TreeHouse Foods, Inc. Reports Fourth Quarter and Full Year 2022 Results
TreeHouse Foods delivered remarkable Q4 2022 results, reporting a 22% increase in net sales, reaching $996.2 million. This growth stemmed primarily from strategic pricing actions aimed at offsetting inflation. The net income from continuing operations was $40.1 million, showcasing a significant margin improvement of 570 basis points from Q3 2022. For FY 2023, the company forecasts a 6% - 8% sales growth and an adjusted EBITDA between $345 million and $365 million, a year-over-year rise of 20% - 27%. Looking ahead, TreeHouse targets annual growth rates of 3% - 5% in net sales starting in 2024.
- Net sales increased by 22% to $996.2 million in Q4 2022.
- Net income from continuing operations rose to $40.1 million, a 570 basis points improvement from Q3 2022.
- Adjusted EBITDA for Q4 2022 was $120.0 million, a 320 basis points increase compared to Q3 2022.
- FY 2023 net sales growth is projected at 6% - 8%, with a substantial adjusted EBITDA forecast of $345 to $365 million.
- Increased cash usage in operating activities from $140.5 million in 2021 to a net cash used of $81.6 million in 2022 due to inflation-related cost increases.
- Ongoing supply chain disruptions and labor costs are impacting service delivery.
Delivered Net Sales Growth of
Anticipates FY23 Outlook for Net Sales Growth of
Issues Annual Growth Target Expectations Beginning in 2024 of
FOURTH QUARTER HIGHLIGHTS
- Net sales increased year-over-year by
22.0% to$996.2 million - Net income from continuing operations was
$40.1 million 4.0% margin, a 570 basis point sequential improvement compared to Q3 2022. - Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations1 was
$120.0 million 12.0% margin, a 320 basis point sequential improvement compared to Q3 2022.
"We continue to work diligently to drive growth and profitability, and in the fourth quarter, we demonstrated those efforts are paying off - we delivered sequential profit improvement and increased service by more than 100 basis points," said
OUTLOOK2
TreeHouse issued the following outlook and guidance for fiscal year 2023:
- The Company assumes that the macro environment will continue to be net inflationary. TreeHouse is recovering higher input costs through targeted pricing actions.
- Net sales growth of
6% -8% year-over-year, driven by pricing. The year-over-year pricing contribution is expected to be most impactful in the first half of the year. Volume is assumed to be flat for the full year, as the Company continues to mitigate supply chain disruption and improve service. - Adjusted EBITDA from continuing operations of
$345 $365 million 24% year-over-year at the midpoint. EBITDA margins are expected to improve on a year-over-year basis each quarter, driven by 2022 pricing actions to recover inflation and continued supply chain recovery. - Net interest expense of
$20 $25 million $65 $70 million $45 million - Capital expenditures of approximately
$130 million
In regard to the first quarter, TreeHouse anticipates year-over-year net sales growth between
In addition, TreeHouse introduced the following annual growth targets expected over 3+ years beginning in 2024:
- Net sales growth of
3% to5% , in-line with the historical private label growth rates of the Company's snacking & beverage categories; - Adjusted EBITDA growth of
8% to10% ; and - Annual free cash flow of at least
$200 million
________________________________________________ |
1 Adjusted earnings per diluted share from continuing operations, adjusted EBIT, adjusted EBITDA, adjusted EBITDAS, 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 GAAP to Non-GAAP measures. |
2 The Company is not able to reconcile prospective adjusted EBITDA from continuing operations, adjusted EBITDA margin from continuing operations or free cash flow, 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. |
FOURTH QUARTER 2022 FINANCIAL RESULTS
Three Months | Twelve Months | |||
(unaudited) | (unaudited) | |||
Pricing | 24.6 % | 18.1 % | ||
Volume/mix | (2.2) | (0.7) | ||
Total change in organic net sales1 | 22.4 % | 17.4 % | ||
Foreign currency | (0.4) | (0.2) | ||
Total change in net sales | 22.0 % | 17.2 % |
The net sales increase of
Gross Profit — Gross profit as a percentage of net sales was
Total Operating Expenses — Total operating expenses were
Total Other Expense (Income) — Total other expense (income) was
Income Taxes — Income taxes were recognized at an effective rate of
Net Income (Loss) from Continuing Operations and Adjusted EBITDA — Net income from continuing operations for the fourth quarter of 2022 was
Discontinued Operations — Net loss from discontinued operations was
CONFERENCE CALL WEBCAST
A webcast to discuss the Company's fourth quarter earnings will be held at
DISCONTINUED OPERATIONS
On
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 for all periods presented. On
COMPARISON OF NON-GAAP 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 Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Stockholders' Equity, and the 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
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 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, 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 earnings (loss) per share from continuing operations as presented in the 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 EBITDAS from Continuing Operations, Adjusted Net Income 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 from continuing operations represents GAAP net income (loss) from continuing operations as reported in the 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 net income 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 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 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 below.
A full reconciliation between the relevant GAAP measure of reported net income (loss) from continuing operations for the three and twelve month periods ended
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 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 twelve months ended
ABOUT
Additional information, including TreeHouse's most recent 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 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 our Annual Report on Form 10-K for the year ended
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (Unaudited, in millions, except per share data) | ||||
|
| |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 43.0 | $ 304.5 | ||
Receivables, net of allowance for credit losses of | 158.8 | 151.3 | ||
Inventories | 589.5 | 461.6 | ||
Prepaid expenses and other current assets | 23.2 | 57.0 | ||
Assets of discontinued operations | — | 1,208.1 | ||
Total current assets | 814.5 | 2,182.5 | ||
Property, plant, and equipment, net | 666.5 | 700.1 | ||
Operating lease right-of-use assets | 184.4 | 138.1 | ||
1,817.6 | 1,821.9 | |||
Intangible assets, net | 296.0 | 336.6 | ||
Note receivable, net of allowance for credit losses of | 427.0 | — | ||
Other assets, net | 47.9 | 28.6 | ||
Total assets | $ 4,253.9 | $ 5,207.8 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $ 618.7 | $ 625.9 | ||
Accrued expenses | 208.5 | 233.9 | ||
Current portion of long-term debt | 0.6 | 15.4 | ||
Liabilities of discontinued operations | — | 282.5 | ||
Total current liabilities | 827.8 | 1,157.7 | ||
Long-term debt | 1,394.0 | 1,890.0 | ||
Operating lease liabilities | 159.1 | 119.0 | ||
Deferred income taxes | 108.7 | 105.1 | ||
Other long-term liabilities | 77.3 | 90.6 | ||
Total liabilities | 2,566.9 | 3,362.4 | ||
Commitments and contingencies | ||||
Stockholders' equity: | ||||
Preferred stock, par value | — | — | ||
Common stock, par value | 0.6 | 0.6 | ||
(133.3) | (133.3) | |||
Additional paid-in capital | 2,205.4 | 2,187.4 | ||
Accumulated deficit | (302.0) | (155.7) | ||
Accumulated other comprehensive loss | (83.7) | (53.6) | ||
Total stockholders' equity | 1,687.0 | 1,845.4 | ||
Total liabilities and stockholders' equity | $ 4,253.9 | $ 5,207.8 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in millions, except per share data) | ||||||||
Three Months Ended | Twelve Months Ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Net sales | $ 996.2 | $ 816.3 | $ 3,454.0 | $ 2,945.9 | ||||
Cost of sales | 820.3 | 694.4 | 2,939.1 | 2,479.2 | ||||
Gross profit | 175.9 | 121.9 | 514.9 | 466.7 | ||||
Operating expenses: | ||||||||
Selling and distribution | 51.1 | 56.6 | 219.0 | 200.4 | ||||
General and administrative | 46.1 | 43.3 | 206.6 | 185.3 | ||||
Amortization expense | 12.2 | 11.9 | 47.9 | 47.3 | ||||
Asset impairment | — | 9.2 | — | 9.2 | ||||
Other operating (income) expense, net | (3.5) | 26.9 | 62.9 | 84.7 | ||||
Total operating expenses | 105.9 | 147.9 | 536.4 | 526.9 | ||||
Operating income (loss) | 70.0 | (26.0) | (21.5) | (60.2) | ||||
Other expense (income): | ||||||||
Interest expense | 18.7 | 16.6 | 69.9 | 72.1 | ||||
Interest income | (11.1) | (0.6) | (15.5) | (4.7) | ||||
Loss on extinguishment of debt | 4.5 | — | 4.5 | 14.4 | ||||
(Gain) loss on foreign currency exchange | (1.3) | (0.1) | 1.7 | (0.4) | ||||
Other expense (income), net | 6.0 | (4.8) | (74.3) | (39.4) | ||||
Total other expense (income) | 16.8 | 11.1 | (13.7) | 42.0 | ||||
Income (loss) before income taxes | 53.2 | (37.1) | (7.8) | (102.2) | ||||
Income tax expense (benefit) | 13.1 | (6.3) | 8.3 | (21.3) | ||||
Net income (loss) from continuing operations | 40.1 | (30.8) | (16.1) | (80.9) | ||||
Net (loss) income from discontinued operations | (63.5) | 1.7 | (130.2) | 68.4 | ||||
Net loss | $ (23.4) | $ (29.1) | $ (146.3) | $ (12.5) | ||||
Earnings (loss) per common share - basic: | ||||||||
Continuing operations | $ 0.71 | $ (0.55) | $ (0.29) | $ (1.45) | ||||
Discontinued operations | (1.13) | 0.03 | (2.33) | 1.22 | ||||
Earnings (loss) per share basic (1) | $ (0.42) | $ (0.52) | $ (2.61) | $ (0.22) | ||||
Earnings (loss) per common share - diluted: | ||||||||
Continuing operations | $ 0.71 | $ (0.55) | $ (0.29) | $ (1.45) | ||||
Discontinued operations | (1.12) | 0.03 | (2.33) | 1.22 | ||||
Earnings (loss) per share diluted (1) | $ (0.41) | $ (0.52) | $ (2.61) | $ (0.22) | ||||
Weighted average common shares: | ||||||||
Basic | 56.1 | 55.8 | 56.0 | 55.9 | ||||
Diluted | 56.7 | 55.8 | 56.0 | 55.9 | ||||
(1) The sum of the individual per share amounts may not add due to rounding. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in millions) | |||||
Year Ended | |||||
2022 | 2021 | 2020 | |||
Cash flows from operating activities: | |||||
Net (loss) income | $ (146.3) | $ (12.5) | $ 13.8 | ||
Net income (loss) from discontinued operations | (130.2) | 68.4 | 68.6 | ||
Net (loss) income from continuing operations | (16.1) | (80.9) | (54.8) | ||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | 143.8 | 148.9 | 148.4 | ||
Asset impairment | — | 9.2 | — | ||
Stock-based compensation | 19.9 | 14.2 | 24.4 | ||
Loss on extinguishment of debt | 4.5 | 14.4 | 1.2 | ||
Unrealized (gain) loss on derivative contracts | (75.1) | (37.3) | 30.0 | ||
Deferred income taxes | 9.2 | (12.4) | 43.5 | ||
Deferred | (22.7) | — | — | ||
Other, net | 6.4 | 2.3 | 6.1 | ||
Changes in operating assets and liabilities, net of acquisitions and divestitures: | |||||
Receivables | (8.9) | 61.3 | (13.5) | ||
Inventories | (139.7) | (58.0) | (9.8) | ||
Prepaid expenses and other assets | 43.6 | 1.0 | (34.6) | ||
Accounts payable | (14.8) | 126.1 | 65.4 | ||
Accrued expenses and other liabilities | (31.7) | (48.3) | 6.0 | ||
Net cash (used in) provided by operating activities - continuing operations | (81.6) | 140.5 | 212.3 | ||
Net cash (used in) provided by operating activities - discontinued operations | (69.1) | 184.4 | 204.4 | ||
Net cash (used in) provided by operating activities | (150.7) | 324.9 | 416.7 | ||
Cash flows from investing activities: | |||||
Additions to property, plant, and equipment | (87.1) | (71.6) | (71.5) | ||
Additions to intangible assets | (7.7) | (14.5) | (12.7) | ||
Proceeds from sale of fixed assets | 4.8 | 0.4 | 5.1 | ||
Acquisition | — | — | (17.5) | ||
Proceeds from divestitures | — | — | 26.9 | ||
Proceeds from sale of investments | — | 17.2 | — | ||
Net cash used in investing activities - continuing operations | (90.0) | (68.5) | (69.7) | ||
Net cash provided by (used in) investing activities - discontinued operations | 502.0 | 51.7 | (262.7) | ||
Net cash provided by (used in) investing activities | 412.0 | (16.8) | (332.4) | ||
Cash flows from financing activities: | |||||
Borrowings under Revolving Credit Facility | 855.9 | 194.4 | 100.0 | ||
Payments under Revolving Credit Facility | (855.9) | (194.4) | (100.0) | ||
Repurchases of Notes | — | (602.9) | (375.9) | ||
Payments on finance lease obligations | (1.1) | (1.6) | (1.5) | ||
Payment of deferred financing costs | (2.7) | (8.5) | (8.3) | ||
Payments on Term Loans | (514.3) | (1,136.7) | (14.0) | ||
Proceeds from refinanced Term Loans | — | 1,430.0 | — | ||
Proceeds from issuance of 2028 Notes | — | — | 500.0 | ||
Payment of debt premium for extinguishment of debt | — | (9.0) | — | ||
Repurchases of common stock | — | (25.0) | (25.0) | ||
Receipts related to stock-based award activities | 0.4 | — | 3.2 | ||
Payments related to stock-based award activities | (4.7) | (8.2) | (4.2) | ||
Net cash (used in) provided by financing activities - continuing operations | (522.4) | (361.9) | 74.3 | ||
Net cash (used in) provided by financing activities - discontinued operations | (0.3) | (0.4) | (0.3) | ||
Net cash (used in) provided by financing activities | (522.7) | (362.3) | 74.0 | ||
Effect of exchange rate changes on cash and cash equivalents | (4.2) | (1.8) | 4.0 | ||
Net (decrease) increase in cash and cash equivalents | (265.6) | (56.0) | 162.3 | ||
Add: Cash and cash equivalents of discontinued operations, beginning of period | 4.1 | 11.8 | 9.2 | ||
Less: Cash and cash equivalents of discontinued operations, end of period | — | (4.1) | (11.8) | ||
Cash and cash equivalents, beginning of year | 304.5 | 352.8 | 193.1 | ||
Cash and cash equivalents, end of year | $ 43.0 | $ 304.5 | $ 352.8 | ||
Year Ended | |||||
2022 | 2021 | 2020 | |||
Supplemental cash flow disclosures: | |||||
Interest paid | $ 68.1 | $ 65.0 | $ 84.3 | ||
Net income taxes refunded | (3.0) | (14.3) | (61.7) | ||
Non-cash investing activities: | |||||
Accrued purchase of property and equipment | $ 20.3 | $ 37.3 | $ 36.5 | ||
Accrued other intangible assets | 1.1 | 2.3 | 3.8 | ||
Right-of-use assets obtained in exchange for lease obligations | 86.8 | 39.5 | 24.4 | ||
Note receivable issued in exchange for the sale of business net assets | 425.9 | — | — | ||
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 Consolidated Statements of Operations, is as follows:
RECONCILIATION OF DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS TO | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||
(unaudited) | (unaudited) | ||||||||
Diluted earnings (loss) per share from continuing operations (GAAP) | $ 0.71 | $ (0.55) | $ (0.29) | $ (1.45) | |||||
Growth, reinvestment, restructuring programs & other | (1) | 0.33 | 0.48 | 1.51 | 1.50 | ||||
Central services and conveyed employee costs | (2) | — | 0.37 | 1.15 | 1.45 | ||||
Divestiture, acquisition, integration, and related costs | (3) | (0.08) | 0.02 | 0.24 | 0.07 | ||||
Loss on extinguishment of debt | (4) | 0.08 | — | 0.08 | 0.26 | ||||
Shareholder activism | (5) | 0.01 | 0.01 | 0.05 | 0.08 | ||||
Foreign currency (gain) loss on remeasurement of intercompany notes | (6) | (0.01) | (0.01) | 0.01 | (0.01) | ||||
Litigation matter | (7) | — | — | 0.01 | — | ||||
Mark-to-market adjustments | (8) | 0.08 | (0.07) | (1.33) | (0.66) | ||||
Tax indemnification | (9) | — | — | — | 0.03 | ||||
COVID-19 | (10) | — | 0.02 | — | 0.26 | ||||
Impairment | (11) | — | 0.16 | — | 0.16 | ||||
Change in regulatory requirements | (12) | — | — | — | — | ||||
Taxes on adjusting items | (0.14) | (0.20) | (0.26) | (0.75) | |||||
Adjusted diluted EPS from continuing operations (Non-GAAP) | $ 0.98 | $ 0.23 | $ 1.17 | $ 0.94 | |||||
During the three and twelve months ended
(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 |
(2) | 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
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 |
(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. During the three and twelve months ended |
(4) | For the three and twelve months ended |
(5) | The Company incurred fees related to shareholder activism which include directly applicable third-party advisory and professional service fees. |
(6) | The Company has foreign currency denominated intercompany loans and incurred foreign currency (gains) loss to re-measure the loans at the respective period ends. These charges are non-cash and the loans are eliminated in consolidation. |
(7) | For the twelve months ended |
(8) | 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 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. |
(9) | 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. |
(10) | During 2021, the Company incurred incremental expenses directly attributable to our response to the COVID-19 pandemic, which included additional protective equipment for employees and additional sanitation measures. These costs were approximately |
(11) | During 2021, the Company incurred |
(12) | The Company incurred regulatory compliance costs related to changes in nutrition labeling requirements. These costs included both consulting services and inventory write-downs. |
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 from continuing operations, adjusted EBIT from continuing operations, adjusted EBITDA from continuing operations, and adjusted EBITDAS from continuing operations for the three and twelve months ended
RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED NET | ||||||||||
(Unaudited, in millions) | ||||||||||
Three Months Ended | Twelve Months Ended | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||
Net income (loss) from continuing operations (GAAP) | $ 40.1 | $ (30.8) | $ (16.1) | $ (80.9) | ||||||
Growth, reinvestment, restructuring programs & other | (1) | 18.7 | 26.6 | 85.1 | 84.2 | |||||
Central services and conveyed employee costs | (2) | — | 20.5 | 65.0 | 81.6 | |||||
Divestiture, acquisition, integration, and related costs | (3) | (4.6) | 1.0 | 13.8 | 4.0 | |||||
Loss on extinguishment of debt | (4) | 4.5 | — | 4.5 | 14.4 | |||||
Shareholder activism | (5) | 0.6 | 0.6 | 2.7 | 4.6 | |||||
Foreign currency (gain) loss on remeasurement of intercompany notes | (6) | (0.6) | (0.3) | 0.8 | (0.5) | |||||
Litigation matter | (7) | — | — | 0.4 | — | |||||
Mark-to-market adjustments | (8) | 4.3 | (4.0) | (75.1) | (37.3) | |||||
Tax indemnification | (9) | — | (0.1) | — | 1.6 | |||||
COVID-19 | (10) | — | 0.9 | — | 14.5 | |||||
Impairment | (11) | — | 9.2 | — | 9.2 | |||||
Change in regulatory requirements | (12) | — | — | — | (0.1) | |||||
Less: Taxes on adjusting items | (7.5) | (10.5) | (15.0) | (42.2) | ||||||
Adjusted net income from continuing operations (Non-GAAP) | 55.5 | 13.1 | 66.1 | 53.1 | ||||||
Interest expense | 18.7 | 16.6 | 69.9 | 72.1 | ||||||
Interest income | (11.1) | (0.6) | (15.5) | (4.7) | ||||||
Income taxes (excluding COVID-19 income tax adjustments) | 13.1 | (6.3) | 8.3 | (23.2) | ||||||
Add: Taxes on adjusting items | 7.5 | 10.5 | 15.0 | 42.2 | ||||||
Adjusted EBIT from continuing operations (Non-GAAP) | 83.7 | 33.3 | 143.8 | 139.5 | ||||||
Depreciation and amortization | (13) | 36.3 | 36.5 | 143.2 | 148.8 | |||||
Adjusted EBITDA from continuing operations (Non-GAAP) | 120.0 | 69.8 | 287.0 | 288.3 | ||||||
Stock-based compensation expense | (14) | 2.6 | 3.4 | 13.3 | 11.7 | |||||
Adjusted EBITDAS from continuing operations (Non-GAAP) | $ 122.6 | $ 73.2 | $ 300.3 | $ 300.0 | ||||||
Net income (loss) margin from continuing operations | 4.0 % | (3.8) % | (0.5) % | (2.7) % | ||||||
Adjusted net income margin from continuing operations | 5.6 % | 1.6 % | 1.9 % | 1.8 % | ||||||
Adjusted EBIT margin from continuing operations | 8.4 % | 4.1 % | 4.2 % | 4.7 % | ||||||
Adjusted EBITDA margin from continuing operations | 12.0 % | 8.6 % | 8.3 % | 9.8 % | ||||||
Adjusted EBITDAS margin from continuing operations | 12.3 % | 9.0 % | 8.7 % | 10.2 % | ||||||
Location in | Three Months Ended | Twelve Months Ended | ||||||||||
Consolidated Statements of | 2022 | 2021 | 2022 | 2021 | ||||||||
(unaudited in millions) | ||||||||||||
(1) | Growth, reinvestment, restructuring | Other operating expense, net | $ 18.2 | $ 26.6 | $ 84.6 | $ 84.2 | ||||||
Cost of sales | 0.5 | — | 0.5 | — | ||||||||
(2) | Central services and conveyed employee | General and administrative | — | 15.9 | 50.1 | 63.5 | ||||||
Cost of sales | — | 4.6 | 14.9 | 18.1 | ||||||||
(3) | Divestiture, acquisition, integration, and | Cost of sales | — | 0.1 | 1.6 | 0.5 | ||||||
General and administrative | 3.4 | 0.9 | 19.1 | 3.4 | ||||||||
Other operating expense, net | (8.0) | — | (6.9) | 0.1 | ||||||||
(4) | Loss on extinguishment of debt | Loss on extinguishment of debt | 4.5 | — | 4.5 | 14.4 | ||||||
(5) | Shareholder activism | General and administrative | 0.6 | 0.6 | 2.7 | 4.6 | ||||||
(6) | Foreign currency (gain) loss on | (Gain) loss on foreign currency exchange | (0.6) | (0.3) | 0.8 | (0.5) | ||||||
(7) | Litigation matter | General and administrative | — | — | 0.4 | — | ||||||
(8) | Mark-to-market adjustments | Other expense (income), net | 4.3 | (4.0) | (75.1) | (37.3) | ||||||
(9) | Tax indemnification | Other expense (income), net | — | (0.1) | — | 1.6 | ||||||
(10) | COVID-19 | Cost of sales | — | 0.9 | — | 12.6 | ||||||
Income tax expense (benefit) | — | — | — | 1.9 | ||||||||
(11) | Impairment | Asset impairment | — | 9.2 | — | 9.2 | ||||||
(12) | Change in regulatory requirements | Cost of sales | — | — | — | (0.1) | ||||||
(13) | Depreciation included as an adjusting | Cost of sales | 0.6 | — | 0.6 | — | ||||||
(14) | Stock-based compensation expense | Other operating expense, net | 2.1 | 0.7 | 6.6 | 2.5 | ||||||
RECONCILIATION OF (Unaudited, in millions) | ||||
Twelve Months Ended | ||||
2022 | 2021 | |||
Cash flow (used in) provided by operating activities from continuing operations | $ (81.6) | $ 140.5 | ||
Less: Capital expenditures | (94.8) | (86.1) | ||
Free cash flow from continuing operations | $ (176.4) | $ 54.4 | ||
View original content:https://www.prnewswire.com/news-releases/treehouse-foods-inc-reports-fourth-quarter-and-full-year-2022-results-301744713.html
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