net decrease in cash
and cash equivalents
|
|
(28.4)
|
|
(115.8)
|
Add: Cash and cash
equivalents of discontinued operations, beginning of
period
|
|
—
|
|
4.1
|
Less: Cash and cash
equivalents of discontinued operations, end of period
|
|
—
|
|
(4.3)
|
Cash and cash
equivalents, beginning of period
|
|
43.0
|
|
304.5
|
Cash and cash
equivalents, end of period
|
|
$
14.6
|
|
$
188.5
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Supplemental cash
flow disclosures:
|
|
|
|
|
Interest
paid
|
|
$
27.4
|
|
$
17.1
|
Net income taxes
paid
|
|
5.5
|
|
0.1
|
|
|
|
|
|
Non-cash investing
activities:
|
|
|
|
|
Accrued purchase of
property and equipment
|
|
$
14.4
|
|
$
27.3
|
Accrued other
intangible assets
|
|
0.4
|
|
1.4
|
Right-of-use assets
obtained in exchange for lease obligations
|
|
8.5
|
|
36.0
|
Paid in kind
interest
|
|
1.1
|
|
—
|
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:
RECONCILIATION OF
DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS TO
ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING
OPERATIONS
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
|
|
2023
|
|
2022
|
|
|
|
|
(unaudited)
|
Diluted EPS from
continuing operations (GAAP)
|
|
|
|
$ 0.34
|
|
$
(0.25)
|
Growth, reinvestment,
and restructuring programs
|
|
(1)
|
|
0.27
|
|
0.54
|
Mark-to-market
adjustments
|
|
(2)
|
|
0.10
|
|
(0.91)
|
Divestiture,
acquisition, integration, and related costs
|
|
(3)
|
|
0.07
|
|
0.05
|
Shareholder
activism
|
|
(4)
|
|
0.01
|
|
0.01
|
Tax
indemnification
|
|
(5)
|
|
—
|
|
—
|
Foreign currency gain
on re-measurement of intercompany notes
|
|
(6)
|
|
—
|
|
(0.01)
|
Central services and
conveyed employee costs
|
|
(7)
|
|
—
|
|
0.39
|
Litigation
matter
|
|
(8)
|
|
—
|
|
0.01
|
Taxes on adjusting
items
|
|
|
|
(0.11)
|
|
0.01
|
Adjusted diluted EPS
from continuing operations (Non-GAAP)
|
|
|
|
$ 0.68
|
|
$
(0.16)
|
During the three months ended March 31,
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. For the three months ended March 31,
2023 and 2022, the Company incurred growth, reinvestment, and
restructuring program costs of approximately $15.3 million and
$30.1 million, respectively.
|
|
|
(2)
|
The Company's
derivative contracts are marked-to-market each period. The non-cash
unrealized changes in fair value recognized in Other expense
(income), 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.
|
|
|
(3)
|
Divestiture,
acquisition, integration, and related costs represents costs
associated with completed and potential divestitures, completed and
potential acquisitions, the related integration of the
acquisitions, and gains or losses on the divestiture of a
business.
|
|
|
(4)
|
The Company incurred
fees related to shareholder activism which include directly
applicable third-party advisory and professional service
fees.
|
|
|
(5)
|
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.
|
|
|
(6)
|
The Company has foreign
currency denominated intercompany loans and incurred foreign
currency gains of $0.2 million and $0.8 million for the three
months ended March 31, 2023 and 2022, respectively, to re-measure
the loans at quarter end. These amounts are non-cash and the loans
are eliminated in consolidation.
|
|
|
(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
months ended March 31, 2023, and for the three months ended March
31, 2022, central service costs were approximately
$13.4 million.
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 months
ended March 31, 2023, and for the three months ended March 31,
2022, conveyed employee costs were approximately
$8.4 million.
|
|
|
(8)
|
During the three months
ended March 31, 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 months ended March 31, 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
March
31,
|
|
|
|
|
2023
|
|
2022
|
Net income (loss) from
continuing operations (GAAP)
|
|
|
|
$ 19.2
|
|
$
(13.8)
|
Growth, reinvestment,
and restructuring programs
|
|
(1)
|
|
15.3
|
|
30.1
|
Mark-to-market
adjustments
|
|
(2)
|
|
5.9
|
|
(50.8)
|
Divestiture,
acquisition, integration, and related costs
|
|
(3)
|
|
3.8
|
|
3.0
|
Shareholder
activism
|
|
(4)
|
|
0.3
|
|
0.6
|
Tax
indemnification
|
|
(5)
|
|
0.2
|
|
—
|
Foreign currency gain
on re-measurement of intercompany notes
|
|
(6)
|
|
(0.2)
|
|
(0.8)
|
Central services and
conveyed employee costs
|
|
(7)
|
|
—
|
|
21.8
|
Litigation
matter
|
|
(8)
|
|
—
|
|
0.4
|
Less: Taxes on
adjusting items
|
|
|
|
(6.1)
|
|
0.3
|
Adjusted net income
(loss) from continuing operations (Non-GAAP)
|
|
|
|
38.4
|
|
(9.2)
|
Interest
expense
|
|
|
|
17.8
|
|
16.7
|
Interest
income
|
|
|
|
(14.6)
|
|
(4.1)
|
Income taxes
|
|
|
|
6.9
|
|
(2.3)
|
Add: Taxes on adjusting
items
|
|
|
|
6.1
|
|
(0.3)
|
Adjusted EBIT from
continuing operations (Non-GAAP)
|
|
|
|
54.6
|
|
0.8
|
Depreciation and
amortization
|
|
|
|
36.0
|
|
36.5
|
Adjusted EBITDA from
continuing operations (Non-GAAP)
|
|
|
|
90.6
|
|
37.3
|
Stock-based
compensation expense
|
|
(9)
|
|
5.0
|
|
3.3
|
Adjusted EBITDAS from
continuing operations (Non-GAAP)
|
|
|
|
$ 95.6
|
|
$ 40.6
|
|
|
|
|
|
|
|
Net income (loss)
margin from continuing operations
|
|
|
|
2.1 %
|
|
(1.8) %
|
Adjusted net income
(loss) margin from continuing operations
|
|
|
|
4.3 %
|
|
(1.2) %
|
Adjusted EBIT margin
from continuing operations
|
|
|
|
6.1 %
|
|
0.1 %
|
Adjusted EBITDA margin
from continuing operations
|
|
|
|
10.1 %
|
|
4.8 %
|
Adjusted EBITDAS margin
from continuing operations
|
|
|
|
10.7 %
|
|
5.3 %
|
|
|
|
|
Location in
Condensed
|
|
Three Months
Ended
March
31,
|
|
|
|
|
Consolidated
Statements of Operations
|
|
2023
|
|
2022
|
|
|
|
|
|
|
(unaudited, in
millions)
|
(1)
|
|
Growth, reinvestment,
and restructuring programs
|
|
Other operating
expense, net
|
|
$ 15.3
|
|
$ 30.1
|
(2)
|
|
Mark-to-market
adjustments
|
|
Other expense (income),
net
|
|
5.9
|
|
(50.8)
|
(3)
|
|
Divestiture,
acquisition, integration, and related costs
|
|
General and
administrative
|
|
3.1
|
|
1.9
|
|
|
|
|
Other operating
expense, net
|
|
0.7
|
|
—
|
|
|
|
|
Cost of
sales
|
|
—
|
|
1.1
|
(4)
|
|
Shareholder
activism
|
|
General and
administrative
|
|
0.3
|
|
0.6
|
(5)
|
|
Tax
indemnification
|
|
Other expense (income),
net
|
|
0.2
|
|
—
|
(6)
|
|
Foreign currency gain
on re-measurement of intercompany notes
|
|
Loss (gain) on foreign
currency exchange
|
|
(0.2)
|
|
(0.8)
|
(7)
|
|
Central services and
conveyed employee costs
|
|
Cost of
sales
|
|
—
|
|
5.0
|
|
|
|
|
General and
administrative
|
|
—
|
|
16.8
|
(8)
|
|
Litigation
matter
|
|
General and
administrative
|
|
—
|
|
0.4
|
(9)
|
|
Stock-based
compensation expense included as an adjusting item
|
|
Other operating
expense, net
|
|
2.2
|
|
0.5
|
TREEHOUSE FOODS, INC.
|
RECONCILIATION OF
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING
OPERATIONS
TO FREE CASH FLOW FROM CONTINUING OPERATIONS
|
(Unaudited, in
millions)
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
|
|
|
Cash flow used in
operating activities from continuing operations
|
|
$
(30.9)
|
|
$
(96.1)
|
Less: Capital
expenditures
|
|
(32.0)
|
|
(19.4)
|
Free cash flow from
continuing operations
|
|
$
(62.9)
|
|
$
(115.5)
|
View original
content:https://www.prnewswire.com/news-releases/treehouse-foods-inc-reports-first-quarter-2023-results-301817812.html
SOURCE TreeHouse Foods, Inc.