TreeHouse(THS) - 2020 Q3 - Quarterly Report

Part I — Financial Information This section encompasses the unaudited condensed consolidated financial statements and management's discussion and analysis for TreeHouse Foods, Inc Item 1 — Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of TreeHouse Foods, Inc. for the periods ended September 30, 2020, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, recent pronouncements, restructuring programs, discontinued operations, debt, and other financial details Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of September 30, 2020, and December 31, 2019 | Metric | Sep 30, 2020 (Millions) | Dec 31, 2019 (Millions) | Change (Millions) | % Change | | :-------------------------------- | :---------------------- | :---------------------- | :---------------- | :------- | | Cash and cash equivalents | $365.1 | $202.3 | $162.8 | 80.5% | | Total current assets | $1,551.8 | $1,219.5 | $332.3 | 27.3% | | Total assets | $5,385.9 | $5,139.4 | $246.5 | 4.8% | | Total current liabilities | $920.6 | $813.4 | $107.2 | 13.2% | | Total liabilities | $3,558.6 | $3,308.5 | $250.1 | 7.6% | | Total stockholders' equity | $1,827.3 | $1,830.9 | $(3.6) | -0.2% | Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including net sales, gross profit, operating income, and net income for the three and nine months ended September 30, 2020 and 2019 | Metric (Continuing Operations) | 3 Months Ended Sep 30, 2020 (Millions) | 3 Months Ended Sep 30, 2019 (Millions) | Change (Millions) | % Change | | :----------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net sales | $1,045.7 | $1,057.3 | $(11.6) | -1.1% | | Gross profit | $188.2 | $186.3 | $1.9 | 1.0% | | Operating income (loss) | $39.8 | $(55.6) | $95.4 | 171.6% | | Net income (loss) | $12.1 | $(177.8) | $189.9 | 106.8% | | EPS - Basic | $0.21 | $(3.16) | $3.37 | 106.6% | | Metric (Continuing Operations) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | Change (Millions) | % Change | | :----------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net sales | $3,172.5 | $3,149.4 | $23.1 | 0.7% | | Gross profit | $574.3 | $571.7 | $2.6 | 0.5% | | Operating income (loss) | $95.3 | $(48.0) | $143.3 | 298.5% | | Net income (loss) | $(20.6) | $(376.5) | $355.9 | 94.5% | | EPS - Basic | $(0.36) | $(6.70) | $6.34 | 94.6% | Condensed Consolidated Statements of Comprehensive Income (Loss) This section details the company's comprehensive income or loss, including net income and other comprehensive income components for the three and nine months ended September 30, 2020 and 2019 | Metric | 3 Months Ended Sep 30, 2020 (Millions) | 3 Months Ended Sep 30, 2019 (Millions) | Change (Millions) | | :----------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Net income (loss) | $12.1 | $(177.8) | $189.9 | | Other comprehensive income (loss) | $5.9 | $(5.4) | $11.3 | | Comprehensive income (loss) | $18.0 | $(183.2) | $201.2 | | Metric | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | Change (Millions) | | :----------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Net income (loss) | $(20.6) | $(376.5) | $355.9 | | Other comprehensive income (loss) | $(2.4) | $8.9 | $(11.3) | | Comprehensive income (loss) | $(23.0) | $(367.6) | $344.6 | Condensed Consolidated Statements of Stockholders' Equity This section presents changes in the company's stockholders' equity, including additional paid-in capital, accumulated deficit, and other comprehensive loss from January 1, 2020, to September 30, 2020 | Metric (Millions) | Jan 1, 2020 | Sep 30, 2020 | Change | | :------------------ | :---------- | :----------- | :----- | | Additional Paid-In Capital | $2,154.6 | $2,174.0 | $19.4 | | Accumulated Deficit | $(157.0) | $(177.6) | $(20.6) | | Accumulated Other Comprehensive Loss | $(84.0) | $(86.4) | $(2.4) | | Total Equity | $1,830.9 | $1,827.3 | $(3.6) | Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 | Cash Flow Activity (Continuing Operations) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | Change (Millions) | | :----------------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Net cash provided by operating activities | $124.5 | $5.8 | $118.7 | | Net cash used in investing activities | $(64.6) | $(99.8) | $35.2 | | Net cash provided by (used in) financing activities | $103.9 | $(141.3) | $245.2 | | Net increase (decrease) in cash and cash equivalents | $162.8 | $(119.2) | $282.0 | | Cash and cash equivalents, end of period | $365.1 | $45.1 | $320.0 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of accounting policies, significant transactions, and other financial information supporting the condensed consolidated financial statements 1. Basis of Presentation This note explains the basis of preparing the financial statements, including the company's organizational and segment structure changes - The Company changed its organizational and segment structure in Q1 2020, reorganizing from three segments to two: Meal Preparation and Snacking & Beverages, with prior period information recast[28] 2. Recent Accounting Pronouncements This note outlines recently adopted and evaluated accounting pronouncements and their impact on the financial statements - Early adopted SEC Rules 3-10 and 3-16 (financial disclosure for debt offerings) and ASU 2019-12 (simplifying income tax accounting) in Q1 2020, with ASU 2019-12 having no material impact[29][30] - Currently evaluating ASU 2020-04 (Reference Rate Reform) for potential impact on consolidated financial statements[31] 3. Restructuring Programs This note details the company's ongoing restructuring programs, including their objectives, costs, and expected impacts on operations - The Company has two restructuring programs: TreeHouse 2020 for long-term growth and margin improvement, and Structure to Win for operating expense improvement[32] | Program | 3 Months Ended Sep 30, 2020 (Millions) | 3 Months Ended Sep 30, 2019 (Millions) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | | :------------------ | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | TreeHouse 2020 | $9.1 | $21.9 | $30.0 | $76.5 | | Structure to Win | $11.1 | $2.4 | $21.9 | $13.4 | | Total | $20.2 | $24.3 | $51.9 | $89.9 | - Total expected costs for the Structure to Win program increased from $60.4 million to $90.0 million during the nine months ended September 30, 2020, due to reorganization transition expenses[38] 4. Receivables Sales Program This note describes the company's program for selling trade accounts receivable to third-party financial institutions and related financial metrics - 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[40] | Metric (Millions) | Sep 30, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Outstanding accounts receivable sold | $226.7 | $243.0 | | Collections not remitted | $123.6 | $158.3 | | Loss on sale of receivables (3M) | $0.4 | $0.8 | | Loss on sale of receivables (9M) | $1.9 | $2.9 | 5. Inventories This note provides a breakdown of the company's inventory components, including raw materials, supplies, and finished goods | Inventory Type (Millions) | Sep 30, 2020 | Dec 31, 2019 | | :------------------------ | :----------- | :----------- | | Raw materials and supplies | $274.4 | $205.5 | | Finished goods | $389.7 | $338.5 | | Total inventories | $664.1 | $544.0 | 6. Discontinued Operations and Other Divestitures This note details the financial impact and status of discontinued operations and other divestitures, including the Snacks division and RTE Cereal business - The Snacks division was sold on August 1, 2019, for $90 million cash, resulting in a non-cash pre-tax loss of $97.5 million[45] - The Ready-to-eat (RTE) Cereal business remains classified as a discontinued operation; the sale to Post Holdings, Inc. was terminated, and the Company is pursuing an alternative buyer[48][49] - Two In-Store Bakery facilities were sold on April 17, 2020, for $24.0 million, resulting in a $0.3 million loss, but did not meet the criteria for discontinued operations[53][54] | Metric (Discontinued Operations) | 3 Months Ended Sep 30, 2020 (Millions) | 3 Months Ended Sep 30, 2019 (Millions) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | | :------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net sales | $51.8 | $122.1 | $168.7 | $581.8 | | Operating income (loss) | $2.7 | $(120.8) | $8.5 | $(278.4) | | Net income (loss) | $0.7 | $(116.8) | $3.4 | $(250.9) | 7. Goodwill and Intangible Assets This note discusses changes in goodwill and intangible assets, including impairment tests, acquisitions, and non-cash impairment charges - The change in organizational structure in Q1 2020 triggered a goodwill impairment test, which did not result in any impairment losses[57] | Goodwill (Millions) | Jan 1, 2020 | Sep 30, 2020 | Change | | :------------------ | :---------- | :----------- | :----- | | Meal Preparation | $1,253.0 | $1,262.0 | $9.0 | | Snacking & Beverages | $854.3 | $853.1 | $(1.2) | | Total Goodwill | $2,107.3| $2,115.1 | $7.8| - Goodwill increased by $10.7 million due to the acquisition of a refrigerated dough business on September 1, 2020[58] - In Q3 2019, the Company recognized $88.0 million in non-cash impairment charges for Cookies and Dry Dinners asset groups, comprising $42.8 million in property, plant, equipment and $45.2 million in finite-lived intangible assets[62] 8. Income Taxes This note provides information on the company's effective tax rates, the impact of the CARES Act, and related tax benefits and receivables | Effective Tax Rate | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Effective Rate | 49.1% | 37.4% | 39.1% | 28.5% | - The CARES Act resulted in a $14.0 million income tax benefit for the three months and $25.0 million for the nine months ended September 30, 2020, related to NOL carryback provisions[66] - A federal income tax refund receivable of $73.5 million related to the CARES Act is included in current assets[66] 9. Long-Term Debt This note details the company's long-term debt structure, including various loan types, note redemptions, new issuances, and available credit facilities | Debt Type (Millions) | Sep 30, 2020 | Dec 31, 2019 | | :------------------- | :----------- | :----------- | | Term Loan A | $454.6 | $458.4 | | Term Loan A-1 | $674.9 | $681.6 | | 2022 Notes | $— | $375.9 | | 2024 Notes | $602.9 | $602.9 | | 2028 Notes | $500.0 | $— | | Finance leases | $4.2 | $3.9 | | Total outstanding debt | $2,236.6 | $2,122.7 | - The Company redeemed all $375.9 million outstanding principal of its 4.875% 2022 Notes on September 25, 2020, incurring a $1.2 million loss on extinguishment of debt[71] - Issued $500 million aggregate principal amount of 4.000% senior notes due September 1, 2028 (2028 Notes) on September 9, 2020, with proceeds used for the 2022 Notes redemption and general corporate purposes[72][73][134] - As of September 30, 2020, $727.0 million was available under the $750.0 million Revolving Credit Facility[70] 10. Earnings Per Share This note presents the calculation of basic and diluted earnings per share, including weighted average common shares outstanding and anti-dilutive equity awards | Metric (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Weighted average common shares outstanding (Basic) | 56.6 | 56.3 | 56.5 | 56.2 | | Weighted average diluted common shares outstanding | 56.8 | 56.3 | 56.5 | 56.2 | - Equity awards totaling 1.5 million for both the three and nine months ended September 30, 2020, were excluded from diluted EPS calculation as they were anti-dilutive due to net loss[80] 11. Stock-Based Compensation This note outlines the company's stock-based compensation expense, related tax benefits, available shares for award, and future compensation costs | Metric (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Compensation expense related to stock-based payments | $5.8 | $5.5 | $20.7 | $17.5 | | Related income tax benefit | $1.5 | $1.2 | $5.4 | $4.4 | - Approximately 4.0 million shares remained available for award under the Equity and Incentive Plan as of September 30, 2020[81] - Future compensation costs for restricted stock units are approximately $23.1 million, to be recognized over the next 2.0 years[89] 12. Accumulated Other Comprehensive Loss This note details the components of accumulated other comprehensive loss, including foreign currency translation adjustments and unrecognized pension benefits | Component (Millions) | Dec 31, 2019 | Sep 30, 2020 | Change | | :------------------- | :----------- | :----------- | :----- | | Foreign Currency Translation | $(79.4) | $(82.2) | $(2.8) | | Unrecognized Pension and Postretirement Benefits | $(4.6) | $(4.2) | $0.4 | | Accumulated Other Comprehensive Loss | $(84.0) | $(86.4) | $(2.4) | 13. Employee Retirement and Postretirement Benefits This note provides information on net periodic pension costs and significant events related to employee retirement and postretirement benefit plans | Net Periodic Pension (Benefit) Cost (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Service cost | $0.4 | $0.4 | $1.2 | $1.3 | | Interest cost | $2.7 | $3.2 | $8.1 | $9.7 | | Expected return on plan assets | $(3.7) | $(3.6) | $(10.9) | $(10.8) | | Net periodic pension (benefit) cost | $(0.4) | $0.1 | $(1.2) | $0.6 | - The Company executed a complete withdrawal from the Retail, Wholesale, and Department Store International Union and Industry Pension Fund in Q2 2019, settling a $4.1 million withdrawal liability in Q4 2019[98] 14. Commitments and Contingencies This note describes the company's involvement in various legal proceedings, including class action lawsuits and a preliminary settlement for wage and hour litigation - The Company is involved in multiple class action lawsuits (Tarara, Wells, Lavin, Bartelt, Ann Arbor) alleging false and misleading statements and breach of fiduciary duty, which it intends to vigorously defend[99][100] - A preliminary settlement understanding has been reached for $9.0 million to resolve wage and hour practice litigation (Negrete v. Ralcorp Holdings, Inc., et al.), with an accrual recorded as of September 30, 2020[105] 15. Derivative Instruments This note explains the company's use of derivative instruments to manage interest rate, foreign currency, and commodity price risks, along with their fair values and gains/losses - The Company uses derivative instruments to manage interest rate, foreign currency, and commodity price risks, not for trading or speculative purposes[108] | Derivative Fair Value (Millions) | Sep 30, 2020 | Dec 31, 2019 | | :------------------------------- | :----------- | :----------- | | Asset Derivatives | $3.1 | $1.6 | | Liability Derivatives | $109.3 | $57.2 | | Total Gain (Loss) on Derivative Contracts (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total unrealized gain (loss) | $9.2 | $(12.4) | $(50.6) | $(53.6) | | Total realized (loss) gain | $(8.8) | $0.2 | $(20.2) | $6.5 | | Total gain (loss) | $0.4 | $(12.2) | $(70.8) | $(47.1) | 16. Segment Information This note provides financial data by reportable segment, including net sales and direct operating income for Meal Preparation and Snacking & Beverages, and revenue by sales channel - Effective January 1, 2020, the Company reorganized into two reportable segments: Meal Preparation and Snacking & Beverages, from the previous three segments[119] | Segment Net Sales (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Meal Preparation | $642.7 | $656.5 | $1,984.0 | $1,984.7 | | Snacking & Beverages | $403.0 | $400.8 | $1,188.5 | $1,164.7 | | Total | $1,045.7 | $1,057.3 | $3,172.5 | $3,149.4 | | Segment Direct Operating Income (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Meal Preparation | $80.1 | $92.4 | $268.7 | $273.5 | | Snacking & Beverages | $65.7 | $41.3 | $166.3 | $134.2 | | Total | $145.8 | $133.7 | $435.0 | $407.7 | | Revenue by Sales Channel (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Retail grocery | $850.7 | $835.4 | $2,616.8 | $2,498.0 | | Food-away-from-home | $64.2 | $94.5 | $186.3 | $271.1 | | Industrial, co-manufacturing, and other | $130.8 | $127.4 | $369.4 | $380.3 | | Total net sales | $1,045.7 | $1,057.3 | $3,172.5 | $3,149.4 | 17. Subsequent Events This note discloses significant events occurring after the reporting period, including the announced acquisition of Riviana Foods' U.S. branded pasta portfolio - On November 5, 2020, the Company announced the acquisition of the majority of Riviana Foods, Inc.'s U.S. branded pasta portfolio and a manufacturing facility for approximately $242.5 million in cash, expected to close in Q4 2020[127] Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and nine months ended September 30, 2020, discussing business overview, recent developments, detailed analysis of financial performance by segment, liquidity, capital resources, and non-GAAP financial measures Business Overview TreeHouse Foods, Inc. is a leading manufacturer and distributor of private label foods and beverages in North America, with a vision to be the undisputed solutions leader for custom brands - TreeHouse Foods, Inc. is a leading manufacturer and distributor of private label foods and beverages in North America, aiming to be the undisputed solutions leader for custom brands[129] - The Company's product portfolio includes snacking, beverages, and meal preparation products, available in various formats, with a focus on high quality and affordability[129] Recent Developments This section highlights key recent events and their potential impact on the company's operations and financial performance - The Company will acquire Riviana Foods' U.S. branded pasta portfolio and a manufacturing facility for approximately $242.5 million, strengthening its portfolio and expanding scale[133] - Completed a public offering of $500 million in 4.000% senior notes due 2028, using proceeds to redeem $375.9 million of 2022 Notes and for general corporate purposes[134] - COVID-19 led to favorable revenue and earnings impacts in retail grocery (80% of sales), offsetting weakness in food-away-from-home, with no material supply chain disruptions to date but production limitations due to a tighter labor market[137] - The Company expects at-home food consumption demand to remain elevated and private label to benefit from consumer shifts and economic recession[138] Results of Operations This section analyzes the company's financial performance, including net sales, gross profit, and operating income, for the reported periods Overall Financial Results This section provides a summary of the company's key financial results from continuing operations for the three and nine months ended September 30, 2020 and 2019 | Metric (Continuing Operations) | 3 Months Ended Sep 30, 2020 (Millions) | 3 Months Ended Sep 30, 2019 (Millions) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | | :----------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net sales | $1,045.7 | $1,057.3 | $3,172.5 | $3,149.4 | | Gross profit | $188.2 | $186.3 | $574.3 | $571.7 | | Operating income (loss) | $39.8 | $(55.6) | $95.3 | $(48.0) | | Net income (loss) from continuing operations | $11.4 | $(61.0) | $(24.0) | $(125.6) | | Net income (loss) | $12.1 | $(177.8) | $(20.6) | $(376.5) | Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019 This section provides a detailed comparative analysis of the company's financial performance for the three months ended September 30, 2020, versus the prior year | Net Sales Change (Millions) | 3 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | | 2019 Net sales | $1,057.3 | | Volume/mix (excl. SKU rationalization & divestitures) | $4.2 (0.4%) | | Pricing | $2.7 (0.3%) | | Volume/mix (divestitures) | $(17.9) (-1.7%) | | Foreign currency | $(0.6) (-0.1%) | | 2020 Net sales | $1,045.7 (-1.1%) | | Organic net sales change | 0.7% | - Gross profit margin increased by 0.4 percentage points to 18.0%, driven by favorable channel mix (more retail, less food-away-from-home) and lower operational costs, partially offset by COVID-19 incremental costs[144] - Total operating expenses decreased by 8.7 percentage points to 14.2% of net sales, primarily due to the absence of non-recurring impairment charges from Q3 2019 and lower restructuring expenses[145] - Net income from discontinued operations increased by $117.5 million, primarily due to non-recurring losses in Q3 2019 related to the Snacks division sale and RTE Cereal impairment[149] - Meal Preparation segment net sales decreased 2.1% (organic -2.0%) due to unfavorable volume/mix from distribution losses and decreased food-away-from-home demand, and unfavorable pricing[152] - Snacking & Beverages segment net sales increased 0.5% (organic +5.2%) due to favorable volume/mix from distribution gains and innovation, and non-recurring pricing, despite divestitures[154] Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 This section provides a detailed comparative analysis of the company's financial performance for the nine months ended September 30, 2020, versus the prior year | Net Sales Change (Millions) | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | | 2019 Net sales | $3,149.4 | | Volume/mix (excl. SKU rationalization & divestitures) | $75.2 (2.4%) | | Pricing | $(4.5) (-0.1%) | | Volume/mix (divestitures) | $(40.3) (-1.4%) | | SKU rationalization | $(3.4) (-0.1%) | | Foreign currency | $(3.9) (-0.1%) | | 2020 Net sales | $3,172.5 (0.7%) | | Organic net sales change | 2.3% | - Gross profit margin decreased by 0.2 percentage points to 18.0%, primarily due to incremental COVID-19 costs and higher employee expenses, partially offset by higher operational throughput[158] - Total operating expenses decreased by 4.6 percentage points to 15.1% of net sales, mainly due to the absence of Q3 2019 impairment charges, lower restructuring expenses, and SG&A discipline[159] - Net income from discontinued operations increased by $254.3 million, primarily due to non-recurring impairment charges and losses on sale from 2019[163] - Meal Preparation segment net sales were flat (organic +0.1%), with favorable volume/mix from increased retail demand offsetting unfavorable pricing and foreign currency[166] - Snacking & Beverages segment net sales increased 2.0% (organic +6.1%), driven by increased retail demand due to COVID-19, despite divestitures and SKU rationalization[168] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash flows, its capital structure, and its capacity to meet short-term and long-term obligations - The Company maintains a strong financial position with $727.0 million available under its Revolving Credit Facility as of September 30, 2020[170] - COVID-19 has not had a material adverse impact on operations, and the CARES Act is expected to provide benefits, including deferring $20-25 million in payroll taxes and a $73.5 million NOL carryback refund[171] | Cash Flow Activity (Continuing Operations) | 9 Months Ended Sep 30, 2020 (Millions) | 9 Months Ended Sep 30, 2019 (Millions) | | :----------------------------------------- | :------------------------------------- | :------------------------------------- | | Operating activities | $124.5 | $5.8 | | Investing activities | $(64.6) | $(99.8) | | Financing activities | $103.9 | $(141.3) | | Discontinued operations | $(2.4) | $111.6 | | Free Cash Flow (Continuing Operations) (Millions) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | | Cash flow provided by operating activities | $124.5 | $5.8 | | Less: Capital expenditures | $(79.1) | $(104.8) | | Free cash flow from continuing operations | $45.4 | $(99.0) | - The Company is in compliance with all applicable financial debt covenants as of September 30, 2020[182] Non-GAAP Measures This section presents non-GAAP financial measures, including organic net sales, adjusted diluted EPS, adjusted net income, adjusted EBIT, and adjusted EBITDA, to provide additional insights into the company's performance - Organic net sales, adjusted diluted EPS, adjusted net income, adjusted EBIT, and adjusted EBITDA are presented as Non-GAAP measures to provide meaningful comparisons of performance between periods[189][190][195][196] | Adjusted Diluted EPS (Non-GAAP) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Diluted EPS (GAAP) | $0.20 | $(1.08) | $(0.42) | $(2.23) | | Adjustments (net of tax) | $0.51 | $1.63 | $2.08 | $3.51 | | Adjusted diluted EPS | $0.71 | $0.55 | $1.66 | $1.28 | | Adjusted EBITDA (Non-GAAP) (Millions) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) from continuing operations (GAAP) | $11.4 | $(61.0) | $(24.0) | $(125.6) | | Adjusted net income from continuing operations | $40.5 | $31.0 | $94.2 | $72.6 | | Adjusted EBIT from continuing operations | $80.1 | $61.9 | $198.6 | $164.0 | | Adjusted EBITDA from continuing operations | $131.0 | $112.6 | $348.9 | $318.0 | Other Commitments and Contingencies This section provides an update on the company's contractual obligations and other contingent liabilities - No material changes to the contractual obligations table from the 2019 Annual Report on Form 10-K, except for debt refinancing changes disclosed in Note 9[201] Recent Accounting Pronouncements This section refers to the relevant note in the financial statements for details on recent accounting pronouncements - Information regarding recent accounting pronouncements is provided in Note 2 to the Condensed Consolidated Financial Statements[202] Critical Accounting Policies This section confirms that there were no material changes to the company's critical accounting policies during the reporting period - There were no material changes to the Company's critical accounting policies in the three and nine months ended September 30, 2020[203] Off-Balance Sheet Arrangements This section discloses any material off-balance sheet arrangements maintained by the company - The Company does not have any material off-balance sheet arrangements other than letters of credit[204] Cautionary Statement Regarding Forward Looking Statements This section advises readers that forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks and uncertainties, including those related to COVID-19, indebtedness, market disruptions, raw material costs, competition, supply chain, acquisitions, litigation, and regulatory changes[206] Item 3 — Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate, foreign currency, and commodity price risks, and its use of derivative instruments to manage these exposures. It notes no significant changes in market risk exposures from the prior year-end - The Company manages interest rate, foreign currency, and commodity price risks using derivative instruments[208] - No significant changes in the Company's portfolio of financial instruments or market risk exposures from the 2019 year-end[209] Item 4 — Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2020, concluding they were effective. There were no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2020[211] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2020[212] Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP reviewed the interim financial information for TreeHouse Foods, Inc. for the periods ended September 30, 2020 and 2019, and found no material modifications needed for conformity with GAAP. They also confirmed the fair statement of the December 31, 2019 balance sheet - Deloitte & Touche LLP reviewed the interim financial information and found no material modifications needed for GAAP conformity[215] - The accompanying condensed consolidated balance sheet as of December 31, 2019, is fairly stated in all material respects[216] Part II — Other Information This section provides additional information on legal proceedings, risk factors, controls, and other required disclosures Item 1. Legal Proceedings This section refers to Note 14 of the Condensed Consolidated Financial Statements for detailed information on legal proceedings, including ongoing class action lawsuits and a preliminary settlement understanding for wage and hour practices - Information on legal proceedings is detailed in Note 14 of the financial statements[220] Item 1A. Risk Factors This section highlights the potential adverse impacts of the COVID-19 pandemic on the company's business, operations, and financial condition, including workforce disruptions, facility shutdowns, decreased food-away-from-home demand, supply chain issues, and financial market volatility. It also references the 2019 Annual Report on Form 10-K for other risk factors - COVID-19 poses significant risks including workforce disruptions, facility shutdowns, decreased food-away-from-home demand, supply chain issues, and financial market volatility[222][223][224][226] - The company cannot accurately predict the future impact of COVID-19 due to various uncertainties[224] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds This item is marked as 'Not applicable,' indicating no unregistered sales of equity securities or specific use of proceeds to report for the period - This item is not applicable for the reporting period[225] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including supplemental indentures, awareness letters, certifications, and XBRL interactive data files - Exhibits include a Twelfth Supplemental Indenture, Awareness Letter from Deloitte & Touche LLP, List of Guarantor Subsidiaries, and CEO/CFO certifications[228] Signatures The report is duly signed on behalf of TreeHouse Foods, Inc. 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, as of November 5, 2020 - The report is signed by William J. Kelley Jr. (EVP & CFO) and Patrick M. O'Donnell (VP, Corporate Controller, & Principal Accounting Officer) on November 5, 2020[231]