TreeHouse(THS) - 2020 Q2 - Quarterly Report

Part I — Financial Information Item 1 — Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements and related notes for the quarter ended June 30, 2020 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Metric | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :-------------------------------- | :--------------------------- | :------------------------------ | | Assets | | | | Total current assets | $1,405.2 | $1,219.5 | | Total assets | $5,242.0 | $5,139.4 | | Liabilities & Equity | | | | Total current liabilities | $951.7 | $813.4 | | Total liabilities | $3,438.3 | $3,308.5 | | Total stockholders' equity | $1,803.7 | $1,830.9 | | Total liabilities and stockholders' equity | $5,242.0 | $5,139.4 | - Total assets increased by $102.6 million from December 31, 2019, to June 30, 2020, primarily driven by an increase in cash and cash equivalents and inventories[10] - Total liabilities increased by $129.8 million, mainly due to higher accounts payable and accrued expenses[10] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Net sales | $1,041.9 | $1,025.3 | $2,126.8 | $2,092.1 | | Gross profit | $191.2 | $189.2 | $386.1 | $385.4 | | Operating income (loss) | $25.3 | $(7.9) | $55.5 | $7.6 | | Net loss from continuing operations | $(2.6) | $(50.1) | $(35.4) | $(64.6) | | Net income (loss) from discontinued operations | $1.1 | $(121.7) | $2.7 | $(134.1) | | Net loss | $(1.5) | $(171.8) | $(32.7) | $(198.7) | | Loss per share basic (1) | $(0.03) | $(3.05) | $(0.58) | $(3.54) | - Net sales increased by 1.6% for the three months ended June 30, 2020, and by 1.7% for the six months ended June 30, 2020, compared to the prior year periods[12] - Operating income significantly improved, moving from a loss of $7.9 million in Q2 2019 to an income of $25.3 million in Q2 2020, and from $7.6 million to $55.5 million for the six-month period[12] Condensed Consolidated Statements of Comprehensive Income (Loss) Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Net loss | $(1.5) | $(171.8) | $(32.7) | $(198.7) | | Other comprehensive income (loss) | $7.5 | $7.4 | $(8.3) | $14.3 | | Comprehensive income (loss) | $6.0 | $(164.4) | $(41.0) | $(184.4) | - Comprehensive income (loss) significantly improved from a loss of $164.4 million in Q2 2019 to an income of $6.0 million in Q2 2020[15] Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity | Metric | Balance, June 30, 2020 (in millions) | Balance, December 31, 2019 (in millions) | | :-------------------------- | :----------------------------------- | :----------------------------------- | | Common Stock | $0.6 | $0.6 | | Additional Paid-In Capital | $2,168.4 | $2,154.6 | | Accumulated Deficit | $(189.7) | $(157.0) | | Accumulated Other Comprehensive Loss | $(92.3) | $(84.0) | | Total Equity | $1,803.7 | $1,830.9 | - Total stockholders' equity decreased from $1,830.9 million at December 31, 2019, to $1,803.7 million at June 30, 2020, primarily due to an increase in accumulated deficit and accumulated other comprehensive loss[18] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | | Net cash provided by operating activities | $123.8 | $9.4 | | Net cash used in investing activities | $(25.0) | $(72.7) | | Net cash used in financing activities | $(9.1) | $(41.4) | | Net increase (decrease) in cash and cash equivalents | $91.6 | $(100.6) | | Cash and cash equivalents, end of period | $293.9 | $63.7 | - Net cash provided by operating activities significantly increased to $123.8 million in the first six months of 2020, compared to $9.4 million in the same period of 2019[21] - Cash and cash equivalents at the end of the period increased substantially to $293.9 million as of June 30, 2020, from $63.7 million in the prior year[21] 1. BASIS OF PRESENTATION - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with SEC rules for quarterly reporting on Form 10-Q and GAAP, with certain information condensed or omitted[25] - The Company changed its organizational and segment structure in Q1 2020, recasting prior period information to reflect this change[28] 2. RECENT ACCOUNTING PRONOUNCEMENTS - The Company early adopted new SEC rules (Rules 3-10 and 3-16 of Regulation S-X) in Q1 2020, simplifying financial disclosure for registered debt offerings[29] - ASU 2019-12, Simplifying the Accounting for Income Taxes, was also early adopted in Q1 2020, with no material impact on financial statements[30] - The Company is evaluating ASU 2020-04, Reference Rate Reform, which provides temporary optional guidance for accounting for reference rate reform[32] 3. RESTRUCTURING PROGRAMS - The Company's restructuring efforts, 'TreeHouse 2020' and 'Structure to Win,' aim to improve long-term profitability through manufacturing optimization, supply chain streamlining, and operating expense reduction[33][35][38] - Total restructuring costs decreased significantly from $33.6 million in Q2 2019 to $11.8 million in Q2 2020, and from $65.6 million to $31.7 million for the six-month period, as the TreeHouse 2020 program winds down[33] - The 'Structure to Win' program's total expected costs increased from $60.4 million to $87.6 million during the six months ended June 30, 2020, due to reorganization transition expenses[39] Restructuring Program Costs | Program | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :---------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | TreeHouse 2020 | $8.8 | $28.1 | $20.9 | $54.5 | | Structure to Win | $3.0 | $5.5 | $10.8 | $11.1 | | Total Restructuring Programs | $11.8 | $33.6 | $31.7 | $65.6 | 4. RECEIVABLES SALES PROGRAM - The Company sells certain trade accounts receivable to third-party financial institutions, with a maximum of $300.0 million that may be sold at any time[41] - Outstanding receivables sold were $200.1 million as of June 30, 2020, down from $243.0 million at December 31, 2019[42] Loss on Sale of Receivables | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :---------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Loss on sale of receivables | $0.6 | $1.2 | $1.5 | $2.1 | 5. INVENTORIES - Total inventories increased by $85.4 million from December 31, 2019, to June 30, 2020, driven by increases in both raw materials and finished goods[45] Inventories | Inventory Type | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :--------------------- | :--------------------------- | :------------------------------ | | Raw materials and supplies | $257.0 | $205.5 | | Finished goods | $372.4 | $338.5 | | Total inventories | $629.4 | $544.0 | 6. DISCONTINUED OPERATIONS AND OTHER DIVESTITURES - The Snacks division was sold on August 1, 2019, for $90 million in cash, after incurring $66.5 million in impairment losses in Q2 2019[46][47] - The Ready-to-eat (RTE) Cereal business remains classified as a discontinued operation, with an expected disposal loss of $63.9 million recognized in Q2 2019[50][51] - The Company completed the sale of two In-Store Bakery facilities for $24.0 million on April 17, 2020, recognizing a $0.3 million loss on divestiture[54] Discontinued Operations Financial Summary | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Net sales (discontinued operations) | $60.1 | $225.8 | $116.9 | $460.8 | | Net income (loss) from discontinued operations | $1.1 | $(121.7) | $2.7 | $(134.1) | 7. GOODWILL AND INTANGIBLE ASSETS - Following a Q1 2020 organizational structure change, goodwill and accumulated impairment losses were reallocated between the new Meal Preparation and Snacking & Beverages segments. An impairment test was performed, resulting in no new impairment losses[56][57] - Total goodwill decreased slightly by $5.2 million due to foreign currency exchange adjustments[58] Goodwill by Segment | Segment | Balance at January 1, 2020 (in millions) | Foreign currency exchange adjustments (in millions) | Balance at June 30, 2020 (in millions) | | :-------------------- | :----------------------------------- | :------------------------------------------ | :----------------------------------- | | Meal Preparation | $1,253.0 | $(3.0) | $1,250.0 | | Snacking & Beverages | $854.3 | $(2.2) | $852.1 | | Total Goodwill | $2,107.3 | $(5.2) | $2,102.1 | 8. INCOME TAXES - The effective income tax rate for Q2 2020 was 123.2% (vs 12.0% in Q2 2019) and 42.7% for the six months ended June 30, 2020 (vs 17.5% in 2019), primarily due to changes in valuation allowance and non-deductible executive compensation, partially offset by CARES Act benefits[61] - The Company recorded a $5.0 million (Q2) and $11.0 million (YTD) income tax benefit related to the NOL carryback provisions of the CARES Act[63] - An estimated federal income tax receivable of $32.3 million related to the CARES Act was recorded as of June 30, 2020, with an expected increase of $10 million to $15 million in Q3 2020 due to new Section 163(j) regulations[63][64] 9. LONG-TERM DEBT - Total outstanding debt decreased slightly from $2,122.7 million at December 31, 2019, to $2,115.6 million at June 30, 2020[65] - The Company repaid $100.0 million from its Revolving Credit Facility in Q2 2020, with $723.9 million remaining available as of June 30, 2020[66] - The average interest rate on debt outstanding under the Credit Agreement was 2.13% for Q2 2020, increasing to 3.91% including interest rate swap agreements[65] Long-Term Debt Summary | Debt Type | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :------------------ | :--------------------------- | :------------------------------ | | Term Loan A | $455.9 | $458.4 | | Term Loan A-1 | $677.1 | $681.6 | | 2022 Notes | $375.9 | $375.9 | | 2024 Notes | $602.9 | $602.9 | | Finance leases | $3.8 | $3.9 | | Total outstanding debt | $2,115.6 | $2,122.7 | | Total long-term debt | $2,086.6 | $2,091.7 | 10. EARNINGS PER SHARE - The weighted average common shares outstanding for basic and diluted EPS remained consistent, as incremental shares from equity awards were anti-dilutive[68] Weighted Average Common Shares Outstanding | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :------------------------------------ | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Weighted average common shares outstanding | 56.5 | 56.3 | 56.4 | 56.2 | | Weighted average diluted common shares outstanding | 56.5 | 56.3 | 56.4 | 56.2 | 11. STOCK-BASED COMPENSATION - Total stock-based compensation expense increased to $7.0 million in Q2 2020 (from $6.3 million in Q2 2019) and to $14.9 million for the six months ended June 30, 2020 (from $12.0 million in 2019)[70] - Approximately 3.9 million shares remained available for award under the Equity and Incentive Plan as of June 30, 2020[69] Stock-Based Compensation Expense | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Compensation expense related to stock-based payments | $7.0 | $6.3 | $14.9 | $12.0 | | Related income tax benefit | $1.8 | $1.7 | $3.9 | $3.2 | 12. ACCUMULATED OTHER COMPREHENSIVE LOSS - Accumulated other comprehensive loss increased from $84.0 million at December 31, 2019, to $92.3 million at June 30, 2020, primarily due to foreign currency translation adjustments[80] Changes in Accumulated Other Comprehensive Loss | Component | Balance at December 31, 2019 (in millions) | Other comprehensive (loss) income (in millions) | Balance at June 30, 2020 (in millions) | | :-------------------------------- | :----------------------------------- | :-------------------------------------- | :----------------------------------- | | Foreign Currency Translation | $(79.4) | $(8.5) | $(87.9) | | Unrecognized Pension and Postretirement Benefits | $(4.6) | $0.2 | $(4.4) | | Accumulated Other Comprehensive Loss | $(84.0) | $(8.3) | $(92.3) | 13. EMPLOYEE RETIREMENT AND POSTRETIREMENT BENEFITS - Net periodic pension cost shifted from an expense of $0.5 million in Q2 2019 to a benefit of $0.4 million in Q2 2020, and from an expense of $0.5 million to a benefit of $0.8 million for the six-month period[83] - The Company executed a complete withdrawal from a multiemployer pension plan in Q2 2019, settling a $4.1 million withdrawal liability in Q4 2019[86] Net Periodic Benefit Cost | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Net periodic pension (benefit) cost | $(0.4) | $0.5 | $(0.8) | $0.5 | | Net periodic postretirement cost | $0.2 | $0.3 | $0.4 | $0.6 | 14. COMMITMENTS AND CONTINGENCIES - The Company is involved in several class action lawsuits, including 'Public Employees' Retirement Systems of Mississippi v. TreeHouse Foods, Inc., et al.' (securities class action) and derivative actions, which it intends to vigorously defend[87][88][89] - A preliminary settlement understanding of $9.0 million was reached with plaintiffs in the 'Negrete v. Ralcorp Holdings, Inc., et al.' wage and hour class action, resulting in a $9.0 million liability accrual as of June 30, 2020[94] - Mediation for the 'Public Employees' case was postponed due to COVID-19 concerns until at least August 26, 2020[92] 15. DERIVATIVE INSTRUMENTS - The Company uses derivative instruments (interest rate swaps, foreign currency contracts, commodity contracts) to manage interest rate, foreign currency, and commodity price risks, not for trading or speculative purposes[96][97][100][101] - As of June 30, 2020, the Company had $875.0 million in interest rate swap agreements to fix LIBOR rates, which are not accounted for under hedge accounting[99] Fair Value of Derivative Instruments | Derivative Type | Fair Value June 30, 2020 (in millions) | Fair Value December 31, 2019 (in millions) | | :---------------------- | :----------------------------------- | :----------------------------------- | | Asset Derivatives | $2.4 | $1.6 | | Liability Derivatives | $117.8 | $57.2 | Gain (Loss) on Derivative Instruments | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Total unrealized gain (loss) | $4.3 | $(25.3) | $(59.8) | $(41.2) | | Total realized (loss) gain | $(9.2) | $3.1 | $(11.4) | $6.3 | | Total loss | $(4.9) | $(22.2) | $(71.2) | $(34.9) | 16. SEGMENT INFORMATION - Effective January 1, 2020, the Company reorganized from three product-category segments to two market-dynamics segments: Meal Preparation and Snacking & Beverages[107] - Both segments showed net sales growth and increased direct operating income for both the three and six months ended June 30, 2020, compared to the prior year[112] Segment Financial Summary | Segment | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :-------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Meal Preparation Net Sales | $667.7 | $657.5 | $1,341.3 | $1,328.2 | | Snacking & Beverages Net Sales | $374.2 | $367.8 | $785.5 | $763.9 | | Total Net Sales | $1,041.9 | $1,025.3 | $2,126.8 | $2,092.1 | | Meal Preparation Direct Operating Income | $102.3 | $90.3 | $188.6 | $181.1 | | Snacking & Beverages Direct Operating Income | $52.5 | $46.0 | $100.6 | $92.9 | | Total Direct Operating Income | $154.8 | $136.3 | $289.2 | $274.0 | Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition, operational results, and the impact of COVID-19 Business Overview - TreeHouse Foods, Inc. is a leading North American manufacturer and distributor of private label foods and beverages, with 36 production facilities[115] - The Company's product portfolio includes snacking, beverages, and meal preparation products across various formats, with a focus on clean label, organic, and preservative-free options[115] - Effective January 1, 2020, the Company operates under two reportable segments: Meal Preparation and Snacking & Beverages[116] Recent Developments - The COVID-19 pandemic led to significant changes in product consumption, favoring the retail grocery business (80% of net sales) and offsetting weakness in the food-away-from-home channel[121] - The Company implemented extensive safety measures for employees, including increased sanitation, physical barriers, PPE, temperature screenings, supplemental pay, and remote work[120] - Favorable revenue and earnings impacts from increased food-at-home consumption are expected to continue in the immediate future, though less elevated in the second half of 2020[123] - The Company reorganized its segments from product categories (Baked Goods, Beverages, Meal Solutions) to market dynamics (Snacking & Beverages, Meal Preparation) effective January 1, 2020[124] Results of Operations - Organic net sales increased 3.7% in Q2 2020 and 3.1% for the six months ended June 30, 2020, primarily due to increased retail demand from COVID-19, despite divestitures and pricing adjustments[128][142] - Gross profit margin slightly decreased due to incremental COVID-19 costs (production shifts, supplemental pay, PPE, sanitation), partially offset by favorable channel mix and higher throughput[129][143] - Total operating expenses decreased significantly due to lower restructuring expenses (TreeHouse 2020 winding down) and SG&A discipline, partially offset by higher employee expenses[130][144] - Total other expense decreased in Q2 2020 due to non-cash mark-to-market gains on hedging activities and favorable foreign currency exchange rates, but increased for the six-month period due to mark-to-market expenses and unfavorable currency rates[131][145] - Net income (loss) from discontinued operations improved significantly due to non-recurring impairment charges recognized in the prior year[134][148] - Meal Preparation segment organic net sales increased 1.8% in Q2 and 1.2% YTD, driven by retail demand, with direct operating income margin increasing due to favorable channel mix and lower SG&A[137][138][151][152] - Snacking & Beverages segment organic net sales increased 7.0% in Q2 and 6.5% YTD, also driven by retail demand, with direct operating income margin increasing due to productivity gains from higher operational throughput[139][140][153][154] Key Financial Metrics | Metric | Q2 2020 Net Sales (in millions) | Q2 2019 Net Sales (in millions) | YTD 2020 Net Sales (in millions) | YTD 2019 Net Sales (in millions) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Sales | $1,041.9 | $1,025.3 | $2,126.8 | $2,092.1 | | Gross Profit % | 18.4% | 18.5% | 18.1% | 18.4% | | Operating Income (Loss) | $25.3 | $(7.9) | $55.5 | $7.6 | | Net Loss | $(1.5) | $(171.8) | $(32.7) | $(198.7) | Liquidity and Capital Resources - The Company maintains a strong financial position, with $723.9 million available under its Revolving Credit Facility as of June 30, 2020, after repaying $100.0 million[156] - COVID-19 has not materially impacted operations, and current cash balances, cash flows, and liquidity are expected to meet requirements, with CARES Act provisions offsetting incremental expenses[157] - Cash provided by operating activities from continuing operations increased by $166.8 million to $123.3 million for the first six months of 2020, driven by higher cash earnings and improved working capital[159] - Cash used in investing activities from continuing operations decreased by $44.6 million to $24.6 million, due to lower capital expenditures and proceeds from asset sales[160] - Free cash flow from continuing operations improved significantly to $66.7 million for the first six months of 2020, compared to a negative $114.0 million in the prior year[165] - The Company is in compliance with all financial debt covenants as of June 30, 2020[168] Guarantor Summarized Financial Information - The 2022 and 2024 Notes are fully and unconditionally guaranteed by domestic subsidiaries (Guarantor Subsidiaries), with no significant restrictions on fund transfers[169] Guarantor Summarized Statement of Operations | Metric | Six Months Ended June 30, 2020 (in millions) | Year Ended December 31, 2019 (in millions) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Net sales | $2,004.2 | $4,104.5 | | Gross profit | $360.7 | $763.9 | | Net loss from continuing operations | $(29.3) | $(116.9) | | Net loss | $(26.6) | $(371.0) | Guarantor Summarized Balance Sheet | Metric | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :------------------ | :--------------------------- | :------------------------------ | | Current assets | $1,222.0 | $1,142.2 | | Noncurrent assets | $3,578.6 | $3,626.5 | | Current liabilities | $881.8 | $858.9 | | Noncurrent liabilities | $2,505.4 | $2,515.6 | Non-GAAP Measures - The Company uses Non-GAAP financial measures like Organic Net Sales, Adjusted Diluted EPS, Adjusted Net Income, Adjusted EBIT, and Adjusted EBITDA from continuing operations to provide useful information for investors and management, excluding items affecting comparability[172][174][175][179][180] - Adjusted Diluted EPS from continuing operations increased significantly to $0.58 in Q2 2020 (from $0.40 in Q2 2019) and to $0.95 YTD (from $0.74 YTD 2019)[176] - Adjusted EBITDA from continuing operations increased to $119.2 million in Q2 2020 (from $105.4 million in Q2 2019) and to $217.9 million YTD (from $205.4 million YTD 2019), reflecting improved operating performance[183] Reconciliation of GAAP to Non-GAAP EPS | Metric | Q2 2020 (per share) | Q2 2019 (per share) | YTD 2020 (per share) | YTD 2019 (per share) | | :------------------------------------------ | :------------------ | :------------------ | :------------------- | :------------------- | | Diluted loss per share from continuing operations (GAAP) | $(0.05) | $(0.89) | $(0.63) | $(1.15) | | Adjusted diluted EPS from continuing operations (Non-GAAP) | $0.58 | $0.40 | $0.95 | $0.74 | Reconciliation of GAAP to Non-GAAP Financial Measures | Metric | Q2 2020 (in millions) | Q2 2019 (in millions) | YTD 2020 (in millions) | YTD 2019 (in millions) | | :------------------------------------------ | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Net loss from continuing operations (GAAP) | $(2.6) | $(50.1) | $(35.4) | $(64.6) | | Adjusted net income from continuing operations (Non-GAAP) | $33.0 | $22.7 | $53.7 | $41.6 | | Adjusted EBIT from continuing operations (Non-GAAP) | $69.6 | $54.9 | $118.5 | $102.1 | | Adjusted EBITDA from continuing operations (Non-GAAP) | $119.2 | $105.4 | $217.9 | $205.4 | | Adjusted EBITDA margin from continuing operations | 11.4% | 10.3% | 10.2% | 9.8% | Other Commitments and Contingencies - The Company has commitments related to lease obligations and selected levels of property and casualty risks (employee health care, workers' compensation, other casualty losses)[185][188] Recent Accounting Pronouncements - Information on recent accounting pronouncements is detailed in Note 2 to the Condensed Consolidated Financial Statements[186] Critical Accounting Policies - There were no material changes to the Company's critical accounting policies in the three and six months ended June 30, 2020[187] Off-Balance Sheet Arrangements - The Company does not have any material off-balance sheet arrangements, other than letters of credit[188] Item 3 — Quantitative and Qualitative Disclosures About Market Risk Details the company's exposure to market risks and the derivative instruments used for management - The Company uses derivative instruments to manage market risks related to interest rates, foreign currency, and commodity prices[191] - No significant changes in the Company's portfolio of financial instruments or market risk exposures have occurred since the 2019 year-end[192] Item 4 — Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020[194] - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2020[195] Report of Independent Registered Public Accounting Firm Presents the independent auditor's review conclusion on the interim financial information - Deloitte & Touche LLP reviewed the interim financial information for Q2 2020 and found no material modifications needed for conformity with GAAP[197] - The firm expressed an unqualified opinion on the Company's consolidated financial statements as of December 31, 2019, and confirmed the fair statement of the accompanying condensed balance sheet information[198] Part II — Other Information Item 1 — Legal Proceedings Refers to Note 14 for detailed information regarding ongoing legal proceedings - Information regarding legal proceedings is available in Note 14 to the Condensed Consolidated Financial Statements[202] Item 1A — Risk Factors Highlights potential adverse impacts of the COVID-19 pandemic on business operations and financial condition - The COVID-19 pandemic may adversely affect the Company's business, results of operations, and financial condition[204] - Key risks include workforce inability to work, facility shutdowns, decreased demand in food-away-from-home, commodity cost volatility, foreign currency fluctuations, supply chain disruptions, and challenges in executing strategic activities or obtaining financing[208] - COVID-19 could also negatively affect internal controls over financial reporting and divert management attention if key employees become ill[205] Item 2 — Unregistered Sale of Equity Securities and Use of Proceeds This section is noted as not applicable for the current reporting period - This section is marked as 'Not applicable'[207] Item 6 — Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files - The exhibits include an Awareness Letter from Deloitte & Touche LLP, a List of Guarantor Subsidiaries, and Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[211] - XBRL Instance Document and other XBRL Taxonomy Extension documents are also filed[211] Signatures Contains the required officer signatures for the Form 10-Q filing - The report is signed by William J. Kelley Jr., Executive Vice President and Chief Financial Officer, and Patrick M. O'Donnell, Vice President, Corporate Controller, and Principal Accounting Officer, on August 6, 2020[214]