OAK BROOK, ILL. — Net income at TreeHouse Foods, Inc. in the second quarter ended June 30 was $18,565,000, equal to 51c per share on the common stock, down 5% from $19,511,000, or 54c per share, in the second quarter of fiscal 2012. The most recent quarterly results were affected adversely by a 14c-per-share expense related to the restructuring of the company’s soup operations and the closing of its salad dressing plant in Seaforth, Ont. The fiscal 2013 second-quarter results also included a 1c-per-share expense associated with the acquisition of Cains Foods.

Adjusted EBITDA, meanwhile, increased to $73,090,000 from $69,137,000.

Sales for the most recent quarter were $526,346,000, down narrowly from $527,421,000.

“Despite the volume challenges across the food industry, we continued to make a great deal of progress in the second quarter and are encouraged by our successes, particularly in our single-service beverage business, which was a key driver for our North American Retail Grocery segment,” said Sam K. Reed, chairman, president and chief executive officer. “Internally, our teams remain steadfast in the pursuit of operating simplification, gross margin improvement and distribution system savings. As a result, all three of our business segments posted direct operating income improvements in both dollars and percentages, a testament to our ability to deliver savings across the whole of TreeHouse.”

Operating income within TreeHouse’s North American Retail Grocery business rose 11% to $61,140,000 from $54,899,000, while sales increased 1% to $375,744,000 from $371,500,000. The sales gain reflected a 0.7 percentage point increase in volume/mix and a 0.4 percentage point increase from acquisitions.

“Single-serve hot beverages made up most of the increase while sales of our traditional grocery products, such as pickles, non-dairy creamers, sauces, dressings and hot cereal, were essentially flat as a group compared to last year,” Dennis Riordan, executive vice-president and chief financial officer, said during an Aug. 8 conference call with analysts. “This pretty much matches the overall volumes of U.S. retail. The only products with noticeable sales decreases came from sugar-free powdered beverages, which continue to feel the pressure of liquid beverage enhancers and a generally cooler summer in the Midwest and East that may also be affecting overall consumption.”

Operating income within Food Away From Home was $11,958,000, up 14% from $10,479,000. Sales were down 3% at $86,675,000, driven in large part by a volume/mix drop in the aseptic and pickle categories.
Looking ahead to the remainder of fiscal 2013, Mr. Reed said TreeHouse is pleased with the progress its operating team has made in finding efficiencies in manufacturing and distribution.

“Although sales volumes have been softer than we originally anticipated, we now expect that as the year progresses, the benefits of our simplification and cost reduction programs will fully offset the lighter sales,” he said. “As a result, we are raising and tightening our full-year adjusted earnings-per-share guidance to a range of $3.07 to $3.12. Our updated guidance assumes that the improvement will occur primarily in the fourth quarter, and does not include the effect of the Associated Brands acquisition. Upon completion, we will update our guidance. However, we do not expect the transaction will have a material impact on 2013 due to the expected late third-quarter timing of the closing.”

For the six months ended June 30 net income was $41,539,000, or $1.14 per share, down narrowly from $41,585,000, or $1.15 per share, in the same period of fiscal 2012. Net sales were $1,066,456,000, up slightly from $1,051,232,000.

In addition to the release of its financials, TreeHouse on Aug. 8 announced it has acquired Associated Brands GP Corp., Mississauga, Ont., for C$187 million ($180 million) in cash from the private equity firm TorQuest Partners. Associated Brands is a manufacturer of private label dry packaged drink mixes, specialty tea, hot chocolate, dessert mixes, soups, side dishes, sweeteners and oatmeal.

Associated Brands has three manufacturing facilities in Delta, B.C.; Medina, N.Y.; and Toronto. The company employs 650 and has annual sales of approximately $200 million.

Mr. Riordan said the transaction is expected to be accretive to fiscal 2013 annual results by 14c to 16c, but likely it will have an immaterial effect on 2013 earnings. The company expects to close the transaction in the third quarter and will finance it with borrowings from TreeHouse’s current revolving credit facility.

“After the transaction closes, we expect our leverage ratio to be in the range of about 3.3 times debt to pro forma EBITDA,” he said. “That will lease us plenty of dry powder to pursue additional attractive transactions as we can lever up to 4 times debt to pro forma EBITDA to make acquisitions.”