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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, 2022.
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)
 ths-20220331_g1.jpg
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 valueTHSNew York Stock Exchange
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 every Interactive Data File required to be submitted 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 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," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
    
Non-accelerated filerSmaller 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.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares of the registrant's common stock outstanding as of April 29, 2022 was 56,018,695.
1


Table of Contents
 

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, 2022December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$192.8 $308.6 
Receivables, net264.3 209.2 
Inventories741.6 677.8 
Prepaid expenses and other current assets78.9 60.2 
Total current assets1,277.6 1,255.8 
Property, plant, and equipment, net999.6 1,019.1 
Operating lease right-of-use assets195.5 165.6 
Goodwill2,184.0 2,181.4 
Intangible assets, net539.9 555.0 
Other assets, net31.6 30.1 
Total assets$5,228.2 $5,207.0 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$840.5 $786.0 
Accrued expenses240.3 274.6 
Current portion of long-term debt4.7 15.6 
Total current liabilities1,085.5 1,076.2 
Long-term debt1,886.6 1,890.7 
Operating lease liabilities170.4 144.0 
Deferred income taxes157.8 156.5 
Other long-term liabilities80.1 94.2 
Total liabilities3,380.4 3,361.6 
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, 56.0 and 55.8 shares outstanding as of March 31, 2022 and December 31, 2021, respectively
0.6 0.6 
Treasury stock(133.3)(133.3)
Additional paid-in capital2,188.4 2,187.4 
Accumulated deficit(158.7)(155.7)
Accumulated other comprehensive loss(49.2)(53.6)
Total stockholders' equity1,847.8 1,845.4 
Total liabilities and stockholders' equity$5,228.2 $5,207.0 



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,
 20222021
Net sales$1,141.0 $1,057.3 
Cost of sales986.0 876.2 
Gross profit155.0 181.1 
Operating expenses:
Selling and distribution82.7 68.7 
General and administrative63.5 63.3 
Amortization expense18.2 18.4 
Other operating expense, net31.3 19.7 
Total operating expenses195.7 170.1 
Operating (loss) income(40.7)11.0 
Other (income) expense:
Interest expense19.2 25.1 
Loss on extinguishment of debt 14.4 
Gain on foreign currency exchange(2.8)(1.3)
Other income, net(55.5)(27.4)
Total other (income) expense(39.1)10.8 
(Loss) income before income taxes(1.6)0.2 
Income tax expense (benefit)1.2 (0.2)
Net (loss) income from continuing operations(2.8)0.4 
Net (loss) income from discontinued operations(0.2)1.1 
Net (loss) income$(3.0)$1.5 
Earnings (loss) per common share - basic:
Continuing operations$(0.05)$0.01 
Discontinued operations 0.02 
Earnings (loss) per share basic (1)
$(0.05)$0.03 
Earnings (loss) per common share - diluted:
Continuing operations$(0.05)$0.01 
Discontinued operations 0.02 
Earnings (loss) per share diluted (1)
$(0.05)$0.03 
Weighted average common shares:
Basic55.8 56.0 
Diluted55.8 56.5 


(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,
 20222021
Net (loss) income$(3.0)$1.5 
Other comprehensive income:
Foreign currency translation adjustments 4.3 0.9 
Pension and postretirement reclassification adjustment 0.1 0.1 
Other comprehensive income4.4 1.0 
Comprehensive income$1.4 $2.5 
 






































See Notes to Condensed Consolidated Financial Statements.
5


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in millions)
Accumulated
AdditionalOther
Common StockPaid-InAccumulatedTreasury StockComprehensiveTotal
SharesAmountCapitalDeficitSharesAmountLossEquity
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 
Issuance of 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 
Balance, January 1, 202258.7 $0.6 $2,187.4 $(155.7)(2.9)$(133.3)$(53.6)$1,845.4 
Net loss— — — (3.0)— — — (3.0)
Other comprehensive income— — — — — — 4.4 4.4 
Issuance of stock awards0.2 — (3.3)— — — — (3.3)
Stock-based compensation— — 4.3 — — — — 4.3 
Balance, March 31, 202258.9 $0.6 $2,188.4 $(158.7)(2.9)$(133.3)$(49.2)$1,847.8 


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,
20222021
Cash flows from operating activities:
Net (loss) income$(3.0)$1.5 
Net (loss) income from discontinued operations(0.2)1.1 
Net (loss) income from continuing operations(2.8)0.4 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization53.1 53.5 
Stock-based compensation4.3 4.9 
Loss on extinguishment of debt 14.4 
Unrealized gain on derivative contracts(50.9)(21.7)
Other(1.6)1.0 
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Receivables(54.4)67.8 
Inventories(62.0)(58.4)
Prepaid expenses and other assets(7.6)(28.3)
Accounts payable64.9 (7.2)
Accrued expenses and other liabilities(13.4)(31.9)
Net cash used in operating activities - continuing operations(70.4)(5.5)
Net cash used in operating activities - discontinued operations(0.2)(3.1)
Net cash used in operating activities(70.6)(8.6)
Cash flows from investing activities:
Additions to property, plant, and equipment(27.8)(28.0)
Additions to intangible assets(2.7)(3.3)
Proceeds from sale of fixed assets4.8 0.9 
Proceeds from sale of investments 17.2 
Net cash used in investing activities - continuing operations(25.7)(13.2)
Net cash used in investing activities - discontinued operations (0.4)
Net cash used in investing activities(25.7)(13.6)
Cash flows from financing activities:
Borrowings under Revolving Credit Facility30.5 30.0 
Payments under Revolving Credit Facility(30.5) 
Payments on financing lease obligations(0.5)(0.5)
Payment of deferred financing costs(1.6)(7.0)
Payments on Term Loans(14.3)(1,126.0)
Proceeds from refinanced Term Loans 1,430.0 
Repurchase of Notes (602.9)
Payment of debt premium for extinguishment of debt (9.0)
Payments related to stock-based award activities(3.3)(7.9)
Net cash used in financing activities - continuing operations(19.7)(293.3)
Net cash used in financing activities - discontinued operations  
Net cash used in financing activities(19.7)(293.3)
Effect of exchange rate changes on cash and cash equivalents0.2 (0.3)
Net decrease in cash and cash equivalents(115.8)(315.8)
Cash and cash equivalents, beginning of period308.6 364.6 
Cash and cash equivalents, end of period$192.8 $48.8 
7


Three Months Ended
March 31,
20222021
Supplemental cash flow disclosures:
Interest paid$17.1 $36.4 
Net income taxes paid (refunded)0.1 (0.2)
Non-cash investing and financing activities:
Accrued purchase of property and equipment$27.3 $27.5 
Accrued other intangible assets1.4 3.9 
Right-of-use assets obtained in exchange for lease obligations36.0 0.9 
Accrued deferred financing costs 1.5 










































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, 2022
(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, 2021. 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 management to use judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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, 2021.

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. This guidance is effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company has identified agreements that reference LIBOR, including interest rate swap agreements, accounts receivable sale agreements, and debt agreements. The new guidance will be applied as these contracts are modified to reference other rates.


9

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 and (2) 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 which primarily reside in our Snacking & Beverages segment. 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 customers' preferred manufacturing and distribution partner. This reinvestment will occur through 2023, and the cumulative costs incurred to date are $75.8 million. 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 severance, retention, and dedicated employee costs.

(2) Other
 
Other costs include restructuring costs incurred for costs to exit facilities, information technology system implementation, retention, severance, and other administrative costs. Retention includes one-time cash recognition payments that were expensed ratably from the fourth quarter of 2021 to the first quarter of 2022. Additional retention recognized is primarily for employees in connection with the ongoing, Board-led strategic review.

The costs by activity for the Growth, Reinvestment, and Restructuring Programs are outlined below:
 Three Months Ended
March 31,
 20222021
 (In millions)
Strategic Growth Initiatives$18.0 $16.1 
Other14.1 3.5 
Total$32.1 $19.6 
 
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 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 type associated with the Growth, Reinvestment, and Restructuring Programs:
Three Months Ended
March 31,
20222021
 (In millions)
Employee-related$16.6 $4.9 
Other costs15.5 14.7 
Total$32.1 $19.6 
 
For the three months ended March 31, 2022 and 2021, employee-related costs primarily consisted of severance, retention, and dedicated project employee cost; and other costs primarily consisted of consulting services. Employee-related and other costs are recognized in Other operating expense, net of the Condensed Consolidated Statements of Operations. 

The table below presents the exit cost liabilities related to severance and retention activity for the Growth, Reinvestment, and Restructuring Programs as of March 31, 2022:  
 SeveranceRetentionTotal Exit Cost Liabilities
 (In millions)
Balance as of December 31, 2021$3.9 $9.7 $13.6 
Expenses recognized7.6 8.1 15.7 
Cash payments(2.0)(14.6)(16.6)
Balance as of March 31, 2022$9.5 $3.2 $12.7 
 
The severance and retention liabilities are included in Accrued expenses in the Condensed Consolidated Balance Sheets.

4. RECEIVABLES SALES PROGRAM
 
The Company has entered into agreements to sell certain trade accounts receivable to unrelated, third-party financial institutions at a discount (collectively, "the Receivables Sales Program"). The agreements can be terminated by either party with 60 days' notice. The Receivables Sales Program is used by the Company to manage liquidity in a cost-effective manner. 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 outstanding accounts receivables sold at any time is $500.0 million.

The following table includes the outstanding amount of accounts receivable sold under the Receivables Sales Program and the receivables collected from customers and not remitted to the financial institutions:
March 31, 2022December 31, 2021
 (In millions)
Outstanding accounts receivable sold$327.0 $357.3 
Receivables collected and not remitted to financial institutions183.5 205.0 
Receivables sold under the Receivables Sales Program are derecognized 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 receivables collected and not remitted to financial institutions are included in Accounts payable in the Condensed Consolidated Balance Sheets.

11

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the cash flows of the Company's accounts receivables associated with the Receivables Sales Program:
Three Months Ended March 31,
20222021
 (In millions)
Receivables sold$512.8 $379.5 
Receivables collected and remitted to financial institutions(543.1)(417.1)

The loss on sale of receivables represents the discount taken by third-party financial institutions and was $0.6 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively, and is included in Other income, net in the Condensed Consolidated Statements of Operations. The Company has not recognized any servicing assets or liabilities as of March 31, 2022 or December 31, 2021, 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, 2022December 31, 2021
 (In millions)
Raw materials and supplies$311.6 $260.9 
Finished goods430.0 416.9 
Total inventories$741.6 $677.8 
 
6. DIVESTITURE

Discontinued Operations

Ready-to-eat Cereal

On June 1, 2021, the Company simultaneously entered into a definitive agreement and completed the sale of its Ready-to-eat ("RTE") Cereal business to Post Holdings, Inc. ("Post") for a base purchase price of $85.0 million, subject to customary purchase price adjustments, resulting in cash proceeds at closing of $88.0 million. The sale of this business is part of the Company's portfolio optimization strategy. RTE Cereal operated as two manufacturing plants located in Lancaster, Ohio and Sparks, Nevada.

The Company entered into a Transition Services Agreement ("TSA") with Post, which is designed to ensure and facilitate an orderly transfer of business operations. The services provided under the TSA terminate at various times up to twelve months from the date of sale and certain services were renewed with a maximum of an additional six-month period expected to end in the fourth quarter of 2022. The income received under the TSA was not material for the three months ended March 31, 2022 and is primarily classified within General and administrative expenses or Cost of sales in the Company's Condensed Consolidated Statements of Operations depending on the functions being supported by the Company.

The Company has reflected the RTE Cereal business (through the date of sale) 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.

12

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

Three Months Ended
March 31,
20222021
(In millions)
Net sales$(0.3)$47.5 
Cost of sales 41.4 
Selling, general, administrative and other operating expenses(0.1)4.2 
Operating (loss) income from discontinued operations(0.2)1.9 
Interest and other expense 0.4 
Income tax expense 0.4 
Net (loss) income from discontinued operations$(0.2)$1.1 

7. GOODWILL AND INTANGIBLE ASSETS
 
Goodwill

Changes in the carrying amount of goodwill for the three months ended March 31, 2022 are as follows:
Meal PreparationSnacking & BeveragesTotal
 (In millions)
Balance at December 31, 2021, before accumulated impairment losses$1,337.4 $888.5 $2,225.9 
Accumulated impairment losses(11.5)(33.0)(44.5)
Balance at December 31, 20211,325.9 855.5 2,181.4 
Foreign currency exchange adjustments1.5 1.1 2.6 
Balance at March 31, 2022$1,327.4 $856.6 $2,184.0 

Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets as of March 31, 2022 and December 31, 2021 are as follows:

 March 31, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
 (In millions)
Intangible assets with finite lives:      
Customer-related$850.6 $(473.9)$376.7 $848.6 $(459.2)$389.4 
Contractual agreements0.5 (0.5) 0.5 (0.5) 
Trademarks96.3 (39.9)56.4 96.2 (38.1)58.1 
Formulas/recipes25.3 (23.1)2.2 25.3 (22.9)2.4 
Computer software209.7 (127.9)81.8 207.4 (124.7)82.7 
Total finite lived intangibles1,182.4 (665.3)517.1 1,178.0 (645.4)532.6 
Intangible assets with indefinite lives:
Trademarks22.8 — 22.8 22.4 — 22.4 
Total intangible assets$1,205.2 $(665.3)$539.9 $1,200.4 $(645.4)$555.0 

13

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. INCOME TAXES
 
Income taxes were recognized at effective rates of (75.0)% and (100.0)% for the three months ended March 31, 2022 and 2021, respectively. The change in the Company's effective tax rate for the three months ended March 31, 2022 compared to 2021 is primarily the result of a change in the amount of tax deductible stock-based compensation. 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 $3.9 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. Approximately $2.9 million of the $3.9 million could affect net income when settled. The timing of cash settlement, if any, cannot be reasonably estimated for uncertain tax benefits.

9. LONG-TERM DEBT
 
March 31, 2022December 31, 2021
 (In millions)
Term Loan A$491.3 $496.3 
Term Loan A-1913.7 923.0 
2028 Notes500.0 500.0 
Finance leases2.7 3.1 
Total outstanding debt1,907.7 1,922.4 
Deferred financing costs(16.4)(16.1)
Less current portion(4.7)(15.6)
Total long-term debt$1,886.6 $1,890.7 

Credit Agreement

On February 14, 2022, the Company entered into Amendment No. 4 to the Credit Agreement. Amendment No. 4 temporarily increases the leverage covenant threshold from 4.50x to 5.50x through June 30, 2022, then 5.25x through September 30, 2022 and thereafter reverts to 4.50x. The material terms and conditions under the Credit Agreement are otherwise substantially consistent with those contained in the Credit Agreement prior to Amendment No. 4.

The Company's average interest rate on debt outstanding under its Credit Agreement for the three months ended March 31, 2022 was 1.89%. Including the impact of interest rate swap agreements in effect as of March 31, 2022, the average rate is 3.64%.

Revolving Credit Facility — As of March 31, 2022, $730.0 million of the aggregate commitment of $750.0 million of the Revolving Credit Facility was available. Under the Credit Agreement, the Revolving Credit Facility matures on March 26, 2026. In addition, as of March 31, 2022, there were $20.0 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.

Loss on Extinguishment of Debt — During the first quarter of 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 in connection with the redemption of its 2024 Notes completed on March 31, 2021 and Credit Agreement refinancing executed on March 26, 2021.

Fair Value At March 31, 2022, the aggregate fair value of the Company's total debt was $1,814.9 million and its carrying value was $1,905.0 million. At December 31, 2021, the aggregate fair value of the Company's total debt was $1,899.5 million and its carrying value was $1,919.3 million. The fair values of 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.
14

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

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,
20222021
(In millions, except per share data)
Weighted average common shares outstanding55.8 56.0 
Assumed exercise/vesting of equity awards (1) 0.5 
Weighted average diluted common shares outstanding55.8 56.5 
 
(1)For the three months ended March 31, 2022, 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 from continuing operations for the period. Equity awards, excluded from our computation of diluted earnings per share because they were anti-dilutive, were 1.2 million and 1.4 million for the three months ended March 31, 2022 and 2021, 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 authorized to be awarded under the Plan is approximately 17.5 million, of which approximately 2.6 million remained available at March 31, 2022.

Total compensation expense related to stock-based payments and the related income tax benefit recognized in Net (loss) income from continuing operations are as follows:
Three Months Ended
March 31,
20222021
(In millions)
Compensation expense related to stock-based payments$4.3 $4.9 
Related income tax benefit1.0 1.4 

All amounts below include continuing and discontinued operations.



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. Additionally, on December 29, 2021, the Compensation Committee of the Board approved restricted stock unit awards granted to certain executive members of management that vest on the passage of time in approximately three equal installments on each of the three six month 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.
 
15

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the restricted stock unit activity during the three months ended March 31, 2022:
 
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, 2021660 $48.88 50 $48.15 
Granted586 31.01   
Vested(235)51.50 (1)53.84 
Forfeited(58)44.99   
Outstanding, at March 31, 2022953 37.49 49 48.01 
Vested and deferred, at March 31, 202216 48.35 
 
 Three Months Ended
March 31,
 20222021
 (In millions)
Fair value of vested restricted stock units$7.6 $16.4 
Tax benefit recognized from vested restricted stock units1.2 2.3 
 
Future compensation costs related to restricted stock units are approximately $34.3 million as of March 31, 2022 and will be recognized on a weighted average basis over the next 2.4 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, and for certain executive members of management, a market condition, in each case as described below.

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 through 2022, 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 each performance period but remain subject to forfeiture until the third anniversary of the grant date. Additionally, for the cumulative three-year performance period, one-quarter of the units will accrue. 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.
In 2022 and 2021, certain executive members of management received awards that were measured using a relative total shareholder return market condition over a three-year performance period instead of a cumulative three-year performance goal. The units will accrue, multiplied by a predefined percentage between 0% and 150% for the relative total shareholder return measure, depending on the achievement attainment over the three-year performance period. The fair value of the portion of the awards based on relative total shareholder return was valued using a Monte Carlo simulation model with a grant-date fair value of $26.84 on approximately 52,600 units granted in 2022 and a grant-date fair value of $59.16 on approximately 23,200 units granted in 2021.

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.

16

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,
20222021
Dividend yield0 %0 %
Risk-free rate2.29 %0.30 %
Expected volatility36.95 %35.65 %
Expected term (in years)2.772.75

The following table summarizes the performance unit activity during the three months ended March 31, 2022:  
Performance
Units
Weighted
Average
Grant Date
Fair Value
 (In thousands) 
Unvested, at December 31, 2021480 $54.21 
Granted190 29.82 
Vested(63)64.55 
Forfeited(122)60.08 
Unvested, at March 31, 2022485 38.25 
 
 Three Months Ended
March 31,
 20222021
 (In millions)
Fair value of vested performance units$2.0 $5.6 
Tax benefit recognized from performance units vested0.2 0.3 

Future compensation costs related to the performance units are estimated to be approximately $10.6 million as of March 31, 2022 and are expected to be recognized over the next 2.0 years. The fair value of the portion of the awards earned based on relative total shareholder return was valued using a Monte Carlo simulation model. For other awards, the grant date fair value is equal to the Company's closing stock price on the date of grant.

17

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, 2020$(67.3)$3.3 $(64.0)
Other comprehensive income before reclassifications0.9  0.9 
Reclassifications from accumulated other comprehensive loss (2) 0.1 0.1 
Other comprehensive income0.9 0.1 1.0 
Balance at March 31, 2021$(66.4)$3.4 $(63.0)
Balance at December 31, 2021$(70.9)$17.3 $(53.6)
Other comprehensive income before reclassifications4.3  4.3 
Reclassifications from accumulated other comprehensive loss (2) 0.1 0.1 
Other comprehensive income4.3 0.1 4.4 
Balance at March 31, 2022$(66.6)$17.4 $(49.2)
  
(1)The tax impact of the foreign currency translation adjustment and the unrecognized pension and postretirement benefits reclassification was insignificant for the three months ended March 31, 2022 and 2021.
(2)Refer to Note 13 for additional information regarding these reclassifications.

13. EMPLOYEE RETIREMENT AND POSTRETIREMENT BENEFITS

Pension, Profit Sharing, and Postretirement Benefits — Certain employees and retirees participate in pension and other postretirement benefit plans. Employee benefit plan obligations and expenses included in the Condensed Consolidated Financial Statements are determined based on plan assumptions, employee demographic data, including years of service and compensation, benefits and claims paid, and employer contributions. The information below includes the activities of the Company's continuing and discontinued operations.

Components of net periodic pension benefit are as follows:
 
Three Months Ended
March 31,
 20222021
 (In millions)
Service cost$0.1 $0.2 
Interest cost2.3 2.2 
Expected return on plan assets(3.8)(3.5)
Amortization of unrecognized net loss0.1 0.1 
Net periodic pension benefit$(1.3)$(1.0)

Components of net periodic postretirement cost are as follows:
Three Months Ended
March 31,
 20222021
 (In millions)
Interest cost$0.2 $0.2 
Net periodic postretirement cost$0.2 $0.2 
18

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

The service cost components of net periodic pension and postretirement costs were recognized in Cost of sales and the other components were recognized in Other income, net of the Condensed Consolidated Statements of Operations.

14. COMMITMENTS AND CONTINGENCIES

Shareholder Class Action and Related Derivative Actions

The Company, as nominal defendant, and certain of its directors, officers and former directors and officers are parties to the following four shareholder derivative suits, each of which involves substantially similar claims and allegations:

(i)Wells v. Reed, et al., Case No. 2016-CH-16359 (filed Dec. 22, 2016 in the Circuit Court of Cook County, Illinois), asserting state law claims for breach of fiduciary duty, unjust enrichment and corporate waste;
(ii)Lavin v. Reed, et al., Case No. 17-cv-01014 (filed Feb. 7, 2017 in the United States District Court for the Northern District of Illinois), asserting state law claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and corporate waste;
(iii)Bartelt v. Reed, et al., Case No. 1:19-cv-00835 (filed Feb. 8, 2019 in the United States District Court for the Northern District of Illinois), asserting state law claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and corporate waste, as well as violations of Section 14 of the Securities Exchange Act of 1934; and
(iv)City of Ann Arbor Employees' Retirement System v. Reed, et al., Case No. 2019-CH-06753 (filed June 3, 2019 in the Circuit Court of Cook County, Illinois), asserting claims breach of fiduciary duty, aiding and abetting breaches of fiduciary duty and contribution and indemnification from the individual defendants for losses incurred by the Company.

Essentially, all four complaints allege that TreeHouse, under the authority and control of the individual defendants: (i) made certain false and misleading statements regarding the Company's business, operations, and future prospects; and (ii) failed to disclose that (a) the Company's private label business was underperforming; (b) the Company's Flagstone business was underperforming; (c) the Company's acquisition strategy was underperforming; (d) the Company had overstated its full-year 2016 guidance; and (e) TreeHouse's statements lacked reasonable basis. The complaints allege, among other things, that these actions artificially inflated the market price of TreeHouse common stock and resulted in harm to the Company, including the filing of the MPERS federal securities fraud class action (see below). The Bartelt action also includes substantially similar allegations concerning events in 2017.

Each of these cases involves allegations similar to those in an earlier-filed, recently resolved federal securities class action, Public Employees' Retirement Systems of Mississippi v. TreeHouse Foods, Inc., et al., Case No. 1:16-cv-10632 (originally captioned Tarara v. TreeHouse Foods, Inc., et al.) (“MPERS”) (filed Nov. 16, 2016), in the United States District Court for the Northern District of Illinois brought on behalf of a class of all purchasers of TreeHouse common stock from January 20, 2016 through and including November 2, 2016. The MPERS complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and sought, among other things, damages and costs and expenses based on essentially the same facts described above. Following denial of defendants’ motion to dismiss, grant of plaintiff’s motion to certify a class, limited discovery, and extended mediator-facilitated negotiations with Greg Lindstrom of Phillips ADR, on July 14, 2021, the parties filed a stipulation of settlement to resolve the case for a cash payment of $27.0 million (funded by D&O insurance) in exchange for dismissal with prejudice of the class claims and full releases. After briefing, preliminary approval, notice and a hearing, on November 17, 2021, the Court granted final approval of the settlement and entered final judgment dismissing the case with prejudice on a classwide basis. On November 18, 2021, the Court granted lead counsel’s request for attorneys’ fees and expenses and approved a plan of allocation.


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TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Due to the similarity of the derivative complaints, Bartelt was consolidated with Lavin, Ann Arbor was consolidated with Wells, and the parties entered stipulations deferring all of the derivative cases until either summary judgment or settlement of the MPERS class action. Pursuant to a schedule entered in light of the resolution of the MPERS class action, plaintiffs in the consolidated Wells case filed an amended, consolidated complaint on February 28, 2022. A briefing schedule has been set if defendants move to dismiss. The parties are to appear for a status conference or hearing on June 27, 2022. The consolidated Lavin case remains stayed pending a ruling on dispositive motions in the Wells case. The court has asked the parties to submit a status report on July 13, 2022. As a result of these developments, the Company has an accrual for a $27.0 million liability and a corresponding insurance receivable within Accrued expenses and Prepaid expenses and other current assets, respectively, in the Condensed Consolidated Balance Sheets as of March 31, 2022.

Employment Related Claims

The Company is party to matters challenging its wage and hour practices. These matters include a number of class actions consolidated under the caption Negrete v. Ralcorp Holdings, Inc., et al, (the first of which was filed in California state court on October 20, 2015) pending in the U.S. District Court for the Central District of California, in which plaintiffs allege a pattern of violations of California and/or federal law at three former Company manufacturing facilities in California. The Company has notified the Court that it has reached a preliminary settlement understanding with the Negrete plaintiffs that would resolve all associated matters for a payment by the Company of $9.4 million. On January 13, 2022, the Court orally