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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2021.
or
 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from                to
Commission File Number 001-32504
TreeHouse Foods, Inc.
(Exact name of the registrant as specified in its charter)
 
Delaware20-2311383
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification no.)
  
2021 Spring Road, Suite 600
Oak Brook IL
60523
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code) (708483-1300

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueTHSNYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
    
Non-accelerated filerSmaller reporting company
(Do not check if a smaller reporting company)  
    
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
Number of shares of Common Stock, $0.01 par value, outstanding as of April 30, 2021: 56,220,707.
1


Table of Contents
 
 Page
 
  
  
  
  
  
  
 
  
  
  
  
  

2


Part I — Financial Information
Item 1. Financial Statements
TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except per share data)
March 31, 2021December 31, 2020
Assets  
Current assets:  
Cash and cash equivalents$48.8 $364.6 
Receivables, net241.0 308.8 
Inventories653.0 598.6 
Prepaid expenses and other current assets101.6 86.1 
Assets of discontinued operations74.5 70.7 
Total current assets1,118.9 1,428.8 
Property, plant, and equipment, net1,053.1 1,070.0 
Operating lease right-of-use assets155.2 160.7 
Goodwill2,179.9 2,178.7 
Intangible assets, net600.4 615.0 
Other assets, net35.0 32.5 
Total assets$5,142.5 $5,485.7 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$610.1 $627.7 
Accrued expenses295.5 340.6 
Current portion of long-term debt15.9 15.7 
Liabilities of discontinued operations5.9 6.7 
Total current liabilities927.4 990.7 
Long-term debt1,929.8 2,199.0 
Operating lease liabilities137.1 144.5 
Deferred income taxes158.4 158.3 
Other long-term liabilities125.3 128.2 
Total liabilities3,278.0 3,620.7 
Commitments and contingencies (Note 14)
Stockholders' equity:  
Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued
  
Common stock, par value $0.01 per share, 90.0 shares authorized, 56.2 and 55.9 shares outstanding, respectively
0.6 0.6 
Treasury stock(108.3)(108.3)
Additional paid-in capital2,176.9 2,179.9 
Accumulated deficit(141.7)(143.2)
Accumulated other comprehensive loss(63.0)(64.0)
Total stockholders' equity1,864.5 1,865.0 
Total liabilities and stockholders' equity$5,142.5 $5,485.7 



See Notes to Condensed Consolidated Financial Statements.
3


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)
Three Months Ended
March 31,
 20212020
Net sales$1,057.3 $1,084.9 
Cost of sales876.2 890.0 
Gross profit181.1 194.9 
Operating expenses:
Selling and distribution68.7 65.1 
General and administrative63.3 63.6 
Amortization expense18.4 17.5 
Other operating expense, net19.7 18.5 
Total operating expenses170.1 164.7 
Operating income11.0 30.2 
Other expense:
Interest expense25.1 24.8 
Loss on extinguishment of debt14.4  
(Gain) loss on foreign currency exchange(1.3)14.4 
Other (income) expense, net(27.4)64.0 
Total other expense10.8 103.2 
Income (loss) before income taxes0.2 (73.0)
Income tax benefit(0.2)(40.2)
Net income (loss) from continuing operations0.4 (32.8)
Net income from discontinued operations1.1 1.6 
Net income (loss)$1.5 $(31.2)
Earnings (loss) per common share - basic:
Continuing operations$0.01 $(0.58)
Discontinued operations0.02 0.03 
Earnings (loss) per share basic (1)
$0.03 $(0.55)
Earnings (loss) per common share - diluted:
Continuing operations$0.01 $(0.58)
Discontinued operations0.02 0.03 
Earnings (loss) per share diluted (1)
$0.03 $(0.55)
Weighted average common shares:
Basic56.0 56.3 
Diluted56.5 56.3 


(1)    The sum of the individual per share amounts may not add due to rounding.





See Notes to Condensed Consolidated Financial Statements.
4


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  
(Unaudited, in millions) 
Three Months Ended
March 31,
 20212020
Net income (loss)$1.5 $(31.2)
Other comprehensive income (loss):
Foreign currency translation adjustments 0.9 (15.9)
Pension and postretirement reclassification adjustment 0.1 0.1 
Other comprehensive income (loss)1.0 (15.8)
Comprehensive income (loss)$2.5 $(47.0)
 






































See Notes to Condensed Consolidated Financial Statements.
5


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in millions)
RetainedAccumulated
AdditionalEarningsOther
Common StockPaid-In(AccumulatedTreasury StockComprehensiveTotal
SharesAmountCapitalDeficit)SharesAmountLossEquity
Balance, January 1, 202058.0 $0.6 $2,154.6 $(157.0)(1.8)$(83.3)$(84.0)$1,830.9 
Net loss— — — (31.2)— — — (31.2)
Other comprehensive loss— — — — — — (15.8)(15.8)
Exercise of stock options and issuance of other stock awards0.2 — (3.9)— — — — (3.9)
Stock-based compensation— — 8.1 — — — — 8.1 
Balance, March 31, 202058.2 $0.6 $2,158.8 $(188.2)(1.8)$(83.3)$(99.8)$1,788.1 
Balance, January 1, 202158.3 $0.6 $2,179.9 $(143.2)(2.4)$(108.3)$(64.0)$1,865.0 
Net income— — — 1.5 — — — 1.5 
Other comprehensive income— — — — — — 1.0 1.0 
Exercise of stock options and issuance of other stock awards0.3 — (7.9)— — — — (7.9)
Stock-based compensation— — 4.9 — — — — 4.9 
Balance, March 31, 202158.6 $0.6 $2,176.9 $(141.7)(2.4)$(108.3)$(63.0)$1,864.5 































See Notes to Condensed Consolidated Financial Statements.
6


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Three Months Ended
March 31,
20212020
Cash flows from operating activities:
Net income (loss)$1.5 $(31.2)
Net income from discontinued operations1.1 1.6 
Net income (loss) from continuing operations0.4 (32.8)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization53.5 49.8 
Stock-based compensation4.9 7.9 
Loss on extinguishment of debt14.4  
Unrealized (gain) loss on derivative contracts(21.7)64.1 
Deferred income taxes2.2 15.0 
Other(1.2)19.2 
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Receivables67.8 (24.0)
Inventories(58.4)1.1 
Prepaid expenses and other assets(28.3)(60.4)
Accounts payable(7.2)39.7 
Accrued expenses and other liabilities(31.9)(11.1)
Net cash (used in) provided by operating activities - continuing operations(5.5)68.5 
Net cash used in operating activities - discontinued operations(3.1)(6.0)
Net cash (used in) provided by operating activities(8.6)62.5 
Cash flows from investing activities:
Additions to property, plant, and equipment(28.0)(27.3)
Additions to intangible assets(3.3)(3.8)
Proceeds from sale of fixed assets0.9 5.1 
Proceeds from sale of investments17.2  
Net cash used in investing activities - continuing operations(13.2)(26.0)
Net cash used in investing activities - discontinued operations(0.4)(0.3)
Net cash used in investing activities(13.6)(26.3)
Cash flows from financing activities:
Borrowings under Revolving Credit Facility30.0 100.0 
Payments on financing lease obligations(0.5)(0.4)
Payment of deferred financing costs(7.0) 
Payments on Term Loans(1,126.0)(3.5)
Proceeds from refinanced Term Loans1,430.0  
Repurchase of 2024 Notes(602.9) 
Payment of debt premium for extinguishment of debt(9.0) 
Payments related to stock-based award activities(7.9)(3.8)
Net cash (used in) provided by financing activities - continuing operations(293.3)92.3 
Net cash (used in) provided by financing activities - discontinued operations  
Net cash (used in) provided by financing activities(293.3)92.3 
Effect of exchange rate changes on cash and cash equivalents(0.3)(0.4)
Net (decrease) increase in cash and cash equivalents(315.8)128.1 
Cash and cash equivalents, beginning of period364.6 202.3 
Cash and cash equivalents, end of period$48.8 $330.4 
7


Three Months Ended
March 31,
20212020
Supplemental cash flow disclosures:
Interest paid$36.4 $37.8 
Net income taxes (refunded) paid(0.2)5.0 
Non-cash investing and financing activities:
Accrued purchase of property and equipment$27.5 $21.1 
Accrued other intangible assets3.9 2.9 
Right-of-use assets and operating lease obligations recognized0.9 1.7 
Accrued deferred financing costs1.5  











































See Notes to Condensed Consolidated Financial Statements.
8


TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of and for the three months ended March 31, 2021
(Unaudited)
1. BASIS OF PRESENTATION

The unaudited Condensed Consolidated Financial Statements included herein have been prepared by TreeHouse Foods, Inc. and its consolidated subsidiaries (the "Company," "TreeHouse," "we," "us," or "our"), pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to quarterly reporting on Form 10-Q. In our opinion, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted as permitted by such rules and regulations. The Condensed Consolidated Financial Statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Results of operations for interim periods are not necessarily indicative of annual results.

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to use our judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from these estimates.

A detailed description of the Company’s significant accounting policies can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Not yet adopted

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 was further amended in January 2021 by ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the ASU from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of this new ASU on its Condensed Consolidated Financial Statements and related disclosures.

3. GROWTH, REINVESTMENT, AND RESTRUCTURING PROGRAMS

The Company’s growth, reinvestment, and restructuring activities are part of an enterprise-wide transformation to build long-term sustainable growth and improve profitability for the Company. These activities are aggregated into the following categories: (1) Strategic Growth Initiatives (expected completion in 2023) – a growth and reinvestment strategy (2) Structure to Win (completed in 2020) – an operating expense improvement program, (3) TreeHouse 2020 (completed in 2020) – a long-term growth and margin improvement strategy, and (4) other (collectively the "Growth, Reinvestment, and Restructuring Programs").

Below is a description of each of the Growth, Reinvestment, and Restructuring Programs:

(1) Strategic Growth Initiatives

In the first quarter of 2021, the Company began executing on its growth and reinvestment initiatives designed to invest in our commercial organization, adapt the supply chain to better support long-term growth opportunities, and further enable the Company to build greater depth in growth categories. These initiatives are intended to better position the Company to accelerate future revenue and earnings growth, and improve the execution of our strategy to be our customer's preferred manufacturing and distribution partner. This reinvestment will occur through 2023, and the Company currently expects the total costs will be up to $130.0 million, comprised of consulting and professional fees, employee-related costs, and investment in information technology. Consulting and professional fees are expected to include building marketing competencies, furthering our e-commerce strategy and digital capabilities, and advancing automation and value engineering in our supply chain network. Employee-related costs primarily consist of dedicated employee costs.
9

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) Structure to Win

In the first quarter of 2018, the Company announced an operating expenses improvement restructuring program ("Structure to Win") designed to align our organizational structure with strategic priorities. The program was intended to drive operational effectiveness, cost reduction, and position the Company for growth with a focus on a lean customer-centric go-to-market team, centralized supply chain, and streamlined administrative functions. This program was completed in 2020. Total costs within this program were $92.7 million, comprised primarily of consulting and professional fees, severance, dedicated employee costs, and Corporate office closing costs.

(3) TreeHouse 2020
 
In the third quarter of 2017, the Company announced TreeHouse 2020, a program intended to accelerate long-term growth through optimization of our manufacturing network, transformation of our mixing centers and warehouse footprint, and leveraging of systems and processes to drive performance. The Company’s workstreams related to these activities and selling, general, and administrative cost reductions were intended to increase our capacity utilization, expand operating margins, and streamline our plant structure to optimize our supply chain. This program was completed in 2020. Total costs within this program were $299.8 million, comprised primarily of consulting and professional fees, severance, dedicated employee costs, and accelerated depreciation for plant and other office closures.

(4) Other
 
Other costs include restructuring costs incurred for costs to exit facilities, information technology system implementation, and other administrative costs.

The costs by activity for the Growth, Reinvestment, and Restructuring Programs are outlined below:
 Three Months Ended
March 31,
 20212020
 (In millions)
Strategic growth initiatives$16.1 $ 
Structure to Win 7.8 
TreeHouse 2020 12.1 
Other3.5  
Total$19.6 $19.9 
 
As part of our growth, reinvestment, and restructuring programs, we generally incur expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee separation costs and other exit costs. Severance and employee separation costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense, pension, and other termination benefits. Other exit costs typically relate to lease and contract terminations. We also incur expenses that are an integral component of, and directly attributable to, our growth, reinvestment, and restructuring activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include asset-related costs and other costs. Asset-related costs primarily relate to accelerated depreciation and certain long-lived asset impairments. Other costs primarily relate to start-up costs of new facilities, consulting and professional fees, information technology implementation, asset relocation costs, and costs to exit facilities.

Expenses associated with these programs are recorded in Cost of sales, General and administrative, and Other operating expense, net in the Condensed Consolidated Statements of Operations. The Company does not allocate costs associated with Growth, Reinvestment, and Restructuring Programs to reportable segments when evaluating the performance of its segments. As a result, costs associated with Growth, Reinvestment, and Restructuring Programs are not presented by reportable segment. Refer to Note 16 for additional information. 
 
10

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Below is a summary of costs by line item for the Growth, Reinvestment, and Restructuring Programs:
 Three Months Ended
March 31,
 20212020
 (In millions)
Cost of sales$ $0.7 
General and administrative 0.7 
Other operating expense, net19.6 18.5 
Total$19.6 $19.9 
 
Below is a summary of costs by type associated with the Growth, Reinvestment, and Restructuring Programs:
Three Months Ended
March 31,
20212020
 (In millions)
Employee-related$4.9 $4.8 
Other costs14.7 15.1 
Total$19.6 $19.9 
 
For the three months ended March 31, 2021 and 2020, employee-related costs primarily consisted of dedicated project employee cost, severance, and retention; and other costs primarily consisted of consulting services. Employee-related and other costs are primarily recognized in Other operating expense, net of the Condensed Consolidated Statements of Operations. 

The table below presents the exit cost liability activity for the Growth, Reinvestment, and Restructuring Programs as of March 31, 2021:  
 Severance
 (In millions)
Balance as of December 31, 2020$4.9 
Expenses recognized0.7 
Cash payments(2.5)
Balance as of March 31, 2021$3.1 
 
Liabilities as of March 31, 2021 associated with total exit cost reserves relate to severance. The severance liability is included in Accrued expenses in the Condensed Consolidated Balance Sheets.

4. RECEIVABLES SALES PROGRAM
 
In December 2017 and June 2019, the Company entered into agreements to sell certain trade accounts receivable to two unrelated, third-party financial institutions (collectively, "the Receivables Sales Program"). The agreements can be terminated by either party with 60 days' notice. The Company has no retained interest in the receivables sold under the Receivables Sales Program; however, under the agreements the Company does have collection and administrative responsibilities for the sold receivables. Under the Receivables Sales Program, the maximum amount of receivables that may be sold at any time is $300.0 million.

The following table includes the outstanding amount of accounts receivable sold under the Receivables Sales Program and the amount collected but not yet remitted to the financial institutions:
March 31, 2021December 31, 2020
 (In millions)
Outstanding accounts receivable sold$246.7 $284.3 
Collections not remitted to financial institutions128.8 202.8 
11

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Receivables sold under the Receivables Sales Program are de-recognized from the Company's Condensed Consolidated Balance Sheet at the time of the sale and the proceeds from such sales are reflected as a component of the change in receivables in the operating activities section of the Condensed Consolidated Statements of Cash Flows. The amount collected but not yet remitted to the financial institutions is included in Accounts payable in the Condensed Consolidated Balance Sheets.

The loss on sale of receivables was $0.5 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively, and is included in Other (income) expense, net in the Condensed Consolidated Statements of Operations. The Company has not recognized any servicing assets or liabilities as of March 31, 2021 or December 31, 2020, as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

5. INVENTORIES
March 31, 2021December 31, 2020
 (In millions)
Raw materials and supplies$234.8 $231.0 
Finished goods418.2 367.6 
Total inventories$653.0 $598.6 
 
6. ACQUISITIONS AND DIVESTITURES

Acquisitions

Pasta Acquisition

On December 11, 2020, the Company completed the acquisition of the majority of the U.S. branded pasta portfolio as well as a manufacturing facility in St. Louis, Missouri of Riviana Foods, Inc. ("Riviana Foods"), a subsidiary of Ebro Foods, S.A. ("Ebro Foods") for a purchase price of approximately $239.2 million in cash. Ebro Foods is a Spanish-based multinational food group operating primarily in the pasta and rice sectors. The acquisition includes the following brands: Skinner, No Yolks, American Beauty, Creamette, San Giorgio, Prince, Light ‘n Fluffy, Mrs. Weiss’, Wacky Mac, P&R Procino-Rossi, and New Mill. Additionally, the Company and Riviana Foods have a mutual put or call right to acquire or sell, respectively, the equipment utilized in the Riviana Foods Fresno, California facility for $5.0 million by December 31, 2021. The acquisition is expected to strengthen the Company's portfolio and expand its scale to better serve its national and regional customers. The acquisition was funded from the Company’s existing cash resources.

The pasta acquisition was accounted for under the acquisition method of accounting and the results of operations were included in our Consolidated Financial Statements from the date of acquisition in the Meal Preparation segment.

The following table summarizes the preliminary purchase price allocation of the fair value of net tangible and intangible assets acquired and liabilities assumed:

(In millions)
Inventories$20.0 
Property, plant, and equipment, net48.2 
Customer relationships68.0 
Trade names43.0 
Formulas/recipes2.3 
Goodwill57.8 
Operating lease right-of-use assets0.1 
Assets acquired239.4 
Assumed liabilities(0.2)
Total purchase price$239.2 


12

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company allocated the intangible assets acquired to the Meal Preparation segment which included $68.0 million of customer relationships with an estimated life of 20 years, $43.0 million of trade names with an estimated life of 20 years, and $2.3 million of formulas/recipes with estimated life of 5 years. The aforementioned intangible assets will be amortized over their estimated useful lives. The Company increased the cost of acquired inventories by approximately $3.1 million as of December 31, 2020 and expensed $1.0 million as a component of Cost of sales during the three months ended March 31, 2021. The Company has allocated $57.8 million of goodwill to the Meal Preparation segment. Goodwill arises principally as a result of expansion opportunities of its scale to better serve its regional and national customers and plant operation synergies across its legacy Pasta category. The goodwill resulting from this acquisition is tax deductible. The purchase price allocation in the table above is preliminary and subject to the finalization of the Company’s valuation analysis and the option to exercise its right to acquire the $5.0 million equipment utilized in the Fresno, California facility.

The fair values for customer relationships at the acquisition date were determined using the excess earnings method under the income approach. Trade name fair values were determined using the relief from royalty method, while the fair value of formulas/recipes was determined using the cost approach. Real property and personal property fair values were determined using the cost approach. The fair value measurements of intangible assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates, and royalty rates.

The following unaudited pro forma information shows the results of operations for the Company as if its pasta acquisition had been completed as of January 1, 2019. Adjustments have been made for the pro forma effects of depreciation and amortization of tangible and intangible assets recognized as part of the business combination and related income taxes. The pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

Three Months Ended
March 31,
2020
(Unaudited, in millions)
Pro forma net sales from continuing operations$1,129.0 
Pro forma net loss from continuing operations(29.1)

Discontinued Operations

Ready-to-eat Cereal

On May 1, 2019, the Company entered into a definitive agreement to sell its Ready-to-eat ("RTE") Cereal business to Post Holdings, Inc. ("Post"), which until that time had been a component of the Meal Preparation reporting segment. The sale of this business is part of the Company's portfolio optimization strategy. On December 19, 2019, the Federal Trade Commission objected to the sale to Post. On January 13, 2020, the sale to Post was terminated and the Company announced its intention to pursue a sale of the RTE Cereal business to an alternative buyer. The Company continues to market the business and is committed to a plan of sale to dispose of the business.

The RTE Cereal business continues to be classified as a discontinued operation as of March 31, 2021. Expected disposal losses of $0.3 million were recognized as an asset impairment charge during both the three months ended March 31, 2021 and 2020 within Net income from discontinued operations. The expected disposal loss for the RTE Cereal business is remeasured each period at the lower of carrying value or estimated fair value less costs to sell and is included in the valuation allowance in the balance sheet. Completion of the sale may be for amounts that could be significantly different from the current fair value estimate. The Company's estimate of fair value will be evaluated and recognized each reporting period until the divestiture is complete.

The Company has reflected the RTE Cereal business as a discontinued operation for all periods presented. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations.

13

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Results of discontinued operations are as follows:

Three Months Ended
March 31,
20212020
(In millions)
Net sales$47.5 $56.8 
Cost of sales41.4 47.9 
Selling, general, administrative and other operating expenses4.2 4.9 
Other operating expense, net  0.5 
Operating income from discontinued operations1.9 3.5 
Interest and other expense0.4 1.3 
Income tax expense0.4 0.6 
Net income from discontinued operations$1.1 $1.6 

Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 include the following:
March 31, 2021December 31, 2020
(In millions)
Inventories$37.9 $33.3 
Property, plant, and equipment, net66.3 65.9 
Operating lease right-of-use assets4.2 5.1 
Goodwill53.5 53.5 
Intangible assets, net38.6 38.6 
Valuation allowance(126.0)(125.7)
Total assets of discontinued operations$74.5 $70.7 
Accrued expenses and other liabilities$1.0 $1.1 
Operating lease liabilities4.9 5.6 
Total liabilities of discontinued operations$5.9 $6.7 

Other Divestitures

In-Store Bakery Facilities

On January 10, 2020, the Company entered into a definitive agreement to sell two of its In-Store Bakery facilities located in Fridley, Minnesota and Lodi, California, which manufacture breads, rolls, and cakes for in-store retail bakeries and food-away-from-home customers. These two facilities were included within the Snacking & Beverages reporting segment. On April 17, 2020, the sale of these facilities was completed for $26.9 million.

14

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7. GOODWILL AND INTANGIBLE ASSETS
 
Goodwill

Changes in the carrying amount of goodwill for the three months ended March 31, 2021 are as follows:
Meal PreparationSnacking & BeveragesTotal
 (In millions)
Balance at December 31, 2020, before accumulated impairment losses$1,334.7 $888.5 $2,223.2 
Accumulated impairment losses(11.5)(33.0)(44.5)
Balance at December 31, 20201,323.2 855.5 2,178.7 
Foreign currency exchange adjustments0.7 0.5 1.2 
Balance at March 31, 2021$1,323.9 $856.0 $2,179.9 

Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets as of March 31, 2021 and December 31, 2020 are as follows:

 March 31, 2021December 31, 2020
Weighted Average Life Remaining (yrs.)Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
 (In millions)
Intangible assets with finite lives:      
Customer-related9.7$849.4 $(420.0)$429.4 $848.5 $(406.4)$442.1 
Contractual agreements— 0.5 (0.5) 0.5 (0.5) 
Trademarks14.896.2 (33.2)63.0 96.2 (31.7)64.5 
Formulas/recipes4.525.3 (22.5)2.8 25.3 (22.1)3.2 
Computer software6.9197.8 (115.2)82.6 194.8 (112.0)82.8 
Total finite lived intangibles9.81,169.2 (591.4)577.8 1,165.3 (572.7)592.6 
Intangible assets with indefinite lives:
Trademarks22.6 — 22.6 22.4 — 22.4 
Total intangible assets$1,191.8 $(591.4)$600.4 $1,187.7 $(572.7)$615.0 

8. INCOME TAXES
 
Income taxes were recognized at effective rates of (100.0)% and 55.1% for the three months ended March 31, 2021 and 2020, respectively. The change in the Company's effective tax rate for the three months ended March 31, 2021 compared to 2020 is primarily the result of benefits recognized in 2020 due to the enactment of the “Coronavirus Aid, Relief, and Economic Security Act” (the CARES Act), a change in the amount of valuation allowance recorded against certain deferred tax assets, and an increase in the amount of tax deductible stock based compensation in 2021. Our effective tax rate may change from period to period based on recurring and non-recurring factors, including the jurisdictional mix of earnings, enacted tax legislation, state income taxes, settlement of tax audits, and the expiration of the statute of limitations in relation to unrecognized tax benefits.

Management estimates that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by as much as $5.3 million within the next 12 months, primarily as a result of the resolution of audits currently in progress and the lapsing of statutes of limitations. As much as $2.0 million of the $5.3 million could affect net income when settled.

15

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
9. LONG-TERM DEBT
 
March 31, 2021December 31, 2020
 (In millions)
Revolving Credit Facility$30.0 $ 
Term Loan A500.0 453.4 
Term Loan A-1930.0 672.6 
2024 Notes 602.9 
2028 Notes500.0 500.0 
Finance leases4.0 4.1 
Total outstanding debt1,964.0 2,233.0 
Deferred financing costs(18.3)(18.3)
Less current portion(15.9)(15.7)
Total long-term debt$1,929.8 $2,199.0 

The scheduled maturities of outstanding debt, excluding deferred financing costs, at March 31, 2021 are as follows (in millions):
Remainder of 2021$12.0 
202215.5 
202315.0 
202414.9 
202514.5 
Thereafter1,892.1 
     Total outstanding debt$1,964.0 

Credit Agreement

On March 26, 2021, the Company entered into Amendment No. 3 (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of December 1, 2017 (the "Credit Agreement") among the Company, the other loan parties thereto, the lenders from time to time party thereto and Bank of America N.A., as administrative agent, swing line lender and L/C issuer. Under the Amendment, among other things, the parties have agreed to: (i) amend and extend the maturity date of the Revolving Credit Facility and Tranche A-1 Term Loans until March 26, 2026 and the maturity date of the Term A Loans until March 26, 2028 (each as defined in the Credit Agreement), (ii) refinance and increase the existing Term Loan amounts by $304.0 million, and (iii) include customary provisions under the Amendment providing for the replacement of LIBOR with any successor rate. The material terms and conditions under the Credit Agreement are otherwise substantially consistent with those contained in the Credit Agreement prior to the Amendment.

The Company’s average interest rate on debt outstanding under its Credit Agreement for the three months ended March 31, 2021 was 1.74%. Including the impact of interest rate swap agreements in effect as of March 31, 2021, the average rate increased to 2.20%.

Revolving Credit Facility — During the three months ended March 31, 2021, the Company drew $30.0 million from its $750.0 million Revolving Credit Facility. As of March 31, 2021, the Company had remaining availability of $697.3 million under the Revolving Credit Facility, and there were $22.7 million in letters of credit under the Revolving Credit Facility that were issued but undrawn, which have been included as a reduction to the calculation of available credit.

2024 Notes — The Company previously issued 6.000% notes in the aggregate principal amount of $775 million due on February 15, 2024 (the "2024 Notes"). On February 16, 2021 the Company, through Wells Fargo Bank, National Association, as trustee (the "Trustee"), completed a partial redemption of $200.0 million of its 2024 Notes, and on March 31, 2021, the Company completed the full redemption of the remaining $402.9 million outstanding principal of its 2024 Notes at a price of 101.50% of the principal amount, plus accrued and unpaid interest to, but not including, each redemption date (the "2024 Notes Redemption").
16

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2028 Notes — On September 9, 2020, the Company completed its public offering of $500 million aggregate principal amount of its 4.000% senior notes due September 1, 2028 (the "2028 Notes").

Loss on Extinguishment of Debt — For the three months ended March 31, 2021, the Company incurred a loss on extinguishment of debt totaling $14.4 million, which included a premium of $9.0 million and a write off of deferred financing costs of $5.4 million.

Fair Value - At March 31, 2021, the aggregate fair value of the Company's total debt was $1,963.8 million and its carrying value was $1,960.0 million. At December 31, 2020, the aggregate fair value of the Company's total debt was $2,250.4 million and its carrying value was $2,228.9 million. The fair values of the Revolving Credit Facility, Term Loan A, and Term Loan A-1 were estimated using present value techniques and market-based interest rates and credit spreads. The fair value of the Company's 2028 Notes was estimated based on quoted market prices for similar instruments due to their infrequent trading volume. Accordingly, the fair value of the Company's debt is classified as Level 2 within the valuation hierarchy.

10. EARNINGS PER SHARE

The following table summarizes the effect of the share-based compensation awards on the weighted average number of shares outstanding used in calculating diluted earnings (loss) per share:
 
Three Months Ended
March 31,
20212020
(In millions, except per share data)
Weighted average common shares outstanding56.0 56.3 
Assumed exercise/vesting of equity awards (1)0.5  
Weighted average diluted common shares outstanding56.5 56.3 
 
(1)For the three months ended March 31, 2020, the weighted average common shares outstanding is the same for the computations of both basic and diluted shares outstanding because the Company had a net loss for the period. Equity awards, excluded from our computation of diluted earnings per share because they were anti-dilutive, were 1.4 million and 2.1 million for the three months ended March 31, 2021 and 2020, respectively.

11. STOCK-BASED COMPENSATION

The Board of Directors adopted, and the Company's stockholders approved, the "TreeHouse Foods, Inc. Equity and Incentive Plan" (the "Plan"). Under the Plan, the Compensation Committee may grant awards of various types of compensation, including stock options, restricted stock, restricted stock units, performance shares, performance units, other types of stock-based awards, and other cash-based compensation. The maximum number of shares available to be awarded under the Plan is approximately 17.5 million, of which approximately 3.4 million remained available at March 31, 2021.

Total compensation expense related to stock-based payments and the related income tax benefit recognized in Net income (loss) from continuing operations are as follows:
Three Months Ended
March 31,
20212020
(In millions)
Compensation expense related to stock-based payments$4.9 $7.9 
Related income tax benefit1.4 2.1 

All amounts below include continuing and discontinued operations.



17

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Restricted Stock Units — Employee restricted stock unit awards generally vest based on the passage of time in approximately three equal installments on each of the first three anniversaries of the grant date. Director restricted stock units generally vest on the first anniversary of the grant date. Certain directors have elected to defer receipt of their awards until either their departure from the Board of Directors or a specified date beyond the first anniversary of the grant date.
 
The following table summarizes the restricted stock unit activity during the three months ended March 31, 2021:
 
Employee
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
Director
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
 (In thousands) (In thousands) 
Outstanding, at December 31, 2020707 $47.92 125 $54.67 
Granted335 52.18 1 53.84 
Vested(307)46.64   
Forfeited(37)52.48   
Outstanding, at March 31, 2021698 50.33 126 54.66 
Vested and deferred, at March 31, 202191 55.88 
 
 Three Months Ended
March 31,
 20212020
 (In millions)
Fair value of vested restricted stock units$16.4 $8.4 
Tax benefit recognized from vested restricted stock units2.3 1.4 
 
Future compensation costs related to restricted stock units are approximately $34.8 million as of March 31, 2021 and will be recognized on a weighted average basis over the next 2.3 years. The grant date fair value of the awards is equal to the Company’s closing stock price on the grant date.

Performance Units — Performance unit awards are granted to certain members of management. These awards contain both service and performance conditions. For awards granted in years prior to 2020, for each year of the three-year performance period, one-third of the units will accrue, multiplied by a predefined percentage generally between 0% and 200%, depending on the achievement of certain operating performance measures. Accrued shares are not earned until the end of the full three-year performance period. For performance unit awards granted in 2020 and 2021, performance goals are set and measured annually with one-quarter of the units eligible to accrue for each year in the three-year performance period. Accrued shares are earned at the end of the three-year performance period. Additionally, for the cumulative three-year performance period, one-quarter of the units will accrue. In 2021, certain executive members of management received awards that had a market condition as described below. For both the annual and cumulative shares, the earned shares are equal to the number of units granted multiplied by a predefined percentage generally between 0% and 200%, depending on the achievement of certain operating performance measures. Accrued units will be converted to stock or cash, at the discretion of the Compensation Committee, generally, on the third anniversary of the grant date. The Company intends to settle these awards in stock and has the shares available to do so.

In 2021, the Compensation Committee of the Board approved performance unit awards granted to certain executive members of management that include a relative total shareholder return market condition that is measured over a three-year performance period in addition to the existing operating performance measures. The units will accrue, multiplied by a predefined percentage generally between 0% and 200% for the operating performance measures and 0% and 150% for the relative total shareholder return measure, depending on the achievement attained for each performance measure. The fair value of the portion of the award earned based on relative total shareholder return was valued using a Monte Carlo simulation model with a grant-date fair value of $59.16 on approximately 23,200 units granted. These awards will be converted to stock or cash, at the discretion of the Compensation Committee, generally, on the third anniversary of the grant date. The Company intends to settle these awards in stock and has the shares available to do so.

18

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The assumptions used in the Monte Carlo simulation were as follows:

Three Months Ended
March 31,
2021
Dividend yield0 %
Risk-free rate0.14 %
Expected volatility35.65 %
Expected term (in years)2.75

The following table summarizes the performance unit activity during the three months ended March 31, 2021:  
Performance
Units
Weighted
Average
Grant Date
Fair Value
 (In thousands) 
Unvested, at December 31, 2020541 $52.38 
Granted166 52.80 
Vested(105)45.79 
Forfeited(47)58.14 
Unvested, at March 31, 2021555 54.07 
 
 Three Months Ended
March 31,
 20212020
 (In millions)
Fair value of vested performance units$5.6 $3.3 
Tax benefit recognized from performance units vested0.3 0.6 

Future compensation costs related to the performance units are estimated to be approximately $18.0 million as of March 31, 2021 and are expected to be recognized over the next 1.9 years. The grant date fair value of the awards is equal to the Company’s closing stock price on the date of grant. The fair value of the portion of certain awards earned based on relative total shareholder return was valued using a Monte Carlo simulation model.

19

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12. ACCUMULATED OTHER COMPREHENSIVE LOSS
 
Accumulated other comprehensive loss consists of the following components, all of which are net of tax:
 
Foreign
Currency
Translation (1)
Unrecognized
Pension and
Postretirement
Benefits (1)
Accumulated
Other
Comprehensive
Loss
 (In millions)
Balance at December 31, 2019$(79.4)$(4.6)$(84.0)
Other comprehensive loss before reclassifications(15.9) (15.9)
Reclassifications from accumulated other comprehensive loss (2) 0.1