TreeHouse Foods: Reports Q3-2019 Results

Oak Brook / IL. (thf) TreeHouse Foods Inc. reported third quarter GAAP loss per diluted share from continuing operations of USD (1.08) compared to a GAAP earnings per diluted share from continuing operations of USD 0.22 reported for the third quarter of 2018. The Company had adjusted earnings per diluted share from continuing operations1 of USD 0.55 in the third quarter of 2019 compared to adjusted earnings per diluted share from continuing operations of USD 0.57 for the third quarter of 2018. Results for the quarter reflected non-cash impairment charges of USD 88 million (pre-tax) related to a write-down of long-lived assets in connection with two historical acquisitions, partially offset by tax planning and continued SG+A discipline.

«Third quarter adjusted earnings per diluted share from continuing operations fell within the range of our guidance, and I’m encouraged by the progress we are making around volumes. Excluding SKU rationalization and divestitures, our third quarter year-over-year shipments improved sequentially to (4.7) percent versus (9.6) percent in the first half of the year. Additionally, I’m pleased by the results of our ongoing commitment to deliver outstanding customer service,» said Steve Oakland, Chief Executive Officer and President.

«The third quarter results also reflect two challenges: an unanticipated reduction in September orders and some temporary operational disruption as we aligned our manufacturing cost profile through workforce reductions. While these changes across our operations will contribute meaningfully to our future efficiency as we pivot the organization to volume growth, our near term results were challenged,» Oakland continued.

«It’s important to note that on a nine-month year-to-date basis, our adjusted earnings per diluted share from continuing operations is up 32 percent, despite our net sales being down 7 percent,» said Bill Kelley, Interim Chief Financial Officer. «Adjusted Ebit margin from continuing operations1 in the third quarter of 5.9 percent improved 10 basis points versus the prior year, reflecting our improved pricing execution, but this was below our internal expectations as we worked to align our production capacity with lower demand. The 140 basis point decline in adjusted SG+A expenses1 as a percent of net sales partly offset the operational shortfall, while a lower tax rate benefited the quarter by approximately USD 0.06.»

Both the Snacks business and the Ready-to-eat (RTE) Cereal business qualified for discontinued operations treatment beginning in the third quarter, and as such, results for these businesses were excluded from continuing operations. Historical quarterly 2018 and 2019 income statements, segment information and GAAP to non-GAAP reconciliations to reflect the continuing operations of the business were provided in the Company’s 8-K filing dated October 22, 2019.

(1)Adjusted earnings per diluted share from continuing operations, adjusted Ebit margin from continuing operations, adjusted SG+A expense, organic net sales, and adjusted EbitdaS from continuing operations are Non-GAAP financial measures.

Outlook

TreeHouse is revising its full year 2019 adjusted earnings from continuing operations guidance to USD 2.30 – USD 2.50 per diluted share. The Company anticipates sequential volume improvement will continue in the fourth quarter, where a pivot to growth is reflected in the midpoint of the guidance. However, 2019 net sales is now expected to be between USD 4.26 to USD 4.36 billion.

In regard to the outlook for the fourth quarter, TreeHouse anticipates adjusted earnings per diluted share from continuing operations in the USD 1.03 to USD 1.23 range, up approximately 13 percent year-over-year at the midpoint, and net sales between USD 1.11 to USD 1.21 billion, down approximately 3 percent year-over-year at the midpoint. Year-over-year volume growth in Beverages is expected to partially offset moderating declines in Baked Goods and Meal Solutions.

Oakland said, «We continue to make meaningful progress across the organization. Strengthening commercial relationships takes time, but our focus on delivering great customer service is paying off as our customer interface evolves from tactical execution toward more strategic, long-term discussions. We remain committed to our vision to be the supply chain for our customers’ brands and to deliver upon our financial commitments of 1-2 percent revenue growth, greater than or equal to 10 percent earnings per share growth and at least USD 300 million in free cash flow in 2020 and beyond,» Oakland concluded.

Management Changes

In a separate press TreeHouse announced that Bill Kelley, formerly Senior Vice President, Corporate and Operations Finance, was named Interim Chief Financial Officer.