TreeHouse Foods 3Q Profits Fall on Rising Sales

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November 9, 2010

Private label manufacturer TreeHouse Foods Inc. reported third quarter earnings of $24.9 million, down $3.2 million or 11 percent, from the $28.1 million posted in the same quarter last year, while net sales rose 22.5 percent.

This quarter’s earnings included higher levels of depreciation, amortization and interest expense associated with the Sturm Foods acquisition, according to TreeHouse Foods, as well as some other “unusual items that affected year-over-year comparisons,” according to a company statement.

Net sales for the third quarter totaled $464.2 million, up $85.3 million compared to $378.9 million posted in the same period last year. Excluding the acquisition of Sturm Foods, sales would have decreased by 0.2 percent due to slightly lower sales in the Food Away From Home and Industrial and Export segments, according to the company.

North American Retail Grocery sales increased 33.6 percent primarily due to the acquisition of Sturm Foods. Sales within the Food Away From Home segment increased 5.5 percent, as conditions are beginning to improve in the food away from home marketplace. Industrial and Export sales were up 1.2 percent due to the acquisition of Sturm Foods.

"Overall it was an excellent quarter, as we delivered solid unit growth in both our legacy businesses as well as our recent acquisitions,” said Sam K. Reed, chairman and CEO. “We are also very pleased with our ongoing cost control efforts, as improvements in margins and operating costs led to our strong cash flow in the quarter."

Total gross margins for the quarter improved from 21.3 percent last year to 23.7 percent in the third quarter due to strong margin improvement from the North American Retail Grocery and Food Away From Home operating segments.
Selling, distribution, general and administrative expenses were $54.3 million for the quarter compared to $46.4 million in the third quarter of 2009, primarily reflecting the growth of the company. As a percent of sales, these expenses declined to 11.7 percent in the quarter compared to 12.3 percent last year.

Interest expense in the quarter was $12.9 million compared to $4.8 million last year as debt increased from $476.1 million last year to $876.5 million at September 30, 2010, primarily from the issuance of new debt to fund the Sturm Foods acquisition.

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