TreeHouse: Delivers Q4-2018 Results Above Expectations

Oak Brook / IL. (thf) TreeHouse Foods Inc. reported fourth quarter GAAP loss per fully diluted share of USD (0.23) compared to a GAAP loss of USD (5.40) reported for the fourth quarter of 2017. The Company reported adjusted earnings per fully diluted share1 of USD 1.03 in the fourth quarter of 2018 compared to adjusted earnings per share of USD 1.02 in the fourth quarter of 2017.

«I am extremely proud of the progress we made in 2018, with the dedication and effort our organization put forth,» said Steve Oakland, Chief Executive Officer and President. «I’m particularly pleased with the excellent cash performance in 2018 which enabled us to reduce our net debt by USD 285 million for the year.»

«We closed the year with adjusted EPS of USD 1.03, and for the full year, delivered adjusted EPS of USD 2.20, in line with our original guidance for 2018,» said Matthew Foulston, EVP and Chief Financial Officer. «Revenue in the fourth quarter declined as we anticipated, largely driven by the loss of low margin business in our Snacks division. Excluding Snacks and the impact of SKU rationalization and divestitures, revenue declined a more modest 3.6 percent. Both our TreeHouse 2020 restructuring program and Structure to Win SG+A initiative meaningfully improved our organization this year. Through TreeHouse 2020, we better optimized our manufacturing and administrative footprint and completed the rollout of our TreeHouse Management Operating Structure (TMOS) in 14 plants, and delivered SG+A savings of over USD 75 million in the year.»

Outlook

«In December, we communicated a new vision and enterprise strategy for the company centered around the customer and based on four key tenets – commercial excellence, operational excellence, portfolio optimization, and investment in people and talent – to deliver long-term shareholder value,» continued Mr. Oakland. «This year, our organization will continue to evolve as we further invest in TreeHouse 2020, build a culture of continuous improvement and leverage our operating and information technology systems in order to return TreeHouse to growth over time. While we will need to lap some revenue decline related to volume loss in the first half of 2019, I’m confident in our ability to pivot to revenue growth in the second half of the year as we better position ourselves to capitalize on the private label growth in our categories.»

The Company reaffirms its 2019 guidance for adjusted earnings per fully diluted share of USD 2.35 to USD 2.75. TreeHouse net sales are expected to decrease in 2019 to approximately USD 5.35 to USD 5.75 billion, and adjusted earnings before interest and taxes (Ebit) is expected to be between USD 290 to USD 325 million, or approximately 5.4 percent to 5.7 percent of net sales.

Net interest expense is expected to be between USD 115 and USD 120 million and assumes a rising interest rate environment as the year progresses. The effective tax rate is expected to increase to a range of 23 percent to 24 percent, in line with the Company’s long-term view of its effective tax rate. The Company also anticipates diluted weighted average shares outstanding to be about ~57 million shares in 2019. Free cash flow in 2019 is anticipated to be between USD 150 to USD 200 million, with the priority for cash proceeds going towards reducing debt.

In regard to the first quarter of 2019, the Company expects adjusted earnings in the range of USD 0.05 to USD 0.15 per fully diluted share and net sales in the range of USD 1.27 to USD 1.33 billion. The expected decrease compared to the first quarter of 2018 will be more than explained by the deterioration in the Snacks division.

The Company is not able to reconcile adjusted earnings per fully diluted share (non-GAAP) to projected reported diluted earnings per share 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.