Nov. 3, 2009 (PR Newswire) -- WESTCHESTER, Ill., Nov. 3 /PRNewswire-FirstCall/ -- TreeHouse Foods, Inc. (NYSE: THS) today reported a strong increase in third quarter earnings compared to last year driven by higher sales in its North American Retail Grocery and Food Away From Home businesses and overall improved gross margins. Earnings for the quarter were $0.85 per fully-diluted share compared to $0.35 per fully diluted share in the third quarter of last year. On an adjusted basis, as described below, fully-diluted earnings per share improved 31.7% to $0.54 compared to $0.41 last year. Improved gross margins in all segments of the business contributed to the improvement.

The reported results for the third quarter included two unusual items that affected quarterly and nine-month comparisons. The first item relates to a gain of $13.6 million, ($0.26 per share) in the quarter resulting from the insurance reimbursement for the replacement of fixed assets at our New Hampton, Iowa facility. The damage was sustained last year and all related insurance matters were settled during the third quarter. The second item relates to the adjustment of the intercompany loan with E.D. Smith to reflect current exchange rates. This non-cash adjustment increased reported earnings by $2.3 million ($0.05 per share) in the third quarter of 2009, but had an insignificant effect on the third quarter results for 2008. Excluding these two items results in adjusted earnings per share on a fully diluted basis of $0.54 in 2009 compared to $0.41 in 2008.

ITEMS AFFECTING DILUTED EPS COMPARABILITY:

Three Months      Nine Months
Ended             Ended
September 30      September 30
------------      ------------
2009     2008     2009     2008
----     ----     ----     ----
(unaudited)       (unaudited)

Diluted EPS as reported                 $0.85    $0.35    $1.83    $0.68
Gain on insurance settlement for fixed
assets                                 (0.26)       -    (0.26)       -
Plant closing costs                         -     0.02     0.01     0.29
Integration costs                           -     0.01        -     0.02
Mark to market adjustment on interest
rate swap                                  -        -    (0.03)       -
(Gain) loss on intercompany note
translation                            (0.05)       -    (0.09)    0.06
Non-cash adjustment to value of license
and other                                  -     0.03        -     0.02
---     ----      ---     ----

Adjusted diluted EPS                    $0.54    $0.41    $1.46    $1.07
=====    =====    =====    =====

Commenting on the results, Sam K. Reed, Chairman and CEO, said, "We had another very good quarter of unit growth in our Retail segment, and showed that new products and increased customer penetration can help to overcome the difficult market conditions in Food Away from Home. Our margins remained strong as we focused on internal opportunities in purchasing and manufacturing efficiencies. We continue to offer the right products at the right value and at the right time to our customers and their consumers."

Adjusted operating earnings before interest, taxes, depreciation, amortization and other non-cash or unusual items (Adjusted EBITDA, reconciled to net income, the most directly comparable GAAP measure, appears on the attached schedule) increased 20.0% to $48.1 million in the quarter compared to $40.1 million in the same period last year. The increase is the result of sales growth and improved gross margins in the quarter.

Net sales for the third quarter totaled $378.9 million compared to $374.6 million last year. Excluding currency effects, sales would have increased by 2.1%. Retail grocery sales increased 7.7% compared to last year's quarter, despite year over year currency pressures as the Company's private label offerings continue to realize share gains across most product categories. The Food Away From Home segment sales were up 2.3% compared to last year as new products and increased distribution points offset the negative trends in the food away from home marketplace. Sales in the Industrial and Export segment declined 19.3% compared to the prior year due to lower co-pack sales and a decrease in export sales due to the strength of the U.S. dollar. Total gross margins for the quarter improved by 180 basis points to 21.3% compared to 19.5% last year, continuing the year over year gross margin improvement achieved in the first half of 2009. The improvement was due to carry over pricing to offset very high input costs previously incurred, as well as productivity gains. The margin improvement was evident in most product categories, led by pickles, non-dairy creamer, salad dressings and soup.

Selling, distribution, general and administrative expenses were $46.4 million for the quarter, an increase of 3.1% from $45.0 million in the third quarter of 2008. The increase was due principally to higher incentive compensation expense reflecting the better than planned performance in 2009, and is generally consistent as a percent of revenue with the spending level in 2008.

Other operating income for the quarter was $14.4 million compared to $0.8 million in expense last year. In 2009 we recognized the gain on the insurance reimbursement for fixed assets which were replaced at our New Hampton, Iowa plant. Last year, we incurred $0.7 million in the quarter for costs associated with the closure of the Portland, Oregon pickle plant.

Interest expense in the quarter was $4.8 million compared to $6.5 million last year as lower interest rates and lower debt levels due to strong operating cash flows over the past year contributed to the decline. The Company's third quarter effective income tax rate of 35.3% was higher than last year's tax rate of 29.9% due to significantly higher U.S. taxable income, a reduced benefit from intercompany interest expense due to lower Canadian exchange rates and incremental Canadian taxes related to the closure of Cambridge, Ontario salad dressing plant.

Net income for the quarter totaled $28.1 million compared to $11.1 million last year. Fully-diluted earnings per share for the quarter were $0.85 per share compared to $0.35 per share last year. Excluding unusual items, adjusted earnings per share from continuing operations for the third quarter of 2009 were $0.54, compared to last year's third quarter adjusted earnings per share of $0.41.

SEGMENT RESULTS

The Company has three reportable segments:

1. North American Retail Grocery - This segment sells private label and
branded products to customers within the United States and Canada.