Illinois-based private brand manufacturing giant TreeHouse Foods shares fell nearly 12%, this past Thursday, after the company said it would restructure its operations, closing two facilities and partially closing another.
The manufacturer’s plan will close facilities in Indiana and Minnesota and shrink one in Alabama. The move will result 375 job cuts and cost the company around $44.5 million, according to a press release.
Two press releases detailed the moves.
TreeHouse Foods, Inc. Reports Second Quarter 2017 Results and Revises Full Year Guidance; Company Launches TreeHouse 2020 Restructuring Program
OAK BROOK, Ill., Aug. 3, 2017 — TreeHouse Foods, Inc. (THS) (NYSE: THS) today reported a second quarter GAAP loss per fully diluted share of $0.60 compared to GAAP earnings of $0.33 reported for the second quarter of 2016. The Company reported adjusted earnings per fully diluted share for the second quarter of $0.51 compared to adjusted earnings of $0.60 for the second quarter of 2016.
“Although we delivered adjusted earnings within the range of our second quarter guidance and we are seeing gross margin improvement, our recovery has been slower than we originally anticipated,” said Sam K. Reed, Chairman and Chief Executive Officer. “We continue to make great strides toward completing the integration of the Private Brands business and are pleased to have paid down over $470 million in debt since we closed the acquisition; however, adverse market conditions, pricing lag from commodity cost increases, and operating inefficiencies related to lower than anticipated volumes continued to present challenges in the second quarter.”
“It is clear that we are witnessing an evolution in the retail landscape, as digital technology and bricks and mortar compete for the attention of consumers in a slow to no growth food and beverage marketplace. As our customers seek growth in this environment by reinvesting in their corporate brands, we continue to believe that we are best positioned to capitalize on the opportunity. However, it is imperative that we as an organization return to our legacy levels of profitability,” said Mr. Reed. “As a result, we are launching the first phase of TreeHouse 2020, a comprehensive strategic blueprint that consists of aggressive actions to manage our category and customer portfolio and optimize our manufacturing and supply chain. By doing so, we believe we can improve our operating margin structure by approximately 300 basis points by the end of 2020,” Mr. Reed continued.
The Company today announced its TreeHouse 2020 restructuring program. Based on new data analytic capabilities and key insights recently visible as a result of the Company’s systems integration of Private Brands, TreeHouse 2020 is a multi-year plan to fully integrate the business and reduce its cost structure in order to invest in market-differentiated capabilities that will serve the rapidly evolving needs of its customers that are strategically focused and highly committed to their corporate brands.
The TreeHouse 2020 restructuring plan will be executed in multiple phases over the next several years. The key elements of Phase 1 actions include the closure of two manufacturing facilities and the downsizing of another as outlined in a separate press release issued today. TreeHouse expects that the restructuring charges associated with these three facilities will total $44.5 million, of which $29.7 million will be cash and $14.8 million will be non-cash.
TreeHouse Foods Announces Plans to Close Brooklyn Park, Minn. and Plymouth, Ind. Facilities; Removal of Non-Peanut Packaging Operations From Dothan, Ala. Facility
OAK BROOK, Ill., Aug. 3, 2017 — TreeHouse Foods, Inc. (THS) (NYSE: THS) today announced its intention to close facilities in Brooklyn Park, Minn., Plymouth, Ind., and transition non-peanut packaging operations out of Dothan, Ala. The decisions are part of TreeHouse 2020, the Company’s broad based restructuring plan to improve its competitive position and operating margin structure through a comprehensive program of category and customer portfolio management as well as manufacturing and supply chain optimization.
“The decisions to close these facilities are difficult ones given their impact on families and communities,” said Mr. Sam K. Reed, Chairman and CEO of TreeHouse. “However, despite the toll they exact, these measures are required if we are to remain competitive in a rapidly changing marketplace for packaged foods. In order to win in today’s marketplace, we must not only produce the finest quality at the lowest costs, but also fully utilize the capacity of our plants and the capability of our people in doing so.”
The Brooklyn Park, Minn. facility employs approximately 90 employees and produces boxed dinners and packaged side dishes. Production is expected to cease by the end of 2017.
The Plymouth, Ind. facility employs approximately 150 employees and produces banana peppers, jalapeños, pickles and pickle relish. Production is expected to cease by the end of 2017.
In Dothan, Ala. approximately 135 employees will be affected by the production transition over a 10 month period beginning in November of 2017.
The Company will provide outplacement support to employees whose positions are being eliminated.
Total costs related to the announced facility closures are expected to be approximately $44.5 million, of which approximately $29.7 million is expected to be in cash. Components of the charges include non-cash asset write-offs of approximately $14.8 million, employee-related costs of approximately $7.0 million, and other closure costs of approximately $22.7 million.