TreeHouse Foods, Inc. reported third quarter earnings of $0.58 per fully diluted share compared to $0.82 per fully diluted share reported for the third quarter of last year. The company reported adjusted earnings per share, excluding unusual items, of $0.70 compared to $0.85 in the prior year.
The company's 2012 third quarter results included several unusual items that affected the year-over-year quarterly comparison. The first item is a $0.12 per share expense of restructuring charges, including the previously announced restructuring of the company's soup operations and the closure of the Seaforth, Ontario, Canada facility. The remaining items are comprised of a $0.01 per share expense associated with the acquisition of substantially all of the assets of Naturally Fresh, Inc. and a $0.01 per share gain on the mark-to-market adjustment of the company's commodity agreements.
"Our sales in the quarter continue to show month to month variability as our customers aggressively manage their inventory needs. Sales in the quarter finished below our expectations, but this shortfall was a matter of timing and not a fundamental change in our business. In fact, our October sales set an all-time record and our order book for November looks very promising as well," said Sam K. Reed, chairman, president and chief executive officer, in a prepared statement. "This quarter we also successfully launched our single serve private label coffee initiative, and thus far both the customer and consumer feedback have been encouraging."
Adjusted operating earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation, and unusual items, or Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), reconciled to net income, the most directly comparable generally accepted accounting principles (GAAP) measure, appears on the attached schedule, was $74.8 million in the quarter, a 10.4 percent decrease compared to the prior year. Adjusted EBITDA was lower primarily due to the decrease in pre-tax income resulting from lower gross profit due to higher input costs, a decrease in volume, and a change in sales mix.
Net sales for the third quarter totaled $538.1 million compared to $528.1 million last year, an increase of 1.9 percent due to additional sales from the acquisition of Naturally Fresh as well as increased pricing to offset higher input and operational costs. Sales for the North American Retail Grocery segment increased 4.1 percent, sales for the Food Away From Home segment increased 13.1 percent compared to last year, while the Industrial and Export segment sales decreased 19.5 percent.
Selling, distribution, general and administrative expenses were $60.5 million for the quarter, a decrease of 2.9 percent from $62.3 million in the third quarter of 2011. The decrease was due primarily to lower distribution and delivery costs resulting from reduced volume, lower freight rates, and the efficiencies of last year's warehouse consolidation program, partially offset by the acquisition of Naturally Fresh.
Other operating expense in the quarter was $3.5 million compared to $1.7 million in the prior year. The current year expense is primarily due to restructuring costs related to our soup operations and the closure of the Seaforth facility.
Interest expense in the quarter was $12.8 million compared to $12.6 million last year.
Income tax expense decreased in the quarter to $7.4 million due to lower pretax income and a lower effective tax rate. The company's third quarter effective income tax rate of 25.6 percent was lower than last year's third quarter rate of 32.6 percent due to the impact of the repayment of certain intercompany debt, a decrease in the Canadian statutory tax rate and a decrease in state tax expense.
Net income for the quarter totaled $21.6 million compared to $30.4 million last year. Fully diluted earnings per share from continuing operations for the quarter were $0.58 per share compared to $0.82 per share last year. Excluding unusual items, adjusted earnings per share from continuing operations for the third quarter of 2012 was $0.70 compared to last year's third quarter adjusted earnings per share of $0.85.
