TreeHouse(THS) - 2024 Q2 - Quarterly Report

Part I — Financial Information Financial Statements (Unaudited) Unaudited financial statements for Q2 2024 reveal decreased assets and equity, a net loss of $16.7 million, and increased cash used in operations Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $928.3 | $1,054.8 | | Total Assets | $3,905.0 | $4,106.6 | | Total Current Liabilities | $645.7 | $704.3 | | Total Liabilities | $2,354.9 | $2,441.8 | | Total Stockholders' Equity | $1,550.1 | $1,664.8 | Condensed Consolidated Statements of Operations Highlights (in millions, except EPS) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $788.5 | $803.5 | $1,609.2 | $1,657.5 | | Gross Profit | $128.3 | $133.2 | $240.3 | $286.8 | | Operating (Loss) Income | $(4.0) | $30.3 | $(9.2) | $71.2 | | Net (Loss) Income | $(16.7) | $23.3 | $(28.4) | $38.5 | | Diluted EPS | $(0.32) | $0.41 | $(0.54) | $0.68 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(71.8) | $(49.8) | | Net cash used in investing activities | $(49.7) | $(172.1) | | Net cash (used in) provided by financing activities | $(92.9) | $193.2 | | Net decrease in cash | $(214.5) | $(26.1) | - During Q2 2024, the company exited the Ready-to-drink (RTD) business, incurring a $19.3 million impairment charge due to forecasted cash flow losses[43] - On January 2, 2024, the company acquired pickle branded assets from The J.M. Smucker Co. for approximately $25.9 million in cash, expanding its Pickles category into Canada[31] - The company repurchased 2.5 million shares for $88.7 million in the first six months of 2024 under its stock repurchase program[52] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 1.9% decrease in Q2 2024 net sales, an operating loss due to asset impairment, and strong liquidity despite reduced cash from operations Results of Operations Q2 2024 net sales fell 1.9% to $788.5 million, resulting in a $16.7 million net loss from continuing operations, primarily due to an asset impairment and facility restoration costs Q2 2024 vs. Q2 2023 Net Sales Change Analysis | Component | Dollars (in millions) | Percent Change | | :--- | :--- | :--- | | 2023 Net Sales | $803.5 | | | Volume/mix from acquisition | $25.5 | 3.2% | | Pricing | $(23.6) | (3.0)% | | Volume/mix excluding acquisition | $(8.9) | (1.1)% | | Broth facility restoration impact | $(7.5) | (0.9)% | | 2024 Net Sales | $788.5 | (1.9)% | - Q2 2024 operating expenses increased by $29.4 million year-over-year, primarily due to a $19.3 million non-cash impairment charge from exiting the Ready-to-drink beverages business[104] - For the first six months of 2024, gross profit margin decreased to 14.9% from 17.3% in the prior year, mainly due to broth facility restoration costs, unfavorable fixed cost absorption, and higher labor costs[114] Liquidity and Capital Resources The company maintains strong liquidity through its Receivables Sales Program and Revolving Credit Facility, despite increased cash used in operating activities and significant share repurchases Six-Month Cash Flow Summary (in millions) | Cash Flow Activity | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Operating activities (continuing) | $(71.8) | $(46.6) | | Investing activities (continuing) | $(49.7) | $(156.5) | | Financing activities (continuing) | $(92.9) | $193.2 | - The company repurchased 2.5 million shares of common stock for a total of $88.7 million during the first six months of 2024[124] - As of June 30, 2024, the company had $905.0 million in variable-rate debt, nearly fully hedged by interest rate swap agreements with a notional value of $1,475.0 million[132] Non-GAAP Measures Non-GAAP measures like Adjusted EBITDA and Adjusted Diluted EPS provide a clearer view of performance, showing a decline in Q2 2024 compared to the prior year Reconciliation of Net (Loss) Income to Adjusted EBITDA (in millions) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income from continuing ops (GAAP) | $(16.7) | $22.4 | $(28.4) | $42.8 | | EBITDA from continuing ops (Non-GAAP) | $30.8 | $74.4 | $63.7 | $140.4 | | Adjusted EBITDA from continuing ops (Non-GAAP) | $70.6 | $76.3 | $116.6 | $167.6 | Adjusted Diluted EPS Reconciliation | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS from continuing ops (GAAP) | $(0.32) | $0.39 | $(0.54) | $0.75 | | Adjusted Diluted EPS from continuing ops (Non-GAAP) | $0.29 | $0.43 | $0.25 | $1.13 | Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposures or financial instruments have occurred since the 2023 Annual Report on Form 10-K - There have been no significant changes in the company's market risk exposures from the 2023 year-end[164] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[166] - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2024[166] Part II — Other Information Legal Proceedings The company faces ongoing legal challenges, including a remanded shareholder derivative suit and a pending antitrust lawsuit, with adequate accruals for potential losses - In a shareholder derivative suit, a state appellate court reversed the trial court's dismissal of the complaint and remanded the case for further proceedings in March 2024[74] - The company's long-pending antitrust lawsuit against Keurig Green Mountain (KGM) remains active, with recent court orders making parts of the summary judgment record public[76] Risk Factors No material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K have been identified - There have been no material changes to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K[170] Unregistered Sale of Equity Securities and Use of Proceeds During Q2 2024, the company repurchased 1.3 million shares for $44.8 million, with $78.0 million remaining under the stock repurchase program Q2 2024 Share Repurchase Activity | Metric | Value | | :--- | :--- | | Shares Repurchased | 1.3 million | | Weighted Average Price per Share | $35.81 | | Total Cost (in millions) | $44.8 | | Approx. Value Remaining under Program (in millions) | $78.0 | Other Information No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the second quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2024[173] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL data files