HIGHLIGHTS

- Q4 net sales grew 7.3% year-over-year; adjusted earnings increase 22.2%

- Full year net sales grew 29.6%; adjusted earnings up 22.7% to $1.62

- Debt reduced $76.1 million or 13.8% in the quarter

WESTCHESTER, Ill., Feb. 12 /PRNewswire-FirstCall/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported a substantial increase in adjusted quarterly and full year earnings compared to last year, after one-time items. On an adjusted basis, as described below, fully-diluted earnings per share from continuing operations in the fourth quarter improved 22.2% to $0.55 compared to $0.45 last year. For the full year, adjusted earnings per share from continuing operations increased 22.7% to $1.62 compared to $1.32 last year. The 22.7% improvement in results was due primarily to having a full year of E.D. Smith sales and profits in 2008 compared to only 75 days in 2007. On a reported basis, income from continuing operations was $0.22 per diluted share for the quarter ended December 31, 2008, compared to $0.46 per diluted share last year, reflecting unusual one-time items. For the full year, reported earnings per share from continuing operations were $0.91 compared to $1.33 last year including unusual one-time items.

The reported results for the fourth quarter and full year included two large mark to market items, both of which were non-cash and non-operating. The first was the adjustment of an intercompany loan with the Company's E.D. Smith subsidiary to reflect current currency rates and the second was the mark to market adjustment of an interest rate swap agreement to current LIBOR rates. The interest rate adjustment will reverse over the remaining life of the 32 month agreement as a non-cash, non-operating gain. In addition, the Company reported non-recurring costs of $0.01 per share associated with the Company's closed Portland, Oregon pickle plant and $0.05 per share in costs associated with unfavorable factory variances resulting from the Company's third quarter inventory reduction programs. The reported results for last year include the net effect of adjustments from the acquisition of the E.D. Smith Income Trust ('E.D. Smith') totaling approximately $0.01 per share.

    ITEMS AFFECTING DILUTED EPS COMPARABILITY:

                                     Three Months Ended  Twelve Months Ended
                                         December 31       December 31
                                        2008     2007     2008     2007
                                        (unaudited)        (unaudited)
    EPS from continuing
     operations as reported            $0.22    $0.46      $0.91    $1.33
    Plant closing costs                 0.01                0.29
    Loss on intercompany
     note translation                   0.13                0.21
    Mark to market adjustment
     on interest rate swap              0.14                0.14
    One time factory costs
     from inventory reduction
     program                            0.05                0.05
    E.D. Smith acquisition-
     related costs                              (0.01)      0.01    (0.01)
    Non-cash adjustment to
     value of license and other            -        -       0.01      -
    Adjusted EPS                       $0.55    $0.45      $1.62    $1.32

Commenting on the results, Sam K. Reed, Chairman and CEO, said, 'The past year was the most challenging the packaged foods industry has faced in decades, yet we overcame the extreme inflation and volatility of input costs through targeted pricing actions and internal cost controls. We generated top-line growth in key product categories including soup, salsa, salad dressing and non-dairy creamer and also expanded distribution of our E.D. Smith and San Antonio Farms acquisitions. Despite the challenges, we exceeded our original expectations and outperformed the food industry.'

Adjusted operating earnings before interest, taxes, depreciation, amortization and unusual items (Adjusted EBITDA, reconciled to net income, the most directly comparable GAAP measure, appears on the attached schedule) decreased slightly to $44.8 million in the fourth quarter compared to $46.2 million in the same period last year. The small decrease in the quarter reflected the negative effect of Canadian currency rates on E.D. Smith cross border transactions. Full year Adjusted EBITDA was $157.0 million compared to $137.6 million last year, an increase of 14.1%.

Net sales for the fourth quarter totaled $398.1 million, an increase of 7.3% over the fourth quarter of 2007, with 3.6% coming from legacy sales and the balance from having a full quarter of E.D. Smith sales in 2008. Reported gross margins for the fourth quarter decreased 40 basis points to 20.1%, but this includes the negative effect of under-absorbed factory costs of $2.5 million associated with our now completed inventory reduction programs. Excluding those one-time fourth quarter costs, gross margins would have been slightly above last year's 20.5% gross margins. After experiencing significant margin erosion early in the year due to very high input costs, we have now seen two quarters of margin improvement, and have returned to last year's fourth quarter gross profit margins.

Selling, distribution, general and administrative expenses were $43.8 million for the quarter, a decrease of 2.2% from $44.8 million in the fourth quarter of 2007. The decrease was due to lower distribution expenses as energy costs dropped significantly in the quarter, partially offset by higher administrative costs associated with the growth of the Company from last year. Selling, distribution, general and administrative expenses as a percent of sales improved to 11.0% of sales in the fourth quarter of 2008 compared to 12.1% last year due principally to higher average selling prices and synergies from the E.D. Smith acquisition.

Other operating expense for the fourth quarter of 2008 was $1.3 million and primarily reflects the ongoing maintenance costs associated with the Company's closed Portland, Oregon pickle plant. The previously announced plant closure took place in June, 2008 in order to better balance production capacity.

Interest expense in the quarter was $5.8 million compared to $9.2 million last year as lower debt from strong cash flow and lower interest rates contributed to the decline. The Company ended the quarter with $475.2 million of long term debt compared to $620.5 million last year, with the significant reduction coming from operating cash flows and the Company's actions to reduce working capital during 2008. In addition, the Company received an insurance reimbursement of $20.0 million in the quarter associated with the previously announced fire at the Company's New Hampton, Iowa plant in the first quarter. The Company's fourth quarter effective income tax rate of 20.5% was significantly lower than last year's tax rate of 35.8% due to the financing structure established for the E.D. Smith Canadian and U.S. businesses. The fourth quarter effective tax rate was lower than the full year run rate of 27.6% due to the low level of pre-tax earnings in the quarter resulting from the mark to market adjustments.

Net income from continuing operations for the fourth quarter totaled $7.1 million compared to $14.3 million last year. Fully-diluted earnings per share from continuing operations for the quarter were $0.22 per share compared to $0.46 per share last year.