TreeHouse Foods, Inc. Reports Second Quarter 2014 Results

          TreeHouse Foods, Inc. Reports Second Quarter 2014 Results

HIGHLIGHTS

- Second quarter adjusted EPS increased 29.2% from prior year to $0.84 in 2014

- Total net sales grew 19.3%, driven by acquisitions and volume/mix; all
segments posted improvement

- North American Retail Grocery volume/mix grew 6.0% in the second quarter

- Company raises full year adjusted EPS guidance to $3.60-$3.75 due to
acquisitions

PR Newswire

OAK BROOK, Ill., Aug. 7, 2014

OAK BROOK, Ill., Aug. 7, 2014 /PRNewswire/ --TreeHouse Foods, Inc. (NYSE:
THS) today reported second quarter earnings of $0.57 per fully diluted share
compared to $0.50 per fully diluted share reported for the second quarter of
last year. The Company reported that adjusted earnings per share increased
29.2% in the second quarter to $0.84 compared to $0.65 in the prior year,
excluding the items described below.

The Company's 2014 second quarter results included four items noted below that
affected the year-over-year quarterly comparison. The first item is a $0.22
per share expense for acquisition, integration and related costs. The second
item is a $0.10 per share expense related to the refinancing of the Company's
debt. The third item is a $0.01 per share expense related to the previously
announced restructuring of the Company's soup operations. The last item is a
$0.06 per share gain on the foreign currency translation of intercompany
notes.

ITEMS AFFECTING DILUTED EPS COMPARABILITY:
                                          Three Months Ended  Six Months Ended
                                          June 30             June 30
                                          2014       2013     2014      2013
                                          (unaudited)         (unaudited)
Diluted EPS as reported                   $ 0.57     $ 0.50   $ 0.95    $ 1.11
Acquisition, integration and related      0.22       0.01     0.27      0.01
costs
Debt refinancing costs                    0.10       -        0.42      -
Restructuring/facility consolidation      0.01       0.14     0.03      0.28
costs
Foreign currency gain on translation of   (0.06)     -        (0.03)    -
intercompany notes
Mark-to-market adjustments                -          -        -         (0.01)
Adjusted EPS                              $ 0.84     $ 0.65   $ 1.64    $ 1.39



"The strength of our second quarter results is a testament to our
well-executed private label strategy and our commitment to providing customers
with a portfolio of products and services that consumers demand," said Sam K.
Reed, Chairman, President and Chief Executive Officer. "We showed very strong
growth in our Retail Grocery segment and delivered positive sales growth in
pickles, salad dressings and beverages, as we posted triple-digit
year-over-year growth in our single serve coffee business."

Mr. Reed continued,"We are particularly pleased to announce that we have
successfully developed new single serve coffee products that will work in both
existing and next generation coffee makers manufactured by the leading
supplier of personal at-home brewing systemsin the United States. We believe
that our introduction of a private label compatible cup is exactly what
customers and consumers want: choice, product variety, customization and price
competition. We remain confident that innovation in the category will provide
us with the avenue for new products and continued strong growth in the single
serve beverage category, and we expect to begin shipping in the fourth quarter
of this year."

Adjusted operating earnings before interest, taxes, depreciation,
amortization, and non-cash stock based compensation, or Adjusted EBITDA (a
reconciliation to net income, the most directly comparable GAAP (generally
accepted accounting principles in the United States) measure, appears on the
attached schedule), was $87.2 million in the second quarter, a 19.4% increase
compared to the prior year. Adjusted EBITDA was higher due to acquisitions
and improved volume/mix.

Net sales for the second quarter totaled $628.0 million compared to $526.3
million last year, an increase of 19.3%, largely due to sales from
acquisitions and favorable volume/mix in each of our segments, partially
offset by unfavorable foreign exchange. Compared to last year, sales in the
second quarter for the North American Retail Grocery segment increased 18.2%,
sales for the Food Away From Home segment increased 13.6% and sales for the
Industrial and Export segment increased 33.1%.

Reported gross margins increased to 21.6% in the second quarter this year from
20.8% last year. The improvement in margins is due in part to the
year-over-year reduction of costs associated with restructurings and facility
consolidations that are included in cost of sales. After adjusting for these
items, cost of sales as a percentage of net sales was flat year-over-year, as
an improved sales mix and operational efficiencies help to offset the impact
of lower margin contribution from recent acquisitions.

Selling, distribution, general and administrative expenses increased $19.7
million in the second quarter this year, or 32.6%, to $80.2 million from $60.5
million in the same period last year. Included in the increase were net
additional costs of $7.0 million associated with acquisitions and
integrations. The remaining increase was primarily due to increased
distribution and delivery costs resulting from higher volume and general
business growth, increased marketing spend and increased ongoing costs
associated with acquisitions. After adjusting for the costs associated with
acquisitions and integrations, selling, distribution, general and
administrative expenses as a percentage of net sales was 11.6% in the current
quarter versus 11.4% last year.

Other expense was $10.8 million for the second quarter, a decrease of $2.3
million from $13.1 million in the same period last year. This decrease was due
to lower interest expense of $3.3 million, driven by lower average interest
rates as a result of the Company's debt refinancing activities, and gains from
foreign exchange of $4.1 million. Partially offsetting this decrease in
other expense was the loss on extinguishment of debt related to the
refinancing of the Company's previously issued 7.75% notes due 2018 ("2018
Notes"), which were extinguished during the first six months of 2014.

Income tax expense increased in the second quarter to $12.0 million. The
Company's second quarter effective income tax rate increased to 35.5% from the
2013 second quarter rate of 33.4% due to an increase in state tax expense,
acquisition related expenses that are not deductible for tax purposes and the
tax impact of a shift in revenue between jurisdictions.

Net income for the second quarter totaled $21.8 million compared to $18.6
million last year.

SEGMENT RESULTS

The Company has three reportable segments:

1.North American Retail Grocery – This segment sells branded and private
    label products to customers within the United States and Canada. These
    products include non-dairy powdered creamers; sweeteners; condensed, ready
    to serve and powdered soups, broths and gravies; refrigerated and shelf
    stable salad dressings and sauces; pickles and related products; salsa and
    Mexican sauces; jams and pie fillings; aseptic products; liquid non-dairy
    creamer; powdered drinks; single serve hot beverages; specialty teas; hot
    and cold cereals; baking and mix powders; macaroni and cheese; and skillet
    dinners.
2.Food Away From Home – This segment sells non-dairy powdered creamers;
    sweeteners; pickles and related products; Mexican sauces; refrigerated and
    shelf stable salad dressings; aseptic products; hot cereals; powdered
    drinks; and single serve hot beverages to foodservice customers, including
    restaurant chains and food distribution companies, within the United
    States and Canada.
3.Industrial and Export – This segment includes the Company's co-pack
    business and non-dairy powdered creamer sales to industrial customers for
    use in industrial applications, including products for repackaging in
    portion control packages and for use as ingredients by other food
    manufacturers; baking and mix powders; pickles and related products;
    refrigerated and shelf stable salad dressings; Mexican sauces; soup and
    infant feeding products; hot cereals; powdered drinks; single serve hot
    beverages; and specialty teas. Export sales are primarily to industrial
    customers outside of North America.

The direct operating income for the Company's segments is determined by
deducting manufacturing costs from net sales and deducting direct operating
costs, such as freight to customers, commissions, and direct selling and
marketing expenses. Indirect sales and administrative expenses, including
restructuring charges and other corporate costs, are not allocated to the
business segments as these costs are managed at the corporate level.

North American Retail Grocery net sales for the second quarter increased 18.2%
to $444.2 million from $375.7 million during the same quarter last year,
driven by a 13.5% increase from acquisitions and a 6.0% increase in
volume/mix, partially offset by the unfavorable impact from foreign exchange.
The Company posted volume gains in the beverages (predominantly single serve
hot beverages), pickles and dressings categories that were partially offset by
volume decreases in the soup category. The volume/mix increase was driven in
large part by the continued success of the single serve hot beverages
program. Direct operating income margin in the second quarter increased from
16.3% in 2013 to 16.5% in 2014, as the volume growth of higher margin
products, specifically single serve hot beverages, and cost savings from
operating efficiencies more than offset the lower margin contribution from
acquisitions.

Food Away From Home segment net sales for the second quarter increased 13.6%
to $97.3 million from $85.7 million during the same quarter last year, due to
a 13.6% increase from acquisitions. Slight increases in volume/mix and
pricing were offset by decreases in foreign currency fluctuations. Volume/mix
was flat in the quarter as volume growth in the beverages (primarily single
serve hot beverages) and aseptic categories were partially offset by
reductions in the pickles and dressings categories. Direct operating income
margin in the second quarter decreased from 14.0% in 2013 to 12.4% in 2014 due
to the impact of lower margin sales from the Cains Foods and Associated Brands
acquisitions and the unfavorable impact of foreign exchange.

Industrial and Export segment net sales for the second quarter increased 33.1%
to $86.4 million from $64.9 million during the same quarter last year, largely
driven by a 25.6% increase from acquisitions and a 8.7% increase in
volume/mix, offset in part by reduced pricing. The volume/mix increase was
primarily driven by volume growth in the beverage enhancers category. Direct
operating income margin in the second quarter decreased from 20.8% in 2013 to
15.6% in 2014 primarily due to acquisition and integration costs that
increased cost of sales as a percentage of net sales. The remaining increase
was due to a shift in sales mix to lower margin products from our legacy
business and acquisitions.

OUTLOOK FOR 2014

The Company raised its full year 2014 adjusted earnings per share guidance by
$0.10 to $0.15 to a range of $3.60 to $3.75, reflecting the accretion from the
recently completed acquisitions of Flagstone Foods and Protenergy Natural
Foods. The 2014 earnings outlook is the Company's best estimates at this
time, and is subject to the finalization of asset valuation work on goodwill
and amortization of intangibles.

With regard to the outlook for the year, Mr. Reed said, "We are pleased that
our legacy businesses continue to perform in line with our original
expectations, and are delighted to increase our full year estimates to include
our most recent additions – Protenergy Natural Foods and Flagstone Foods. We
are looking forward to delivering another year of record sales and earnings.
Given our strong cash flow and our prudent capital structure, we will continue
to pursue new branches for our TreeHouse in the quarters to come."

COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION

The adjusted earnings per share data contained in this press release reflects
adjustments to reported earnings per share data to eliminate the net expense
or net gain related to items identified in the above chart. This information
is provided in order to allow investors to make meaningful comparisons of the
Company's operating performance between periods and to view the Company's
business from the same perspective as Company management. Because the Company
cannot predict the timing and amount of charges associated with items such as
acquisition, integration and related costs, or facility closings and
reorganizations, management does not consider these costs when evaluating the
Company's performance, when making decisions regarding the allocation of
resources, in determining incentive compensation for management, or in
determining earnings estimates. These costs are not recorded in any of the
Company's operating segments. Adjusted EBITDA represents adjusted net income
before interest expense, income tax expense, depreciation and amortization
expense, and non-cash stock based compensation expense. Adjusted EBITDA is a
performance measure used by management, and the Company believes it is
commonly reported and widely used by investors and other interested parties,
as a measure of a company's operating performance. This non-GAAP financial
information is provided as additional information for investors 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. A full
reconciliation table between reported net income for the three and six month
periods ended June 30, 2014 and 2013 calculated according to GAAP and Adjusted
EBITDA is attached. 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.

CONFERENCE CALL WEBCAST

A webcast to discuss the Company's second quarter earnings will be held at
9:00 a.m. (Eastern Time) today and may be accessed by visiting the "Investor
Overview" page through the "Investor Relations" menu of the Company's website
at http://www.treehousefoods.com.

ABOUT TREEHOUSE FOODS

TreeHouse is a food manufacturer servicing primarily the retail grocery and
foodservice distribution channels. Our products include non-dairy powdered
creamers and sweeteners; condensed, ready to serve and powdered soups;
refrigerated and shelf stable salad dressings and sauces; powdered drink
mixes; single serve hot beverages; specialty teas; hot and cold cereals;
macaroni and cheese, skillet dinners, and other value-added side dishes and
salads; salsa and Mexican sauces; jams and pie fillings; pickles and related
products; aseptic sauces; and liquid non-dairy creamer. We believe we are the
largest manufacturer of pickles and non-dairy powdered creamer in the United
States, and the largest manufacturer of private label salad dressings,
powdered drink mixes, and instant hot cereals in the United States and Canada,
based on sales volume.

FORWARD LOOKING STATEMENTS

This press release contains "forward-looking statements." Forward-looking
statements include all statements that do not relate solely to historical or
current facts, and can generally be identified by the use of words such as
"may," "should," "could," "expects," "seek to," "anticipates," "plans,"
"believes," "estimates," "intends," "predicts," "projects," "potential" or
"continue" or the negative of such terms and other comparable terminology.
These statements are only predictions. The outcome of the events described in
these forward-looking statements is subject to known and unknown risks,
uncertainties and other factors that may cause the Company or its industry's
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievement expressed or implied by these forward-looking statements.
TreeHouse's Form 10-K for the year ended December 31, 2013 and other filings
with the SEC, discuss some of the factors that could contribute to these
differences. 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 presentation. The Company 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 STATEMENTS OF INCOME
(In thousands, except per share data)
                              Three Months Ended  Six Months Ended
                              June 30               June 30
                              2014       2013       2014          2013
                              (unaudited)         (unaudited)
Net sales                    $627,960   $526,346   $1,246,863    $1,066,456
Cost of sales                492,283    416,778    978,195       842,716
Gross profit                 135,677    109,568    268,668       223,740
Operating expenses:
 Selling and distribution   39,594     31,394     77,611        63,796
 General and administrative 40,610     29,106     74,378        56,579
 Amortization expense        10,532     8,227      20,566        16,726
 Other operating expense     365        (136)      1,238         1,282
(income), net
 Total operating        91,101     68,591     173,793       138,383
expenses
Operating income             44,576     40,977     94,875        85,357
Other expense (income):
 Interest expense            9,001      12,230     19,874        25,008
 Interest income             (413)      (322)      (581)         (1,000)
(Gain) loss on foreign        (4,099)    841        (1,148)       480
currency exchange
 Loss on extinguishment of   5,259      -          21,944        -
debt
 Other expense (income),     1,088      345        1,003         (368)
net
 Total other expense   10,836     13,094     41,092        24,120
Income before income taxes   33,740     27,883     53,783        61,237
Income taxes                 11,981     9,318      17,702        19,698
Net income                    $ 21,759  $ 18,565  $   36,081  $   41,539
Weighted average common
shares:
 Basic                      36,961     36,337     36,822        36,323
 Diluted                    37,990     37,373     37,861        37,312
Net earnings per common
share:
 Basic                       $0.59      $0.51      $0.98         $1.14
 Diluted                     $0.57      $0.50      $0.95         $1.11
Supplemental Information:
Depreciation and Amortization $25,651    $28,254    $52,657       $55,138
Stock-based compensation      $5,519     $3,690     $9,699        $7,108
expense, before tax
Segment Information:
North American Retail Grocery
Net Sales                     $444,244   $375,744   $896,655      $761,825
Direct Operating Income       $73,150    $61,140    $148,726      $126,449
Direct Operating Income       16.5%      16.3%      16.6%         16.6%
Percent
Food Away From Home
Net Sales                     $97,285    $85,675    $185,960      $167,488
Direct Operating Income       $12,054    $11,958    $21,543       $22,858
Direct Operating Income       12.4%      14.0%      11.6%         13.6%
Percent
Industrial and Export
Net Sales                     $86,431    $64,927    $164,248      $137,143
Direct Operating Income       $13,476    $13,509    $28,926       $25,914
Direct Operating Income       15.6%      20.8%      17.6%         18.9%
Percent



The following table reconciles the Company's net income to Adjusted EBITDA for
the three and six months ended June 30, 2014 and 2013:

TREEHOUSE FOODS, INC.
RECONCILIATION OF REPORTED EARNINGS TO ADJUSTED EBITDA
(In thousands)
                                    Three Months Ended  Six Months Ended
                                    June 30             June 30
                                    2014      2013      2014        2013
                                    (unaudited)         (unaudited)
Net income as reported              $ 21,759  $ 18,565  $  36,081  $  41,539
Interest expense                    9,001     12,230    19,874      25,008
Interest income                     (413)     (322)     (581)       (1,000)
Income taxes                        11,981    9,318     17,702      19,698
Depreciation and amortization ^(1)  25,152    21,065    48,931      42,442
Stock-based compensation expense    5,519     3,690     9,699       7,108
Foreign currency gain on
translation of intercompany         (3,213)   -         (1,401)     -
notes^(2)
Mark-to-market adjustments ^(3)     141       274       24          (499)
Acquisition, integration and        11,580    480       14,142      480
related costs ^(4)
Debt refinancing costs ^(5)         5,355     -         22,114      -
Restructuring/facility              371       7,790     1,238       15,138
consolidation costs ^(6)
Adjusted EBITDA                     $ 87,233  $ 73,090  $ 167,823   $ 149,914

    Depreciation and amortization excludes $0.5 million and $3.7 million of
    accelerated depreciation charges included in the acquisition, integration
    and related costs line of the Adjusted EBITDA reconciliation for the three
(1) and six months ended June 30, 2014, respectively. Depreciation and
    amortization excludes $7.2 million and $12.7 million of accelerated
    depreciation charges included in the restructuring/facility consolidation
    costs line of the Adjusted EBITDA reconciliation for the three and six
    months ended June 30, 2013, respectively.
    Foreign currency gain on translation of cash and notes included in (Gain)
(2) loss on foreign currency exchange totaled $3.2 million and $1.4 million
    for the three and six months ended June 30, 2014, respectively.
    Mark-to-market adjustments included in Other expense (income), net totaled
    $0.1 million and $24 thousand for the three and six months ended June 30,
(3) 2014, respectively. Mark-to-market adjustments included in Other expense
    (income), net totaled $0.3 million and ($0.5) million for the three and
    six months ended June 30, 2013, respectively.
    Acquisition, integration and related costs included in General and
    administrative expense totaled $7.4 million and $8.3 million for the three
    and six months ended June 30, 2014, respectively. Acquisition,
    integration and related costs included in Selling and distribution totaled
(4) $0.1 million for the three and six months ended June 30, 2014.
    Acquisition, integration and related costs included in cost of sales
    totaled $4.1 million and $5.7 million for the three and six months ended
    June 30, 2014, respectively. Acquisition and integration costs included
    in General and administrative expense totaled $0.5 million for the three
    and six months ended June 30, 2013.
    Debt refinancing costs included in Loss on extinguishment of debt totaled
    $5.3 million and $22.0 million for the three and six months ended June 30,
(5) 2014, respectively. Debt refinancing costs included in General and
    administrative expense totaled $0.1 million and $0.2 million for the three
    and six months ended June 30, 2014, respectively.
    Restructuring/facility consolidation costs included in Other operating
    expense (income), net totaled $0.4 million and $1.2 million for the three
    and six months ended June 30, 2014, respectively. Restructuring/facility
(6) consolidation costs included in Cost of sales totaled $7.8 million and
    $13.7 million for the three and six months ended June 30, 2013,
    respectively. Restructuring/facility consolidation costs included in
    Other operating expense (income), net totaled $0 and $1.4 million for the
    three and six months ended June 30, 2013, respectively.



The following table presents the Company's change in net sales by segment for
the three and six months ended June 30, 2014 vs. 2013:

Three months ended June 30,
2014:
                                North American    Food Away      Industrial
                                Retail Grocery    From Home      and Export
                                (unaudited)       (unaudited)    (unaudited)
Volume/mix                      6.0            %  0.1         %  8.7         %
Pricing                         (0.3)             0.7            (1.1)
Acquisition                     13.5              13.6           25.6
Foreign currency                (1.0)             (0.8)          (0.1)
Total change in net sales       18.2           %  13.6        %  33.1        %
Six months ended June 30,
2014:
                                North American    Food Away      Industrial
                                Retail Grocery    From Home      and Export
                                (unaudited)       (unaudited)    (unaudited)
Volume/mix                      6.0            %  (1.1)       %  2.0         %
Pricing                         -                 0.6            (1.0)
Acquisition                     12.8              12.4           19.0
Foreign currency                (1.1)             (0.9)          (0.2)
Total change in net sales       17.7           %  11.0        %  19.8        %

SOURCE TreeHouse Foods, Inc.

Website: http://www.treehousefoods.com
Contact: Investor Relations, 708.483.1300 Ext 1331
 
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