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 ~~September~~June 30, ~~2022.~~2023.


☐			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)


Delaware			20-2311383
(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) (708) 483-1300

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	THS	New 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 filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 ~~October~~July 31, ~~2022~~2023 was ~~56,082,442.~~56,378,524.

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except per share data)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	74.7	$	304.5	Cash and cash equivalents	$	16.9	$	43.0

Receivables, net	Receivables, net	155.1		151.3		Receivables, net	163.5		158.8
Inventories	Inventories	648.9		461.6		Inventories	673.4		589.5
Prepaid expenses and other current assets	Prepaid expenses and other current assets	64.6		57.0		Prepaid expenses and other current assets	21.4		23.2

Assets of discontinued operations		1,251.7		1,208.1

Total current assets	Total current assets	2,195.0		2,182.5		Total current assets	875.2		814.5
Property, plant, and equipment, net	Property, plant, and equipment, net	655.8		700.1		Property, plant, and equipment, net	725.6		666.5
Operating lease right-of-use assets	Operating lease right-of-use assets	182.9		138.1		Operating lease right-of-use assets	200.5		184.4
Goodwill	Goodwill	1,817.0		1,821.9		Goodwill	1,824.6		1,817.6
Intangible assets, net	Intangible assets, net	305.4		336.6		Intangible assets, net	279.5		296.0
Note receivable, net						Note receivable, net	424.1		427.0
Other assets, net	Other assets, net	32.0		28.6		Other assets, net	50.9		47.9

Total assets	Total assets	$	5,188.1	$	5,207.8	Total assets	$	4,380.4	$	4,253.9
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	721.9	$	625.9	Accounts payable	$	526.5	$	618.7
Accrued expenses	Accrued expenses	186.5		233.9		Accrued expenses	164.9		208.5
Current portion of long-term debt	Current portion of long-term debt	11.3		15.4		Current portion of long-term debt	0.5		0.6
Liabilities of discontinued operations		339.4		282.5
Total current liabilities	Total current liabilities	1,259.1		1,157.7		Total current liabilities	691.9		827.8
Long-term debt	Long-term debt	1,879.4		1,890.0		Long-term debt	1,594.5		1,394.0
Operating lease liabilities	Operating lease liabilities	158.6		119.0		Operating lease liabilities	172.4		159.1
Deferred income taxes	Deferred income taxes	106.9		105.1		Deferred income taxes	110.5		108.7
Other long-term liabilities	Other long-term liabilities	69.1		90.6		Other long-term liabilities	76.2		77.3

Total liabilities	Total liabilities	3,473.1		3,362.4		Total liabilities	2,645.5		2,566.9
Commitments and contingencies (Note 18)
Commitments and contingencies (Note 16)						Commitments and contingencies (Note 16)
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued	Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued	—		—		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, 56.1 and 55.8 shares outstanding as of September 30, 2022 and December 31, 2021, respectively		0.6		0.6
Common stock, par value $0.01 per share, 90.0 shares authorized, 56.4 and 56.1 shares outstanding as of June 30, 2023 and December 31, 2022, respectively						Common stock, par value $0.01 per share, 90.0 shares authorized, 56.4 and 56.1 shares outstanding as of June 30, 2023 and December 31, 2022, respectively	0.6		0.6
Treasury stock	Treasury stock	(133.3)		(133.3)		Treasury stock	(133.3)		(133.3)
Additional paid-in capital	Additional paid-in capital	2,200.5		2,187.4		Additional paid-in capital	2,212.5		2,205.4
Accumulated deficit	Accumulated deficit	(278.6)		(155.7)		Accumulated deficit	(263.5)		(302.0)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(74.2)		(53.6)		Accumulated other comprehensive loss	(81.4)		(83.7)
Total stockholders' equity	Total stockholders' equity	1,715.0		1,845.4		Total stockholders' equity	1,734.9		1,687.0
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	5,188.1	$	5,207.8	Total liabilities and stockholders' equity	$	4,380.4	$	4,253.9

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	875.0	$	751.7	$	2,457.8	$	2,129.6	Net sales	$	843.6	$	810.2	$	1,738.4	$	1,582.8
Cost of sales	Cost of sales	745.7		625.8		2,118.8		1,784.8		Cost of sales	710.8		699.2		1,453.3		1,373.1
Gross profit	Gross profit	129.3		125.9		339.0		344.8		Gross profit	132.8		111.0		285.1		209.7
Operating expenses:	Operating expenses:									Operating expenses:
Selling and distribution	Selling and distribution	52.0		50.1		167.9		143.8		Selling and distribution	39.9		54.8		84.9		115.9
General and administrative	General and administrative	51.5		38.1		160.5		142.0		General and administrative	54.1		56.1		107.5		109.0
Amortization expense	Amortization expense	11.9		11.8		35.7		35.4		Amortization expense	12.1		11.9		24.1		23.8

Other operating expense, net		23.4		16.9		66.4		57.8
Other operating (income) expense, net										Other operating (income) expense, net	(2.8)		13.9		(0.2)		43.0
Total operating expenses	Total operating expenses	138.8		116.9		430.5		379.0		Total operating expenses	103.3		136.7		216.3		291.7
Operating (loss) income		(9.5)		9.0		(91.5)		(34.2)
Other expense (income):
Operating income (loss)										Operating income (loss)	29.5		(25.7)		68.8		(82.0)
Other (income) expense:										Other (income) expense:
Interest expense	Interest expense	17.5		16.5		51.2		55.5		Interest expense	19.2		17.0		37.0		33.7
Loss on extinguishment of debt		—		—		—		14.4
Loss (gain) on foreign currency exchange		3.0		0.6		3.0		(0.3)
Other income, net		(16.9)		(3.6)		(84.7)		(38.7)
Total other expense (income)		3.6		13.5		(30.5)		30.9
Loss before income taxes		(13.1)		(4.5)		(61.0)		(65.1)
Interest income										Interest income	(10.8)		(0.1)		(25.4)		(4.2)
(Gain) loss on foreign currency exchange										(Gain) loss on foreign currency exchange	(3.3)		1.1		(3.0)		—
Other (income) expense, net										Other (income) expense, net	(6.2)		(11.9)		3.5		(63.6)
Total other (income) expense										Total other (income) expense	(1.1)		6.1		12.1		(34.1)
Income (loss) before income taxes										Income (loss) before income taxes	30.6		(31.8)		56.7		(47.9)
Income tax expense (benefit)	Income tax expense (benefit)	2.0		(0.4)		(4.8)		(15.0)		Income tax expense (benefit)	8.9		(4.5)		15.8		(6.8)
Net loss from continuing operations		(15.1)		(4.1)		(56.2)		(50.1)
Net (loss) income from discontinued operations		(75.4)		10.8		(66.7)		66.7
Net (loss) income		$	(90.5)	$	6.7	$	(122.9)	$	16.6
Net income (loss) from continuing operations										Net income (loss) from continuing operations	21.7		(27.3)		40.9		(41.1)
Net income (loss) from discontinued operations										Net income (loss) from discontinued operations	1.6		(2.1)		(2.4)		8.7
Net income (loss)										Net income (loss)	$	23.3	$	(29.4)	$	38.5	$	(32.4)

Earnings (loss) per common share - basic:	Earnings (loss) per common share - basic:									Earnings (loss) per common share - basic:
Continuing operations	Continuing operations	$	(0.27)	$	(0.07)	$	(1.00)	$	(0.90)	Continuing operations	$	0.38	$	(0.49)	$	0.73	$	(0.74)
Discontinued operations	Discontinued operations	(1.34)		0.19		(1.19)		1.19		Discontinued operations	0.03		(0.04)		(0.04)		0.16
Earnings (loss) per share basic (1)	Earnings (loss) per share basic (1)	$	(1.61)	$	0.12	$	(2.19)	$	0.30	Earnings (loss) per share basic (1)	$	0.41	$	(0.53)	$	0.68	$	(0.58)

Earnings (loss) per common share - diluted:	Earnings (loss) per common share - diluted:									Earnings (loss) per common share - diluted:
Continuing operations	Continuing operations	$	(0.27)	$	(0.07)	$	(1.00)	$	(0.90)	Continuing operations	$	0.38	$	(0.49)	$	0.72	$	(0.74)
Discontinued operations	Discontinued operations	(1.34)		0.19		(1.19)		1.19		Discontinued operations	0.03		(0.04)		(0.04)		0.16
Earnings (loss) per share diluted (1)	Earnings (loss) per share diluted (1)	$	(1.61)	$	0.12	$	(2.19)	$	0.30	Earnings (loss) per share diluted (1)	$	0.41	$	(0.53)	$	0.68	$	(0.58)

Weighted average common shares:	Weighted average common shares:									Weighted average common shares:
Basic	Basic	56.1		55.8		56.0		55.9		Basic	56.4		56.0		56.3		55.9
Diluted	Diluted	56.1		55.8		56.0		55.9		Diluted	56.8		56.0		56.8		55.9

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

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net (loss) income $ (90.5) $ 6.7 $ (122.9) $ 16.6
Other comprehensive (loss) income:
Foreign currency translation adjustments (14.5) (9.2) (20.8) (2.5)
Pension and postretirement reclassification adjustment 0.1 0.2 0.2 0.5
Other comprehensive loss (14.4) (9.0) (20.6) (2.0)
Comprehensive (loss) income $ (104.9) $ (2.3) $ (143.5) $ 14.6


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	23.3	$	(29.4)	$	38.5	$	(32.4)

Other comprehensive income (loss):
Foreign currency translation adjustments	1.9		(10.6)		2.2		(6.3)
Pension and postretirement reclassification adjustment	0.1		—		0.1		0.1
Other comprehensive income (loss)	2.0		(10.6)		2.3		(6.2)
Comprehensive income (loss)	$	25.3	$	(40.0)	$	40.8	$	(38.6)

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, in millions)


												Accumulated															Accumulated
					Additional							Other											Additional				Other
		Common Stock			Paid-In		Accumulated		Treasury Stock			Comprehensive		Total			Common Stock			Treasury Stock			Paid-In		Accumulated		Comprehensive		Total
		Shares	Amount		Capital		Deficit		Shares	Amount		Loss		Equity			Shares	Amount		Shares	Amount		Capital		Deficit		Loss		Equity
Balance, January 1, 2021		58.3	$	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 awards		0.3	—		(7.9)		—		—	—		—		(7.9)
Stock-based compensation		—	—		4.9		—		—	—		—		4.9

Balance, March 31, 2021		58.6	$	0.6	$	2,176.9	$	(141.7)	(2.4)	$	(108.3)	$	(63.0)	$	1,864.5
Net income		—	—		—		8.4		—	—		—		8.4
Other comprehensive income		—	—		—		—		—	—		6.0		6.0
Treasury stock repurchases		—	—		—		—		(0.5)	(25.0)		—		(25.0)
Issuance of stock awards		—	—		(0.1)		—		—	—		—		(0.1)
Stock-based compensation		—	—		4.7		—		—	—		—		4.7

Balance, June 30, 2021		58.6	$	0.6	$	2,181.5	$	(133.3)	(2.9)	$	(133.3)	$	(57.0)	$	1,858.5
Net income		—	—		—		6.7		—	—		—		6.7
Other comprehensive loss		—	—		—		—		—	—		(9.0)		(9.0)

Issuance of stock awards		0.1	—		(0.1)		—		—	—		—		(0.1)
Stock-based compensation		—	—		1.7		—		—	—		—		1.7

Balance, September 30, 2021		58.7	$	0.6	$	2,183.1	$	(126.6)	(2.9)	$	(133.3)	$	(66.0)	$	1,857.8

Balance, January 1, 2022	Balance, January 1, 2022	58.7	$	0.6	$	2,187.4	$	(155.7)	(2.9)	$	(133.3)	$	(53.6)	$	1,845.4	Balance, January 1, 2022	58.7	$	0.6	(2.9)	$	(133.3)	$	2,187.4	$	(155.7)	$	(53.6)	$	1,845.4
Net loss	Net loss	—	—		—		(3.0)		—	—		—		(3.0)		Net loss	—	—		—	—		—		(3.0)		—		(3.0)
Other comprehensive income	Other comprehensive income	—	—		—		—		—	—		4.4		4.4		Other comprehensive income	—	—		—	—		—		—		4.4		4.4

Issuance of stock awards	Issuance of stock awards	0.2	—		(3.3)		—		—	—		—		(3.3)		Issuance of stock awards	0.2	—		—	—		(3.3)		—		—		(3.3)
Stock-based compensation	Stock-based compensation	—	—		4.3		—		—	—		—		4.3		Stock-based compensation	—	—		—	—		4.3		—		—		4.3

Balance, March 31, 2022	Balance, March 31, 2022	58.9	$	0.6	$	2,188.4	$	(158.7)	(2.9)	$	(133.3)	$	(49.2)	$	1,847.8	Balance, March 31, 2022	58.9	$	0.6	(2.9)	$	(133.3)	$	2,188.4	$	(158.7)	$	(49.2)	$	1,847.8
Net loss	Net loss	—	—		—		(29.4)		—	—		—		(29.4)		Net loss	—	—		—	—		—		(29.4)		—		(29.4)
Other comprehensive loss	Other comprehensive loss	—	—		—		—		—	—		(10.6)		(10.6)		Other comprehensive loss	—	—		—	—		—		—		(10.6)		(10.6)

Stock-based compensation	Stock-based compensation	—	—		5.8		—		—	—		—		5.8		Stock-based compensation	—	—		—	—		5.8		—		—		5.8

Balance, June 30, 2022	Balance, June 30, 2022	58.9	$	0.6	$	2,194.2	$	(188.1)	(2.9)	$	(133.3)	$	(59.8)	$	1,813.6	Balance, June 30, 2022	58.9	$	0.6	(2.9)	$	(133.3)	$	2,194.2	$	(188.1)	$	(59.8)	$	1,813.6
Net loss		—	—		—		(90.5)		—	—		—		(90.5)
Other comprehensive loss		—	—		—		—		—	—		(14.4)		(14.4)

Balance, January 1, 2023																Balance, January 1, 2023	59.0	$	0.6	(2.9)	$	(133.3)	$	2,205.4	$	(302.0)	$	(83.7)	$	1,687.0
Net income																Net income	—	—		—	—		—		15.2		—		15.2
Other comprehensive income																Other comprehensive income	—	—		—	—		—		—		0.3		0.3

Issuance of stock awards	Issuance of stock awards	0.1	—		(0.5)		—		—	—		—		(0.5)		Issuance of stock awards	0.2	—		—	—		(5.3)		—		—		(5.3)
Stock-based compensation	Stock-based compensation	—	—		6.8		—		—	—		—		6.8		Stock-based compensation	—	—		—	—		7.2		—		—		7.2

Balance, September 30, 2022		59.0	$	0.6	$	2,200.5	$	(278.6)	(2.9)	$	(133.3)	$	(74.2)	$	1,715.0
Balance, March 31, 2023																Balance, March 31, 2023	59.2	$	0.6	(2.9)	$	(133.3)	$	2,207.3	$	(286.8)	$	(83.4)	$	1,704.4
Net income																Net income	—	—		—	—		—		23.3		—		23.3
Other comprehensive income																Other comprehensive income	—	—		—	—		—		—		2.0		2.0

Issuance of stock awards																Issuance of stock awards	0.1	—		—	—		(0.7)		—		—		(0.7)
Stock-based compensation																Stock-based compensation	—	—		—	—		5.9		—		—		5.9

Balance, June 30, 2023																Balance, June 30, 2023	59.3	$	0.6	(2.9)	$	(133.3)	$	2,212.5	$	(263.5)	$	(81.4)	$	1,734.9

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(122.9)	$	16.6
Net income (loss)						Net income (loss)	$	38.5	$	(32.4)
Net (loss) income from discontinued operations	Net (loss) income from discontinued operations	(66.7)		66.7		Net (loss) income from discontinued operations	(2.4)		8.7
Net loss from continuing operations		(56.2)		(50.1)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income (loss) from continuing operations						Net income (loss) from continuing operations	40.9		(41.1)
Adjustments to reconcile net income (loss) to net cash used in operating activities:						Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	106.9		112.3		Depreciation and amortization	71.5		71.8

Stock-based compensation	Stock-based compensation	15.2		10.1		Stock-based compensation	13.1		9.1
Loss on extinguishment of debt		—		14.4

Unrealized gain on derivative contracts	Unrealized gain on derivative contracts	(79.3)		(33.1)		Unrealized gain on derivative contracts	(3.5)		(62.3)
Deferred income taxes		5.7		(1.3)

Deferred TSA income						Deferred TSA income	(12.3)		—
Other	Other	6.8		3.5		Other	(1.7)		(0.8)
Changes in operating assets and liabilities, net of acquisitions and divestitures:	Changes in operating assets and liabilities, net of acquisitions and divestitures:					Changes in operating assets and liabilities, net of acquisitions and divestitures:
Receivables	Receivables	(6.1)		27.3		Receivables	(3.3)		(4.2)
Inventories	Inventories	(199.3)		(90.8)		Inventories	(50.3)		(118.3)
Prepaid expenses and other assets	Prepaid expenses and other assets	22.0		(5.3)		Prepaid expenses and other assets	8.0		(9.4)
Accounts payable	Accounts payable	110.5		12.1		Accounts payable	(86.3)		94.0
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(16.6)		(56.1)		Accrued expenses and other liabilities	(25.9)		(9.5)
Net cash used in operating activities - continuing operations	Net cash used in operating activities - continuing operations	(90.4)		(57.0)		Net cash used in operating activities - continuing operations	(49.8)		(70.7)
Net cash (used in) provided by operating activities - discontinued operations		(23.7)		111.2
Net cash (used in) provided by operating activities		(114.1)		54.2
Net cash provided by operating activities - discontinued operations						Net cash provided by operating activities - discontinued operations	—		44.1
Net cash used in operating activities						Net cash used in operating activities	(49.8)		(26.6)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to property, plant, and equipment	Additions to property, plant, and equipment	(55.1)		(58.9)		Additions to property, plant, and equipment	(52.6)		(39.0)
Additions to intangible assets	Additions to intangible assets	(6.2)		(11.5)		Additions to intangible assets	(2.1)		(4.4)
Proceeds from sale of fixed assets	Proceeds from sale of fixed assets	4.8		0.1		Proceeds from sale of fixed assets	—		4.8
Acquisitions, net of cash acquired						Acquisitions, net of cash acquired	(102.2)		—

Proceeds from sale of investments		—		17.2
Net cash used in investing activities - continuing operations	Net cash used in investing activities - continuing operations	(56.5)		(53.1)		Net cash used in investing activities - continuing operations	(156.9)		(38.6)
Net cash (used in) provided by investing activities - discontinued operations		(35.9)		60.4
Net cash (used in) provided by investing activities		(92.4)		7.3
Net cash used in investing activities - discontinued operations						Net cash used in investing activities - discontinued operations	(15.2)		(23.4)
Net cash used in investing activities						Net cash used in investing activities	(172.1)		(62.0)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings under Revolving Credit Facility	Borrowings under Revolving Credit Facility	326.9		194.4		Borrowings under Revolving Credit Facility	1,544.3		48.0
Payments under Revolving Credit Facility	Payments under Revolving Credit Facility	(326.9)		(194.4)		Payments under Revolving Credit Facility	(1,344.8)		(48.0)
Payments on financing lease obligations	Payments on financing lease obligations	(1.0)		(1.3)		Payments on financing lease obligations	(0.3)		(0.7)
Payment of deferred financing costs	Payment of deferred financing costs	(2.7)		(8.5)		Payment of deferred financing costs	—		(1.6)
Payments on Term Loans	Payments on Term Loans	(14.3)		(1,133.2)		Payments on Term Loans	—		(14.3)
Proceeds from refinanced Term Loans		—		1,430.0

Repurchase of Notes		—		(602.9)
Payment of debt premium for extinguishment of debt		—		(9.0)
Repurchases of common stock		—		(25.0)

Payments related to stock-based award activities	Payments related to stock-based award activities	(3.8)		(8.0)		Payments related to stock-based award activities	(6.0)		(3.3)
Net cash used in financing activities - continuing operations		(21.8)		(357.9)
Net cash provided by (used in) financing activities - continuing operations						Net cash provided by (used in) financing activities - continuing operations	193.2		(19.9)
Net cash used in financing activities - discontinued operations	Net cash used in financing activities - discontinued operations	(0.3)		(0.3)		Net cash used in financing activities - discontinued operations	—		(0.2)
Net cash used in financing activities		(22.1)		(358.2)
Net cash provided by (used) in financing activities						Net cash provided by (used) in financing activities	193.2		(20.1)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(2.5)		(0.5)		Effect of exchange rate changes on cash and cash equivalents	2.6		(0.8)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(231.1)		(297.2)		Net decrease in cash and cash equivalents	(26.1)		(109.5)

Add: Cash and cash equivalents of discontinued operations, beginning of period	Add: Cash and cash equivalents of discontinued operations, beginning of period	4.1		11.8		Add: Cash and cash equivalents of discontinued operations, beginning of period	—		4.1
Less: Cash and cash equivalents of discontinued operations, end of period	Less: Cash and cash equivalents of discontinued operations, end of period	(2.8)		(12.5)		Less: Cash and cash equivalents of discontinued operations, end of period	—		(4.1)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	304.5		352.8		Cash and cash equivalents, beginning of period	43.0		304.5
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	74.7	$	54.9	Cash and cash equivalents, end of period	$	16.9	$	195.0

Nine Months Ended
September 30,
2022 2021
Supplemental cash flow disclosures:
Interest paid $ 51.0 $ 60.3
Net income taxes (refunded) paid (2.3) 0.5
Non-cash investing activities:
Accrued purchase of property and equipment $ 21.5 $ 16.8
Accrued other intangible assets 1.2 2.5
Right-of-use assets obtained in exchange for lease obligations 77.2 17.1


	Six Months Ended June 30,
	2023		2022
Supplemental cash flow disclosures:
Interest paid	$	45.3	$	26.6
Net income taxes paid	16.7		1.2

Non-cash investing activities:
Accrued purchase of property and equipment	$	12.3	$	21.2
Accrued other intangible assets	0.2		1.4
Right-of-use assets obtained in exchange for lease obligations	32.2		43.0
Note receivable purchase price adjustment reduction	(5.1)		—
Note receivable increase from paid in kind interest	2.2		—
Deferred payment from acquisition of seasoned pretzel capability	4.0		—

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023

(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.~~2022. Results of operations for interim periods are not necessarily indicative of annual results.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, Interest income has been reclassified out of Other (income) expense, net within the Condensed Consolidated Statements of Operations.

Use of Estimates

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.

Summary of Significant Accounting Policies

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.~~

~~Discontinued Operations~~

On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business, including pasta, pourable and spoonable dressing, preserves, red sauces, syrup, dry blends and baking, dry dinners, pie filling, pita chips and other sauces, for a base purchase price of $950 million (the "Transaction" or the "Business"), subject to certain adjustments pursuant to the terms of the Stock Purchase Agreement, dated as of August 10, 2022. This Transaction is in line with the Company’s strategy to build leadership and depth around a focused group of categories in its higher-growth businesses. Beginning in the third quarter of 2022, the Business met the criteria for discontinued operations presentation, and, as such, has been excluded from continuing operations for all periods presented. Refer to Note 7 for additional information.

Segment Information

~~As a result of entering into the Transaction, the Company changed the structure of its internal organization and reporting in the third quarter of 2022 and began operating as one segment.~~ The Company manages operations on a company-wide basis, thereby making determinations as to the allocation of resources as one segment. We manufacture and distribute private label food and beverages in North America. Our products are primarily shelf stable and share similar customers and distribution. The Chief Executive Officer, who has been identified as our Chief Operating Decision Maker ("CODM") allocates resources and assesses performance based upon discrete financial information at the consolidated level. We have one segment manager who reports directly to the CODM with incentive compensation based on aggregated consolidated results of the Company. The annual operating plan is prepared and approved by the CODM based on consolidated results of the Company. We operate our business with a centralized financial systems infrastructure, and we share centralized resources for sales, procurement, and general and administrative activities. The majority of our manufacturing plants each produce one food or beverage category. Refer to Note 2018 for disaggregation of revenue for additional information of our principal products sold.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~2. RECENT ACCOUNTING PRONOUNCEMENTS~~

~~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 has been or will be applied as these contracts are modified to reference other rates. The Company adopted this guidance during the second quarter of 2022 as a result of a modification to a receivable sale agreement. The adoption did not have a material impact on the Company's financial statements.

3.2. 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. 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 ~~$91.1~~$110.8 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 TreeHouse Management Operating System ("TMOS") initiatives at our manufacturing plants, building 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 retention, severance, organization redesign, information technology system implementation, costs to exit facilities or production, and other administrative costs. Retention includes one-time cash recognition payments that were expensed ~~ratably from the fourth quarter of 2021 to~~during the first quarter of 2022 as well as additional cash bonuses and stock-based compensation to drive retention through 2023.

The costs by activity for the Growth, Reinvestment, and Restructuring Programs are outlined below:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)									(In millions)
Strategic Growth Initiatives	Strategic Growth Initiatives	$	6.5	$	13.4	$	31.1	$	43.0	Strategic Growth Initiatives	$	3.4	$	7.8	$	10.4	$	24.6

Other	Other	15.9		3.5		35.3		14.7		Other	5.5		6.1		13.8		19.4
Total	Total	$	22.4	$	16.9	$	66.4	$	57.7	Total	$	8.9	$	13.9	$	24.2	$	44.0

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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.

Below is a summary of costs by type associated with the Growth, Reinvestment, and Restructuring Programs:


		Three Months Ended September 30,				Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)								(In millions)

Employee-related	Employee-related	$	12.5	$	4.3	$	31.8	$	16.3			Employee-related	$	3.4	$	3.5	$	7.7	$	19.3
Other costs	Other costs	9.9		12.6		34.6		41.4				Other costs	5.5		10.4		16.5		24.7
Total	Total	$	22.4	$	16.9	$	66.4	$	57.7			Total	$	8.9	$	13.9	$	24.2	$	44.0

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, employee-related costs primarily consisted of retention, severance, and dedicated project employee cost; and other costs primarily consisted of consulting services. Employee-related and other costs are recognized in Other operating (income) 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 ~~September~~June 30, ~~2022. All amounts in the table below include continuing and discontinued operations:~~2023:


		Severance		Retention		Total Exit Cost Liabilities				Severance		Retention		Total Exit Cost Liabilities
		(In millions)						(In millions)
Balance as of December 31, 2021		$	3.9	$	9.7	$	13.6
Balance as of December 31, 2022									Balance as of December 31, 2022	$	8.8	$	4.2	$	13.0
Expenses recognized	Expenses recognized	12.3		17.6		29.9			Expenses recognized	0.3		2.3		2.6
Cash payments	Cash payments	(6.1)		(17.8)		(23.9)			Cash payments	(5.0)		(6.2)		(11.2)

Balance as of September 30, 2022		$	10.1	$	9.5	$	19.6
Balance as of June 30, 2023									Balance as of June 30, 2023	$	4.1	$	0.3	$	4.4

The severance and retention liabilities are included in Accrued expenses in the Condensed Consolidated Balance Sheets.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~4. LEASES~~

The Company has operating and finance leases for manufacturing facilities, warehouses and distribution centers, office space, and certain equipment. Remaining lease terms for these leases range from 1 year to 11 years. Some of the Company's leases include options to extend the leases for up to 26 years, and some include options to terminate the leases within 1 year.

~~Supplemental balance sheet information related to leases was as follows:~~

Balance Sheet Classification September 30, 2022 December 31, 2021
(In millions)
Assets
Operating Operating lease right-of-use assets $ 182.9 $ 138.1
Finance Property, plant, and equipment, net 1.3 2.2
Total assets $ 184.2 $ 140.3
Liabilities
Current liabilities
Operating Accrued expenses $ 38.1 $ 33.1
Finance Current portion of long-term debt 0.6 1.0
Total current liabilities 38.7 34.1
Noncurrent liabilities
Operating Operating lease liabilities 158.6 119.0
Finance Long-term debt 0.7 1.2
Total noncurrent liabilities 159.3 120.2
Total lease liabilities $ 198.0 $ 154.3

~~The weighted-average discount rates for the Company's operating and finance leases are as follows:~~

Weighted-average discount rate September 30, 2022 December 31, 2021
Operating leases 4.3 % 4.3 %
Finance leases 2.7 % 2.9 %

~~The weighted-average remaining lease term of the Company's operating and finance leases are as follows:~~

~~Weighted-average remaining lease term~~

~~September 30, 2022~~

~~December 31, 2021~~

~~Operating leases~~

~~5.9 years~~

~~6.7 years~~

~~Finance leases~~

~~2.5 years~~

~~2.8 years~~

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~The components of lease expense were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
Statement of Operations Classification 2022 2021 2022 2021
(In millions)
Operating lease cost Cost of sales and General and administrative $ 12.1 $ 8.5 $ 29.0 $ 25.8
Finance lease cost:
Amortization of right-of-use assets Cost of sales and General and administrative 0.3 0.3 0.9 1.1
Interest on lease liabilities Interest expense — — — 0.1
Total finance lease cost 0.3 0.3 0.9 1.2
Variable lease cost (1) Cost of sales and General and administrative 3.7 4.2 11.9 11.6
Net lease cost $ 16.1 $ 13.0 $ 41.8 $ 38.6

~~(1) Includes short-term leases, which are immaterial.~~

~~Future maturities of lease liabilities were as follows:~~

Operating Leases (1) Finance Leases
(In millions)
Three months ended December 31, 2022 $ 11.3 $ 0.2
2023 44.2 0.5
2024 38.8 0.4
2025 35.6 0.2
2026 34.8 —
Thereafter 59.6 —
Total lease payments 224.3 1.3
Less: Interest (27.6) —
Present value of lease liabilities $ 196.7 $ 1.3

~~(1) Operating lease payments include $2.8 million related to options to extend lease terms that are reasonably certain of being exercised.~~

~~Other information related to leases were as follows:~~

Nine Months Ended Nine Months Ended
September 30, 2022 September 30, 2021
(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 27.8 $ 27.6
Financing cash flows from finance leases 1.0 1.3

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

5.3. 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. ~~All amounts in the table below include continuing and discontinued operations:~~


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Outstanding accounts receivable sold	Outstanding accounts receivable sold	$	378.0	$	357.3	Outstanding accounts receivable sold	$	305.4	$	347.1
Receivables collected and not remitted to financial institutions	Receivables collected and not remitted to financial institutions	216.4		205.0		Receivables collected and not remitted to financial institutions	176.9		204.5

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.

The following table summarizes the cash flows of the Company's accounts receivables associated with the Receivables Sales Program. All amounts in the table below include continuing and discontinued operations:


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
		(In millions)					(In millions)
Receivables sold	Receivables sold	$	1,782.3	$	1,312.3	Receivables sold	$	923.0	$	1,105.5
Receivables collected and remitted to financial institutions	Receivables collected and remitted to financial institutions	(1,761.6)		(1,316.3)		Receivables collected and remitted to financial institutions	(964.7)		(1,036.5)

The loss on sale of receivables ~~from continuing operations~~ represents the discount taken by third-party financial institutions and was ~~$2.0~~$3.3 million and ~~$0.5~~$0.9 million for three months ended June 30, 2023 and 2022, respectively, and $6.6 million and $1.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively, and $3.3 million and $1.2 million for the nine months ended September 30,~~ 2022, ~~and 2021,~~ respectively, and is included in Other ~~income,~~(income) expense, net in the Condensed Consolidated Statements of Operations. The Company has not recognized any servicing assets or liabilities as of ~~September~~June 30, ~~2022~~2023 or December 31, ~~2021,~~2022, as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

6.4. INVENTORIES


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Raw materials and supplies	Raw materials and supplies	$	259.8	$	183.0	Raw materials and supplies	$	275.0	$	232.0
Finished goods	Finished goods	389.1		278.6		Finished goods	398.4		357.5

Total inventories	Total inventories	$	648.9	$	461.6	Total inventories	$	673.4	$	589.5

5. ACQUISITIONS AND DIVESTITURE

~~TREEHOUSE FOODS, INC.~~Acquisitions

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~7. DISCONTINUED OPERATIONS~~Acquisition of Coffee Roasting Capability

On June 30, 2023,the Company completed the acquisition of the Direct Ship coffee business and its Northlake, Texas coffee facility (the "Coffee Roasting Capability") from Farmer Brothers Company, a national coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea, and culinary products. The acquisition brings roasting, grinding, flavoring and blending capabilities to the Company's portfolio to complement the Company's existing single-serve pod and ready-to-drink coffee businesses. The purchase consideration consisted of approximately $92.2 million in cash, subject to customary purchase price adjustments. The acquisition was funded by borrowings from the Company’s $500.0 million Revolving Credit Facility.

The Coffee Roasting Capability was accounted for under the acquisition method of accounting. The Company incurred approximately $2.1 million in acquisition-related costs during the three and six months ended June 30, 2023. These costs are included in General and administrative expense in the Condensed Consolidated Statements of Operations.

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


	(In millions)




Allocation of consideration to assets acquired:
Inventories	$	31.5
Property, plant, and equipment, net	60.7







Total purchase price	$	92.2

Real property and personal property fair values were determined using the cost and market approaches. The purchase price allocation in the table above is preliminary and subject to the finalization of the Company’s valuation analysis.

Acquisition of Seasoned Pretzel Capability

On April 1, 2023, the Company completed the acquisition of a seasoned pretzel capability for a total purchase price of $14.0 million, which included the recognition of $5.4 million within Goodwill in the Condensed Consolidated Balance Sheets based on the preliminary purchase price allocation. The purchase price consisted of approximately $10.0 million in cash and a deferred payment of $4.0 million due in the third quarter of 2024. The deferred payment is recognized within Other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2023. The acquisition is in line with our strategy to build category leadership, depth and capabilities to drive profitable growth.

Discontinued Operations

Sale of a Significant Portion of the Meal Preparation Business

On ~~August 10,~~October 3, 2022, the Company ~~entered into~~completed the sale of a ~~Stock Purchase Agreement~~significant portion of the Company’s Meal Preparation business (the ~~"Purchase Agreement"~~"Business") ~~with~~to two entities affiliated with Investindustrial: Rushmore Investment III LLC, a Delaware limited liability company ("US Buyer") and 1373978 B.C., ULC, a British Columbia unlimited liability company ("CA Buyer" and together with US Buyer, the "Buyer"). ~~On October 3, 2022,~~The closing purchase price was $963.8 million, and during the ~~Company completed~~second quarter of 2023, a $20.3 million adjustment to the ~~sale of~~purchase price was finalized, resulting in a ~~significant portion of the Company’s Meal Preparation business (the "Business") for a base~~final purchase price of ~~$950.0 million, subject to certain adjustments pursuant to the terms of the Purchase Agreement.~~$943.5 million. The final purchase price ~~consists~~consisted of approximately ~~$527.5~~$522.6 million in cash and approximately ~~$422.5~~$420.9 million in a five-year secured ~~seller promissory note issued by Rushmore Investment III LLC in favor of~~Seller Promissory Note. Refer to Note 6 for additional information on the Company and certain of its subsidiaries. The sale of the Business is in line with the Company’s strategy to build leadership and depth around a focused group of categories in its higher-growth businesses. In October 2022, the Company used the majority of its cash proceeds of the sale to pay down debt.secured Seller Promissory Note.

The Business consists of consumer packaged food manufacturers operating 14 manufacturing facilities in the United States, Canada, and Italy servicing primarily retail grocery customers. The Business includes 11 categories and sells center of the store grocery and main course meal items, such as pasta, pourable dressings, sauces, red sauces (salsas and pasta sauces), spoonables (mayos and dips), syrups, preserves, dry dinners (macaroni and cheese), dry blends and baking goods, and pie filling as well as pita ~~chips, which was previously reported in the Snacking & Beverages segment.~~chips.

The Company entered into a Transition Services Agreement ("TSA") with the Buyer, which is designed to ensure and facilitate an orderly transfer of business operations. The services provided under the TSA include, but are not limited to, IT systems implementation, IT and financial shared services, procurement and order processing, customer service, distribution network separation, and a supply agreement. These services terminate at various times up to twenty-four months from the date of sale and certain services can be renewed with a maximum of an additional twelve-month period. Additionally, a $35.0 million credit ~~will be~~was provided to the Buyer by TreeHouse to cover initial TSA set-up costs that otherwise would have been incurred by the Buyer ("TSA Credit"). The TSA Credit is included in the fair value of consideration transferred, and it represents deferred income for TreeHouse until the Company incurs the related TSA ~~set-up~~ costs, at which point deferred income ~~will be~~is reduced and TSA income recognized.

~~The Company has classified the assets and liabilities related to the Business~~ TSA income is recognized as ~~held for sale in its Condensed Consolidated Balance Sheets as of September 30, 2022. The disposal group of the Business was tested for recoverability as of the balance sheet date,~~services are performed, and the Company recognized an expected loss on disposal of $73.8 million during the three and nine months ended September 30, 2022, as the fair value was determined to be less than the carrying value of the associated assets, including the related goodwill. The fair value for the secured seller promissory note was estimated at par value as of September 30, 2022, and the valuation will be completed in the fourth quarter of 2022. The expected loss on disposal is recognized within Net (loss) income from discontinued operations in the Condensed Consolidated Statements of 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 Company classified the proceeds within Net cash (used in) provided by investing activities - discontinued operations, and a pre-tax gain was recognized on the transaction upon closing of $18.4 million as a component of Net (loss) income from discontinued operations in the Condensed Consolidated Statements of Operations. The sale of this business was 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 ("RTE TSA") with Post, which is designed to ensure and facilitate an orderly transfer of business operations. The services provided under the RTE 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 ~~RTE~~ TSA was ~~not material~~$11.9 million for the three ~~and nine~~ months ended ~~September~~June 30, ~~2022 or 2021~~2023 and $25.3 million for the six months ended June 30, 2023. The TSA income is ~~primarily~~ classified within ~~General and administrative expenses or Cost of sales~~Other operating (income) expense, net in the Company's Condensed Consolidated Statements of ~~Operations depending~~Operations. As of June 30, 2023, the deferred income balance on the ~~functions being supported by the Company.~~TSA Credit was fully utilized with no balance remaining.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The Company has reflected ~~both of these transactions~~this transaction as a discontinued operation. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations.

Results of discontinued operations are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)
Net sales	Net sales	$	424.4	$	349.2	$	1,179.6	$	1,110.2	Net sales	$	—	$	387.1	$	—	$	755.2
Cost of sales	Cost of sales	370.1		295.1		1,018.1		918.5		Cost of sales	—		335.9		—		648.0
Selling, general, administrative and other operating expenses	Selling, general, administrative and other operating expenses	41.9		31.0		117.0		95.6		Selling, general, administrative and other operating expenses	—		40.8		—		75.1

Amortization expense	Amortization expense	2.0		6.3		14.5		19.1		Amortization expense	—		6.2		—		12.5

Loss (gain) on sale of business		73.8		—		73.8		(18.4)
Operating income from discontinued operations		(63.4)		16.8		(43.8)		95.4
Interest and other expense		11.4		4.1		18.3		8.9
(Gain) loss on sale of business										(Gain) loss on sale of business	(1.0)		—		3.5		—

Operating income (loss) from discontinued operations										Operating income (loss) from discontinued operations	1.0		4.2		(3.5)		19.6
Interest and other expense (income)										Interest and other expense (income)	—		5.8		(1.1)		6.9

Income tax (benefit) expense	Income tax (benefit) expense	0.6		1.9		4.6		19.8		Income tax (benefit) expense	(0.6)		0.5		—		4.0
Net (loss) income from discontinued operations		$	(75.4)	$	10.8	$	(66.7)	$	66.7
Net income (loss) from discontinued operations										Net income (loss) from discontinued operations	$	1.6	$	(2.1)	$	(2.4)	$	8.7

~~Assets~~

6. NOTE RECEIVABLE

On October 3, 2022, the Company entered into a five-year secured Seller Promissory Note ("Seller Note Credit Agreement") which matures on October 1, 2027. The Seller Note Credit Agreement sets forth the terms of the Seller Promissory Note and ~~liabilities~~the loan evidenced thereby (the "Seller Loan"). The Seller Loan bears interest at a rate per annum equal to 10% for the first two years thereof, 11% for the third year thereof, 12% for the fourth year thereof, and 13% thereafter, payable quarterly in arrears. For the first year of ~~discontinued operations presented~~the Seller Loan, a portion of the interest, of up to 1% per annum, may be paid in kind; all other interest for the first year, and all interest thereafter, will be paid in cash. Starting on March 31, 2025, the Loan Parties shall commence repayment of the principal amount of the Seller Loan on a quarterly basis at 0.25% of the principal adjusted for prepayments. During the second quarter of 2023, the Company entered into Amendment No. 1 to the Seller Note Credit Agreement and amended the collateral requirements under the Canadian Collateral Agreement.

The Seller Loan has a balance of $424.1 million and $427.0 million as of June 30, 2023 and December 31, 2022, respectively, included within Note receivable, net in the Condensed Consolidated Balance ~~Sheets as~~Sheets. During the three and six months ended June 30, 2023, the Company recognized $10.7 million and $21.4 million, respectively, within Interest income in the Condensed Consolidated Statements of ~~September~~Operations related to the Note Receivable. As of June 30, ~~2022 and December 31, 2021 include~~2023, the ~~following:~~Company has not recorded an allowance for credit losses on uncollectible amounts related to the Note Receivable.

September 30, 2022 December 31, 2021
(In millions)
Cash $ 2.8 $ 4.1
Receivables, net 133.7 57.9
Inventories 271.3 216.2
Prepaid expenses and other assets 5.2 5.5
Property, plant, and equipment, net 323.5 319.0
Operating lease right-of-use assets 29.9 27.5
Goodwill 356.0 359.5
Intangible assets, net 203.1 218.4
Valuation allowance (73.8) —
Total assets of discontinued operations $ 1,251.7 $ 1,208.1
Accounts payable $ 207.8 $ 160.1
Accrued expenses and other liabilities 56.5 45.2
Operating lease liabilities 25.6 25.0
Deferred income taxes 49.5 52.2
Total liabilities of discontinued operations $ 339.4 $ 282.5

1614

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

8.7. PROPERTY, PLANT, AND EQUIPMENT


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Land	Land	$	28.5	$	28.7	Land	$	37.4	$	28.7
Buildings and improvements	Buildings and improvements	315.3		308.0		Buildings and improvements	383.1		321.2
Machinery and equipment	Machinery and equipment	997.4		999.1		Machinery and equipment	1,057.7		1,006.8
Construction in progress	Construction in progress	48.6		51.3		Construction in progress	52.3		66.6
Total	Total	1,389.8		1,387.1		Total	1,530.5		1,423.3
Less accumulated depreciation	Less accumulated depreciation	(734.0)		(687.0)		Less accumulated depreciation	(804.9)		(756.8)
Property, plant, and equipment, net	Property, plant, and equipment, net	$	655.8	$	700.1	Property, plant, and equipment, net	$	725.6	$	666.5

Depreciation expense was ~~$23.2~~$23.4 million ~~and $25.5 million~~ for both the three months ended ~~September~~June 30, 2023 and 2022 and ~~2021 and $71.2~~$47.4 million and ~~$76.9~~$48.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

9.8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As a result of the changes in organizational structure completed in the third quarter of 2022, the Company now has one reportable segment. See Note 1 for more information regarding the change in segment structure during the third quarter of 2022. See Note 7 for more information regarding Goodwill of $356.0 million reclassified within Assets of discontinued operations in the Condensed Consolidated Balance Sheets as of September 30, 2022 as a result of the sale of a significant portion of the Meal Preparation business.

Changes in the carrying amount of goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are as follows:

Goodwill

(In millions)

Balance at December 31, ~~2021,~~2022, before accumulated impairment losses

~~1,854.9~~1,850.6

Accumulated impairment losses

(33.0)

Balance at December 31, ~~2021~~2022

~~1,821.9~~1,817.6

Acquisition

5.4

Foreign currency exchange adjustments

~~(4.9)~~1.6

Balance at ~~September~~June 30, ~~2022~~2023

~~1,817.0~~1,824.6

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:


		September 30, 2022				December 31, 2021								June 30, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount				Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
		(In millions)												(In millions)
Intangible assets with finite lives:	Intangible assets with finite lives:														Intangible assets with finite lives:
Customer-related	Customer-related	$	542.6	$	(321.0)	$	221.6	$	545.5	$	(297.3)	$	248.2		Customer-related	$	549.3	$	(347.1)		$	202.2	$	542.9	$	(329.5)	$	213.4

Trademarks	Trademarks	18.7		(14.2)		4.5		18.8		(13.4)		5.4			Trademarks	18.7		(15.3)			3.4		18.7		(14.6)		4.1
Formulas/recipes	Formulas/recipes	15.0		(14.6)		0.4		15.1		(14.5)		0.6			Formulas/recipes	15.5		(14.8)			0.7		15.1		(14.7)		0.4
Computer software	Computer software	203.1		(130.2)		72.9		197.6		(121.2)		76.4			Computer software	207.0		(139.8)			67.2		205.6		(133.5)		72.1
Total finite lived intangibles	Total finite lived intangibles	779.4		(480.0)		299.4		777.0		(446.4)		330.6			Total finite lived intangibles	790.5		(517.0)			273.5		782.3		(492.3)		290.0

Intangible assets with indefinite lives:	Intangible assets with indefinite lives:														Intangible assets with indefinite lives:
Trademarks	Trademarks	6.0		—		6.0		6.0		—		6.0			Trademarks	6.0		—			6.0		6.0		—		6.0
Total intangible assets	Total intangible assets	$	785.4	$	(480.0)	$	305.4	$	783.0	$	(446.4)	$	336.6		Total intangible assets	$	796.5	$	(517.0)		$	279.5	$	788.3	$	(492.3)	$	296.0

~~10. ACCRUED EXPENSES~~

~~Accrued expenses consist of:~~
September 30, 2022 December 31, 2021
(In millions)
Payroll and benefits $ 79.4 $ 46.0
Trade promotion liabilities 22.1 21.8
Operating lease liabilities 38.1 33.1
Interest 5.8 8.8
Taxes 7.0 3.3
Health insurance, workers' compensation, and other insurance costs 22.0 21.9
Derivative contracts 0.1 52.1
Other accrued liabilities 12.0 46.9
Total $ 186.5 $ 233.9

~~11.~~9. INCOME TAXES

Income taxes were recognized at effective rates of ~~(15.3)%~~29.1% and ~~7.9%~~27.9% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, compared to ~~8.9% and 23.0%~~14.2% for both the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively.~~2022. The change in the Company's effective tax rate for the three and six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~2021~~2022 is primarily driven by ~~a change in~~ the valuation allowance recorded against certain deferred tax assets, tax expense recognized in 2022 due to the restructuring of certain Canadian subsidiaries, and tax expense recognized in 2021 due to the enactment of the "Coronavirus Aid, Relief, and Economic Security Act" (the "CARES Act"). The change in the Company's effective tax rate for the nine months ended September 30, 2022 compared to 2021 is primarily driven by a change in the valuation allowance recorded against certain deferred tax assets, tax expense recognized in 2021 due to the enactment of the CARES Act, and a change in theestimated amount of ~~non-deductible executive compensation.~~annual pre-tax earnings. 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.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Management estimates that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by as much as ~~$0.6~~$0.3 million within the next 12 months, primarily as a result of the resolution of audits currently in progress and the lapsing of statutes of limitations. Approximately ~~$0.3 million~~all of the ~~$0.6~~$0.3 million could affect net income when settled. The timing of cash settlement, if any, cannot be reasonably estimated for uncertain tax benefits.

~~12.~~

10. LONG-TERM DEBT


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)

Revolving Credit Facility						Revolving Credit Facility	$	199.5	$	—
Term Loan A	Term Loan A	$	491.3	$	496.3	Term Loan A	316.4		316.4
Term Loan A-1	Term Loan A-1	913.7		923.0		Term Loan A-1	588.6		588.6

2028 Notes	2028 Notes	500.0		500.0		2028 Notes	500.0		500.0
Finance leases	Finance leases	1.3		2.2		Finance leases	0.9		1.2
Total outstanding debt	Total outstanding debt	1,906.3		1,921.5		Total outstanding debt	1,605.4		1,406.2
Deferred financing costs	Deferred financing costs	(15.6)		(16.1)		Deferred financing costs	(10.4)		(11.6)
Less current portion	Less current portion	(11.3)		(15.4)		Less current portion	(0.5)		(0.6)
Total long-term debt	Total long-term debt	$	1,879.4	$	1,890.0	Total long-term debt	$	1,594.5	$	1,394.0

Credit Agreement

On February ~~14, 2022,~~17, 2023, the Company entered into Amendment No. 46 to the Credit Agreement. Amendment No. ~~4 temporarily increases~~6 implemented 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.~~replacement provisions for LIBOR with rates based on Term SOFR, plus a credit spread adjustment of 0.10%. 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.

On August 10, 2022, the Company entered into Amendment No. 5 to the Credit Agreement. Under Amendment No. 5, among other things, the parties have agreed to: (i) amend the definition of "Consolidated EBITDA", (ii) allow the Borrower to make Investments pursuant to a credit facility in principal amount not to exceed $50.0 million provided by the Borrower or any guarantors under the Credit Agreement to any Person that comprises or owns, directly or indirectly, any business unit disposed of by the Borrower or any such guarantors; and (iii) allow the Borrower to consummate the Transaction for consideration of at least 65% cash or cash equivalents. The material terms and conditions under the Credit Agreement are otherwise substantially consistent with those contained in the Credit Agreement prior to Amendment No. 5.

The Company's average interest rate on debt outstanding under its Credit Agreement for the three months ended September 30, 2022 was 4.10%. Including the impact of interest rate swap agreements in effect as of September 30, 2022, the average rate is 4.54%.6.

Revolving Credit Facility — As of ~~September~~June 30, ~~2022, $714.2~~2023, the Company had $199.5 million drawn from its $500.0 million Revolving Credit Facility. The Company had remaining availability of ~~the aggregate commitment of $750.0~~$267.5 million ofunder the Revolving Credit Facility, ~~was available. Under the Credit Agreement, the Revolving Credit Facility matures on March 26, 2026. In addition, as of September 30, 2022,~~and there were ~~$35.8~~$33.0 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. ~~In October 2022, the Company reduced the revolving credit commitment from $750.0 million to an aggregate amount of $500.0 million.~~

Interest is payable quarterly or, if earlier, at the end of the applicable interest period in arrears on any outstanding borrowings under the Revolving Credit Facility. The interest rates applicable to the Revolving Credit Facility are based upon the Company’s consolidated net leverage ratio or the Company’s Corporate Credit Rating, whichever results in lower pricing, and are determined by either (i) Term SOFR, plus a margin ranging from 1.20% to 1.70%, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.20% to 0.70%. The unused fee on the Revolving Credit Facility is also based on the Company’s consolidated net leverage ratio or the Company’s Corporate Credit Rating, whichever results in lower pricing, and accrues at a rate ranging from 0.20% to 0.35%.

Term Loan A — On December 1, 2017, the Company entered into a $500 million term loan and amended the loan to extend the maturity date to March 26, 2028. The interest rates applicable to Term Loan ~~A-1~~ ~~— In October 2022,~~A are based upon the ~~Company paid down debt~~Company’s consolidated net leverage ratio or the Company’s Corporate Credit Rating, whichever results in lower pricing, and are determined by either (i) Term SOFR, plus a margin ranging from 1.675% to 2.175%, or (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.675% to 1.175%. As a result of ~~$500.0 million which consisted~~the principal prepayment of $174.8 million on Term Loan A in October 2022, principal amortization payments are no longer due on a quarterly basis, and the remaining principal balance is due at maturity. Interest is payable quarterly or, if earlier, at the end of the applicable interest period in arrears on any outstanding borrowings under Term Loan A.

Term Loan A-1 — On December 1, 2017, the Company entered into a term loan and amended the loan amount to $930 million and extended the maturity date to March 26, 2026. The interest rates applicable to Term Loan A-1 are the same as those applicable to the Revolving Credit Facility (other than, for the avoidance of doubt, the unused fee). As a result of the principal prepayment of $325.2 million on Term Loan ~~A-1. The cash used to pay down~~A-1 in October 2022, principal amortization payments are no longer due on a quarterly basis, and the ~~term loans was from~~remaining principal balance is due at maturity. Interest is payable quarterly or, if earlier, at the ~~net proceeds~~end of the ~~divestiture of a significant portion of the Meal Preparation business.~~applicable interest period in arrears on any outstanding borrowing under Term Loan A-1.

~~Loss on Extinguishment of Debt~~2028 Notes — ~~During the first quarter of 2021,~~On September 9, 2020, the Company ~~incurred a loss~~completed its public offering of $500 million aggregate principal amount of the 2028 Notes. The 2028 Notes pay interest at the rate of 4.000% per annum and mature 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~~September 1, 2028. Interest is payable on the ~~redemption of its 2024~~2028 Notes ~~completed~~ on March ~~31, 2021~~1 and ~~Credit Agreement refinancing executed~~September 1 of each year. The payments began on March ~~26,~~1, 2021.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Fair Value — At ~~September~~June 30, 2023, the aggregate fair value of the Company's total debt was $1,539.3 million and its carrying value was $1,604.5 million. At December 31, 2022, the aggregate fair value of the Company's total debt was ~~$1,782.3~~$1,335.8 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~~$1,405.0 million. The fair values of Revolving Credit Facility, Term Loan A, and Term Loan A-1 were estimated using present value techniques and market-based interest rates and credit spreads. The fair value of the Company's 2028 Notes was estimated based on quoted market prices for similar instruments due to their infrequent trading volume. Accordingly, the fair value of the Company's debt is classified as Level 2 within the valuation hierarchy.

~~13.~~11. 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 September 30,		Nine Months Ended September 30,			Three Months Ended June 30,		Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
		(In millions, except per share data)					(In millions)

Weighted average common shares outstanding	Weighted average common shares outstanding	56.1	55.8	56.0	55.9	Weighted average common shares outstanding	56.4	56.0	56.3	55.9
Assumed exercise/vesting of equity awards (1)	Assumed exercise/vesting of equity awards (1)	—	—	—	—	Assumed exercise/vesting of equity awards (1)	0.4	—	0.5	—
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	56.1	55.8	56.0	55.9	Weighted average diluted common shares outstanding	56.8	56.0	56.8	55.9

(1)For the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~and 2021,~~ 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 ~~1.6~~1.2 million for both the three and six months ended June 30, 2023, and 1.8 million and 1.4 million for ~~the~~ three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~respectively, and 1.7 million and 1.5 million for the three and nine months ended September 30, 2021,~~ respectively.

~~14.~~12. 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. On April 27, 2023, the Plan was amended and restated to increase the number of shares available for issuance under the Plan by 5.0 million shares. The maximum number of shares authorized to be awarded under the Plan is approximately ~~17.5 million.~~22.5 million as of June 30, 2023.

Total compensation expense related to stock-based payments and the related income tax benefit recognized in Net ~~loss~~income (loss) from continuing operations are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)
Compensation expense related to stock-based payments	Compensation expense related to stock-based payments	$	6.1	$	1.4	$	15.2	$	10.1	Compensation expense related to stock-based payments	$	5.9	$	5.3	$	13.1	$	9.1
Related income tax benefit	Related income tax benefit	1.5		0.3		3.6		2.5		Related income tax benefit	0.8		1.2		1.7		2.1

All amounts below include continuing and discontinued operations.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Stock Options —~~The following table summarizes stock option activity during the nine months ended September 30, 2022.~~ Stock options granted under the ~~plan~~Plan during 2022 have a three year vesting schedule, vest one-third on the second anniversary of the grant date and two-thirds on the third anniversary of the grant date, and expire ten years from the grant date. Stock options are generally only granted to employees and non-employee directors.

The following table summarizes stock option activity during 2023:

Employee
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term (years) Aggregate
Intrinsic
Value
(In thousands) (In millions)
Outstanding, at December 31, 2021 1,149 $ 79.51 2.3 $ —
Granted 376 42.69
Forfeited (34) 42.69
Expired (194) 67.32
Outstanding, at September 30, 2022 1,297 71.63 3.8 —
Vested/expected to vest, at September 30, 2022 1,230 73.21 3.5 —
Exercisable, at September 30, 2022 956 81.97 1.7 —


	Employee Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (yrs.)	Aggregate Intrinsic Value
	(In thousands)				(In millions)
Outstanding, at December 31, 2022	1,258	$	72.09	3.5	$	2.1



Expired	(215)	71.92
Outstanding, at June 30, 2023	1,043	72.13		3.5	2.4
Vested/expected to vest, at June 30, 2023	1,001	73.35		3.3	2.1
Exercisable, at June 30, 2023	727	84.90		1.2	—

Unrecognized compensation costs related to nonvested options totaled ~~$4.7~~$3.1 million at ~~September~~June 30, ~~2022~~2023 and are expected to be recognized over a weighted average period of ~~2.6~~1.9 years. ~~The weighted average grant date fair value of options granted in 2022 was $15.62.~~

Stock options are valued using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company’s stock price. The risk-free rate for periods within the contractual life of the stock options is based on the U.S. Treasury yield curve in effect at the time of the grant. We based our expected term on the simplified method as described under the SEC Staff Accounting Bulletin No. 107. The weighted average assumptions used to calculate the value of the stock option awards granted are presented as follows:


	Nine Months Ended September 30,
	~~2022~~
~~Dividend yield~~	0	%
~~Risk-free rate~~	~~2.93~~	%
~~Expected volatility~~	~~38.54~~	%
~~Expected term (in years)~~	~~6.33~~

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 with the following exceptions:

•On June 9, 2022, restricted stock unit awards were granted that vest on the passage of time on the eighteen month anniversary of the grant date. The fair value of the awards was $37.90 on approximately 62,000 units granted.

•On December 29, 2021, 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. The fair value of the awards was $40.03 on approximately 51,200 units granted.

~~Director~~

Non-employee director restricted stock units generally vest on the first anniversary of the grant date. Certain non-employee 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.

2118

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The following table summarizes the restricted stock unit activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


		Employee Restricted Stock Units	Weighted Average Grant Date Fair Value		Director Restricted Stock Units	Weighted Average Grant Date Fair Value			Employee Restricted Stock Units	Weighted Average Grant Date Fair Value		Director Restricted Stock Units	Weighted Average Grant Date Fair Value
		(In thousands)			(In thousands)				(In thousands)			(In thousands)
Nonvested, at December 31, 2021		660	$	48.88	50	$	48.15
Nonvested, at December 31, 2022								Nonvested, at December 31, 2022	632	$	37.08	71	$	35.88
Granted	Granted	673	31.91		51	31.25		Granted	323	47.44		22	52.81
Vested	Vested	(275)	50.60		(30)	48.59		Vested	(240)	39.11		(45)	31.25
Forfeited	Forfeited	(225)	39.65		—	—		Forfeited	(40)	38.25		—	—
Nonvested, at September 30, 2022		833	37.10		71	35.88
Vested and deferred, at September 30, 2022					20	47.50
Nonvested, at June 30, 2023								Nonvested, at June 30, 2023	675	41.24		48	48.15
Vested and deferred, at June 30, 2023								Vested and deferred, at June 30, 2023				26	44.01


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)

Fair value of vested restricted stock units	Fair value of vested restricted stock units	$	1.0	$	2.0	$	10.3	$	22.0	Fair value of vested restricted stock units	$	3.2	$	1.7	$	14.3	$	9.3
Tax benefit recognized from vested restricted stock units	Tax benefit recognized from vested restricted stock units	0.1		0.5		1.6		3.7		Tax benefit recognized from vested restricted stock units	0.7		0.3		2.3		1.5

Unrecognized compensation costs related to nonvested restricted stock units are approximately ~~$24.4~~$23.9 million as of ~~September~~June 30, ~~2022~~2023 and will be recognized over a weighted average period of ~~1.9~~2.0 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~~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~~For performance unit awards granted in 2021 through 2023, certain executive members of management received awards that were measured using a relative total shareholder return ("TSR") 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 TSR measure, depending on the achievement attainment over the three-year performance period based on the ~~Company’s~~Company's absolute annualized TSR relative to the annualized TSR of a Peer Group. The fair value of the portion of the awards based on relative TSR was valued using a Monte Carlo simulation model with a grant-date fair value of $50.43 on approximately 22,000 units granted in 2023 and 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.~~2022.

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

•During the second quarter of 2022, the Company made grants to certain of the Company’s named executive officers and certain other executive officers of performance-based restricted stock units (the "PBRSU Awards"). The PBRSU Awards include a relative TSR market condition over a two-year performance period beginning on the date of grant. The units will accrue, multiplied by a predefined percentage between 0% to 450% for the relative TSR measure, depending on the achievement attainment over the two-year performance period based on Company’s absolute annualized TSR relative to the annualized TSR of the S&P Food & Beverage Select Industry Index (the "Index"). The fair value of the awards was valued using a Monte Carlo simulation model with a weighted average grant-date fair value of $58.36 on approximately 239,300 units granted in 2022.

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 with the exception of the PBRSU Awards on the second anniversary. The Company intends to settle these awards in stock and has the shares available to do so.

Performance unit awards with market conditions are valued using a Monte Carlo simulation model. Expected volatility is based on the historical volatility of the Company’s stock price, average Peer Group stock price, or the total return value of the Index. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant with a term equivalent to the expected term of the award. The expected term is the time period from the grant date to the end of the performance period. The weighted average assumptions used in the Monte Carlo simulations were as follows:

Nine Months Ended
September 30,
2022 2021
Dividend yield 0 % 0 %
Risk-free rate 2.36 % 0.30 %
Expected volatility (TreeHouse Foods, Inc.) 36.84 % 35.65 %
Expected volatility (Peer Group) 36.64 % 37.72 %
Expected volatility (Index) 16.30 % N/A
Expected term (in years) 2.14 2.75


	Six Months Ended June 30,
	2023
Dividend yield	0	%
Risk-free rate	3.87	%
Expected volatility (TreeHouse Foods, Inc.)	35.17	%
Expected volatility (Peer Group)	35.04	%
Expected volatility (Index)	N/A
Expected term (in years)	2.80

The following table summarizes the performance unit activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


		Performance Units	Weighted Average Grant Date Fair Value			Performance Units	Weighted Average Grant Date Fair Value
		(In thousands)				(In thousands)
Nonvested, at December 31, 2021		480	$	54.21
Nonvested, at December 31, 2022					Nonvested, at December 31, 2022	620	$	45.23
Granted	Granted	429	45.75		Granted	99	47.73
Vested	Vested	(63)	64.55		Vested	(98)	42.73
Forfeited	Forfeited	(202)	53.68		Forfeited	(72)	42.10
Nonvested, at September 30, 2022		644	45.01
Nonvested, at June 30, 2023					Nonvested, at June 30, 2023	549	47.42


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)

Fair value of vested performance units	Fair value of vested performance units	$	—	$	—	$	2.0	$	5.6	Fair value of vested performance units	$	1.3	$	—	$	5.0	$	2.0
Tax benefit recognized from performance units vested	Tax benefit recognized from performance units vested	—		0.1		0.2		0.3		Tax benefit recognized from performance units vested	—		—		0.4		0.2

Unrecognized compensation costs related to nonvested performance units are estimated to be approximately ~~$17.2~~$11.6 million as of ~~September~~June 30, ~~2022~~2023 and are expected to be recognized over a weighted average period of ~~1.6~~1.4 years. The fair value of the portion of the awards earned based on market conditions were 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.

2320

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~15.~~13. 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			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 loss before reclassifications		(2.5)		—		(2.5)
Reclassifications from accumulated other comprehensive loss (2)		—		0.5		0.5

Other comprehensive (loss) income		(2.5)		0.5		(2.0)
Balance at September 30, 2021		$	(69.8)	$	3.8	$	(66.0)
									(In millions)
Balance at December 31, 2021	Balance at December 31, 2021	$	(70.9)	$	17.3	$	(53.6)	Balance at December 31, 2021	$	(70.9)	$	17.3	$	(53.6)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	(20.8)		—		(20.8)		Other comprehensive loss before reclassifications	(6.3)		—		(6.3)
Reclassifications from accumulated other comprehensive loss (2)	Reclassifications from accumulated other comprehensive loss (2)	—		0.2		0.2		Reclassifications from accumulated other comprehensive loss (2)	—		0.1		0.1
Other comprehensive (loss) income								Other comprehensive (loss) income	(6.3)		0.1		(6.2)
Balance at June 30, 2022								Balance at June 30, 2022	$	(77.2)	$	17.4	$	(59.8)

Other comprehensive (loss) income		(20.8)		0.2		(20.6)
Balance at September 30, 2022		$	(91.7)	$	17.5	$	(74.2)
Balance at December 31, 2022								Balance at December 31, 2022	$	(87.0)	$	3.3	$	(83.7)
Other comprehensive income before reclassifications								Other comprehensive income before reclassifications	2.2		—		2.2
Reclassifications from accumulated other comprehensive loss (2)								Reclassifications from accumulated other comprehensive loss (2)	—		0.1		0.1
Other comprehensive income								Other comprehensive income	2.2		0.1		2.3
Balance at June 30, 2023								Balance at June 30, 2023	$	(84.8)	$	3.4	$	(81.4)

(1)The tax impact of the foreign currency translation adjustment and the unrecognized pension and postretirement benefits reclassification was insignificant for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

(2)Refer to Note 1614 for additional information regarding these reclassifications.

~~16.~~14. 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
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(In millions) (In millions)
Service cost $ 0.1 $ 0.4 $ 0.4 $ 0.8
Interest cost 2.3 2.3 6.9 6.6
Expected return on plan assets (3.8) (3.5) (11.4) (10.4)
Curtailment (1) — (0.7) — (0.7)
Amortization of unrecognized prior service cost — — — 0.1
Amortization of unrecognized net loss 0.1 0.2 0.2 0.4
Net periodic pension benefit $ (1.3) $ (1.3) $ (3.9) $ (3.2)

(1) For the three and nine months ended September 30, 2021, the Company recognized a curtailment gain of $0.7 million related to the sale of the RTE Cereal business within Cost of sales in the Condensed Consolidated Statements of Operations.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)				(In millions)
Service cost	$	0.1	$	0.2	$	0.2	$	0.3
Interest cost	3.1		2.3		6.3		4.6
Expected return on plan assets	(3.5)		(3.8)		(6.9)		(7.6)

Amortization of unrecognized prior service cost	0.1		—		0.1		—
Amortization of unrecognized net loss	0.1		—		0.2		0.1
Net periodic pension benefit	$	(0.1)	$	(1.3)	$	(0.1)	$	(2.6)

2421

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Components of net periodic postretirement cost are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)
Interest cost	Interest cost	$	0.2	$	0.2	$	0.5	$	0.5	Interest cost	$	0.2	$	0.1	$	0.4	$	0.3
Amortization of unrecognized net gain										Amortization of unrecognized net gain	(0.1)		—		(0.2)		—
Net periodic postretirement cost	Net periodic postretirement cost	$	0.2	$	0.2	$	0.5	$	0.5	Net periodic postretirement cost	$	0.1	$	0.1	$	0.2	$	0.3

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,~~(income) expense, net of the Condensed Consolidated Statements of Operations.

~~17.~~15. OTHER OPERATING (INCOME) EXPENSE, NET

The Company incurred other operating expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, which consisted of the following:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(In millions) (In millions)
Restructuring (1) $ 22.4 $ 16.9 $ 66.4 $ 57.7
Other 1.0 — — 0.1
Total other operating expense, net $ 23.4 $ 16.9 $ 66.4 $ 57.8


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)				(In millions)
Growth, reinvestment, and restructuring programs (1)	$	8.9	$	13.9	$	24.2	$	44.0
TSA income (2)	(11.9)		—		(25.3)		—

Other	0.2		—		0.9		(1.0)
Other operating (income) expense, net	$	(2.8)	$	13.9	$	(0.2)	$	43.0

(1) Refer to Note 32 for more information.

(2) Refer to Note 5 for more information.

~~18.~~16. 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.

2522

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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 Foods 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 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, resolved federal securities class action, Public Employees' Retirement Systems of Mississippi v. TreeHouse Foods, Inc., et al., Case No. 1:16-cv-10632 ("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 was based on essentially the same facts described above. The parties filed a stipulation of settlement to resolve the MPERS class action 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 a final judgment dismissing the case with prejudice on a classwide basis.

Due to the similarity of the derivative complaints, Bartelt was consolidated with Lavin, and Ann Arbor was consolidated with Wells. On August ~~24, 2022 the stay in the consolidated~~ ~~Lavin~~ ~~case was lifted, and plaintiffs were ordered to file a single operative complaint by October 24, 2022, which defendants are in the process of responding to. On August~~ 26, 2022, plaintiffs in the consolidated Wells case filed a second amended complaint, which was dismissed in its entirety with prejudice on March 15, 2023. The plaintiffs filed a notice of appeal on March 16, 2023, and they filed the record on appeal on May 25, 2023, which is being responded to pursuant to a briefing schedule set by the appellate court. On October 24, 2022, the plaintiffs’ designated an operative complaint in the Lavin case, which defendants have moved to ~~strike. A briefing schedule has been set in the consolidated~~ ~~Wells~~ ~~case for defendants’ motion to strike~~dismiss, and ~~the plaintiffs’ second amended complaint.~~was fully briefed as of May 25, 2023.

Other Claims

In addition, the Company is party in the ordinary course of business to certain claims, litigation, audits, and investigations. The Company will record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable that may be incurred in connection with any such currently pending or threatened matter. In the Company's opinion, the eventual resolution of such matters, either individually or in the aggregate, is not expected to have a material impact on the Company's financial position, results of operations, or cash flows. However, litigation is inherently unpredictable and resolutions or dispositions of claims or lawsuits by settlement or otherwise could have an adverse impact on our financial position, results of operations or cash flows for the reporting period in which any such resolution or disposition occurs.

In February 2014, TreeHouse, along with its 100% owned subsidiaries, Bay Valley Foods, LLC and Sturm Foods, Inc., filed suit against Keurig Dr. Pepper Inc.'s wholly-owned subsidiary, Keurig Green Mountain ("KGM"), in the U.S. District Court for the Southern District of New York captioned TreeHouse Foods, Inc. et al. v. Green Mountain Coffee Roasters, Inc. et al. asserting claims under the federal antitrust laws, various state antitrust laws and unfair competition statutes, contending that KGM had monopolized alleged markets for single serve coffee brewers and single serve coffee pods. The Company is seeking monetary damages, declaratory relief, injunctive relief, and attorneys' fees. The matter remains pending, with summary judgment, motions to exclude certain expert opinions, and discovery sanctions motions fully briefed. On March 28, 2022, the Magistrate Judge issued a non-public Opinion and Order granting in part and denying in part the TreeHouse sanctions motion against KGM and denying the KGM sanctions motion against TreeHouse. KGM has appealed a portion of the Opinion and Order awarding sanctions to the Company. KGM is denying the allegations made by the Company in the litigation. The Company has not recorded any amount in its Condensed Consolidated Financial Statements as of ~~September~~June 30, ~~2022.~~2023.

~~19.~~17. DERIVATIVE INSTRUMENTS

Interest Rate Swap Agreements - The Company manages its exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps to hedge our exposure to changes in interest rates, to reduce the volatility of our financing costs, and to achieve a desired proportion of fixed versus floating-rate debt, based on current and projected market conditions.

2623

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The Company has entered into long-term interest rate swap agreements ~~to lock into a fixed LIBOR interest rate base that have~~with a notional value of $875.0 million as of both ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, to fix the interest rate base. Subsequent to June 30, 2023, SOFR will become the reference rate for the Company's interest rate swap agreements as a result of LIBOR ceasing to be a representative rate. Under the terms of the agreements, $875.0 million in variable-rate debt is swapped for a weighted average fixed interest rate base of approximately 2.91% ~~from 2021~~ through February 28, 2025.

Commodity Contracts - Certain commodities the Company uses in the production and distribution of its products are exposed to market price risk. The Company utilizes derivative contracts to manage this risk. The majority of commodity forward contracts are not derivatives, and those that are generally qualify for the normal purchases and normal sales scope exception under the guidance for derivative instruments and hedging activities and, therefore, are not subject to its provisions. For derivative commodity contracts that do not qualify for the normal purchases and normal sales scope exception, the Company accounts for the contracts as derivatives.

The Company's derivative commodity contracts may include contracts for diesel, oil, plastics, ~~natural gas, electricity,~~ resin, and other commodity contracts that do not meet the requirements for the normal purchases and normal sales scope exception. Diesel contracts are used to manage the Company's risk associated with the underlying cost of diesel fuel used to deliver products. Contracts for oil, plastics, and resin are used to manage the Company's risk associated with the underlying commodity cost of a significant component used in packaging materials. ~~Contracts for natural gas and electricity are used to manage the Company's risk associated with the utility costs of its manufacturing facilities, and other~~Other commodity contracts that are derivatives that do not meet the normal purchases and normal sales scope exception are used to manage the price risk associated with raw material costs. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the notional value of the derivative commodity contracts outstanding was ~~$12.3~~$12.5 million and ~~$58.8~~$8.9 million, respectively. These commodity contracts have maturities expiring ~~through the remainder of 2022 and~~ throughout 2023 and 2024 as of ~~September~~June 30, ~~2022.~~2023.

Total Return Swap Contract - The Company ~~has~~had an economic hedge program that ~~uses~~used a total return swap contract to hedge the market risk associated with the unfunded portion of the Company's deferred compensation liability. The total return swap contract trades generally ~~have~~had a duration of one month and ~~are~~were rebalanced and re-hedged at the end of each monthly term. While the total return swap contract was treated as an economic hedge, the Company did not designate it as a hedge for accounting purposes. The total return swap contract iswas measured at fair value and recognized in the Condensed Consolidated Balance Sheets, with changes in value being recognized in the Condensed Consolidated Statements of Operations. ~~As of September~~At June 30, ~~2022~~2023, the Company had no outstanding and unsettled total return swap contracts, and at December 31, ~~2021,~~2022, the notional value of the total return swap contract was ~~$4.1 million and $7.0 million, respectively.~~$3.9 million.

The following table identifies the fair value of each derivative instrument:


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Asset derivatives	Asset derivatives					Asset derivatives
Commodity contracts	Commodity contracts	$	5.4	$	3.9	Commodity contracts	$	0.4	$	—

Interest rate swap agreements	Interest rate swap agreements	25.8		—		Interest rate swap agreements	30.0		27.2

		$	31.2	$	3.9		$	30.4	$	27.2
Liability derivatives	Liability derivatives					Liability derivatives
Commodity contracts	Commodity contracts	$	—	$	0.9	Commodity contracts	$	—	$	0.3

Interest rate swap agreements		—		51.2
Total return swap contract		0.1		—
		$	0.1	$	52.1

Asset derivatives for commodity contracts are included within Prepaid expenses and other current assets and ~~liability~~interest rate swap agreements are included within Other assets, net. Liability derivatives are included within Accrued expenses in the Condensed Consolidated Balance Sheets.

The fair values of the commodity ~~contracts, foreign currency~~ contracts, interest rate swap agreements, and the total return swap contract are determined using Level 2 inputs. Level 2 inputs are inputs other than quoted market prices that are observable for an asset or liability, either directly or indirectly. The fair values of the commodity contracts, interest rate swap agreements, and total return swap contract are based on an analysis comparing the contract rates to the market rates at the balance sheet date.

2724

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

We recognized the following gains and losses on our derivative contracts in the Condensed Consolidated Statements of Operations:


		Location of Gain (Loss)	Three Months Ended September 30,				Nine Months Ended September 30,					Location of Gain (Loss)	Three Months Ended June 30,				Six Months Ended June 30,
		Recognized in Net Income (Loss)	2022		2021		2022		2021			Recognized in Net Income (Loss)	2023		2022		2023		2022
			(In millions)				(In millions)						(In millions)				(In millions)
Mark-to-market unrealized gain (loss)	Mark-to-market unrealized gain (loss)										Mark-to-market unrealized gain (loss)
Commodity contracts	Commodity contracts	Other income, net	$	(7.6)	$	(1.7)	$	2.4	$	3.5	Commodity contracts	Other (income) expense, net	$	0.4	$	(1.7)	$	0.7	$	10.0

Interest rate swap agreements											Interest rate swap agreements	Other (income) expense, net	9.0		13.2		2.8		52.3

Interest rate swap agreements		Other income, net	24.8		6.4		77.0		29.8
Total return swap contract		General and administrative	(0.1)		(0.3)		(0.1)		(0.2)
Total unrealized gain	Total unrealized gain		$	17.1	$	4.4	$	79.3	$	33.1	Total unrealized gain		$	9.4	$	11.5	$	3.5	$	62.3
Realized gain (loss)	Realized gain (loss)										Realized gain (loss)
Commodity contracts	Commodity contracts	Manufacturing related to Cost of sales and transportation related to Selling and distribution	$	3.1	$	8.2	$	12.9	$	23.7	Commodity contracts	Manufacturing related to Cost of sales and transportation related to Selling and distribution	$	—	$	6.7	$	—	$	9.8

Interest rate swap agreements	Interest rate swap agreements	Interest expense	(1.6)		(6.3)		(12.4)		(18.6)		Interest rate swap agreements	Interest expense	4.6		(4.8)		8.2		(10.8)
Total return swap contracts		General and administrative	(0.2)		0.2		(1.3)		0.8
Total return swap contract											Total return swap contract	General and administrative	—		(0.7)		—		(1.1)
Total realized gain (loss)	Total realized gain (loss)		$	1.3	$	2.1	$	(0.8)	$	5.9	Total realized gain (loss)		$	4.6	$	1.2	$	8.2	$	(2.1)
Total gain	Total gain		$	18.4	$	6.5	$	78.5	$	39.0	Total gain		$	14.0	$	12.7	$	11.7	$	60.2

~~TREEHOUSE FOODS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~20.~~18. DISAGGREGATION OF REVENUE

The principal products that comprise our different product category groups are as follows:


Product Category Group						Principal Products
Snacking						Candy; cookies; crackers; in-store bakery items; pretzels; ~~retail~~frozen griddle ~~waffles, pancakes, and French toast;~~items; and snack bars
Beverages & drink mixes						Broths/stocks; ~~liquid and powdered~~ non-dairy creamer; powdered beverages and other blends; ready-to-drink beverages; ~~single serve hot beverages;~~coffee; and ~~specialty teas~~tea
Grocery						Cheese & pudding; hot ~~cereals;~~cereal; pickles; and refrigerated dough

Revenue disaggregated by product category groups is as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(In millions) (In millions)
Snacking $ 347.4 $ 293.8 $ 980.0 $ 833.7
Beverages & drink mixes 290.6 241.6 797.2 694.5
Grocery 237.0 216.3 680.6 601.4
Total net sales $ 875.0 $ 751.7 $ 2,457.8 $ 2,129.6


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)				(In millions)
Snacking	$	361.5	$	333.5	$	720.1	$	632.6
Beverages & drink mixes	243.9		246.8		535.2		506.6
Grocery	238.2		229.9		483.1		443.6
Total net sales	$	843.6	$	810.2	$	1,738.4	$	1,582.8

Revenue disaggregated by sales channel is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)				(In millions)					(In millions)				(In millions)
Retail grocery	Retail grocery	$	682.9	$	575.2	$	1,884.6	$	1,653.6	Retail grocery	$	663.4	$	608.6	$	1,378.1	$	1,201.7
Co-manufacturing	Co-manufacturing	128.4		116.3		382.9		306.9		Co-manufacturing	111.7		131.5		226.1		254.5
Food-away-from-home and other	Food-away-from-home and other	63.7		60.2		190.3		169.1		Food-away-from-home and other	68.5		70.1		134.2		126.6
Total net sales	Total net sales	$	875.0	$	751.7	$	2,457.8	$	2,129.6	Total net sales	$	843.6	$	810.2	$	1,738.4	$	1,582.8

2925

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

TreeHouse Foods, Inc. is a leading private label food and beverage manufacturer in North America. Our purpose is to engage and delight - one customer at a time. Through our customer focus and category experience, we strive to deliver excellent service and build capabilities and insights to drive ~~mutual~~mutually profitable growth for TreeHouse and for our customers. Our purpose is supported by investment in depth, capabilities and operational efficiencies which are aimed to capitalize on the long-term growth prospects in the categories in which we operate.

~~We believe we are~~TreeHouse believes it is well positioned across attractive snacking and beverage growth categories fueled by strong consumer demand ~~trends, and our~~trends. The portfolio includes ~~crackers, non-dairy creamer, pickles, single serve beverages, refrigerated dough, broths/stocks, hot cereal,~~snacking offerings (crackers, pretzels, in-store bakery items, frozen griddle items, cookies, snack bars, ~~cheese~~and unique candy offerings), beverage & ~~pudding,~~drink mix offerings (non-dairy creamer, coffee, broths/stocks, powdered beverages and other blends, tea, ~~ready-to-drink beverages,~~ and ~~unique candy products. We sell our~~ready-to-drink-beverages), and grocery offerings (pickles, refrigerated dough, hot cereal, and cheese & pudding). The Company sells its products to retail, co-manufacturing, and food-away-from-home customers in shelf stable, refrigerated, and frozen formats. WeTreeHouse also ~~offer our~~offers its customer partners a range of value and nutritional solutions, including natural, organic and gluten free so they can meet the unique needs of their consumers.

The following discussion and analysis presents the factors that had a material effect on our financial condition, changes in financial condition, and results of operations for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes to those Condensed Consolidated Financial Statements included elsewhere in this report. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements for a discussion of the uncertainties, risks, and assumptions associated with these statements.

Recent Developments

~~Sale~~Acquisition of ~~a Significant Portion~~Coffee Roasting Capability

On June 30, 2023,the Company completed the acquisition of the ~~Meal Preparation Business~~Direct Ship coffee business and its Northlake, Texas coffee facility (the "Coffee Roasting Capability") from Farmer Brothers Company, a national coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea, and culinary products. The acquisition brings roasting, grinding, flavoring and blending capabilities to the Company's portfolio to complement the Company's existing single-serve pod and ready-to-drink coffee businesses. The Coffee Roasting Capability enables us to deliver greater category depth in a world-class, end-to-end private label coffee offering for our customers. The purchase consideration consisted of approximately $92.2 million in cash, subject to customary purchase price adjustments. The acquisition was funded by borrowings from the Company’s $500.0 million Revolving Credit Facility. Refer to Note 5 to our Condensed Consolidated Financial Statements for additional information.

Acquisition of Seasoned Pretzel Capability

On ~~October 3, 2022,~~April 1, 2023, the Company completed the ~~sale~~acquisition of a significant portion of the Company’s Meal Preparation business, including pasta, pourable and spoonable dressing, preserves, red sauces, syrup, dry blends and baking, dry dinners, pie filling, pita chips and other sauces,seasoned pretzel capability for a ~~base~~total purchase price of $950 million (the "Transaction" or the "Business"), subject to certain adjustments pursuant to the terms of the Stock Purchase Agreement, dated as of August 10, 2022. In October 2022, the Company used $500.0 million of the net proceeds to pay down debt on its term loans. This Transaction$14.0 million. The acquisition is in line with ~~the Company’s~~our strategy to build category leadership, depth and ~~depth around a focused group~~capabilities to drive profitable growth. The seasoned pretzel acquisition expands our current portfolio of ~~categories in its higher-growth businesses. Beginning in~~traditional, filled and enrobed pretzels and extends our capabilities into this growing sub-sector of the ~~third quarter of 2022, the Business met the criteria for discontinued operations presentation, and, as such, has been excluded from continuing operations for all periods presented.~~Pretzels category. Refer to Note ~~7 of~~5 to our Condensed Consolidated Financial Statements for additional information.

~~Segment Change~~

As a result of entering into the sale agreement of a significant portion of the Company's Meal Preparation business, the Company changed the structure of its internal organization and reporting in the third quarter of 2022 and began operating as one segment. Refer to Note 1 of our Condensed Consolidated Financial Statements for more information regarding the change in segment structure during the third quarter of 2022.

3026

Executive Summary

The following table summarizes our consolidated financial results (in millions, except per share data and percentages):


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended June 30,						Six Months Ended June 30,
		2022	2021	% Change	2022	2021	% Change		2023		2022		% Change		2023		2022		% Change
GAAP Results	GAAP Results							GAAP Results
Net sales	Net sales	$875.0	$751.7	16.4%	$2,457.8	$2,129.6	15.4%	Net sales	$	843.6	$	810.2	4.1	%	$	1,738.4	$	1,582.8	9.8	%

Net loss from continuing operations		(15.1)	(4.1)	(268.3)	(56.2)	(50.1)	(12.2)
Net (loss) income		(90.5)	6.7	(1,450.7)	(122.9)	16.6	(840.4)
Diluted loss per share from continuing operations		(0.27)	(0.07)	(285.7)	(1.00)	(0.90)	(11.1)
Net income (loss) from continuing operations								Net income (loss) from continuing operations	21.7		(27.3)		179.5	%	40.9		(41.1)		199.5	%
Diluted earnings (loss) per share from continuing operations								Diluted earnings (loss) per share from continuing operations	0.38		(0.49)		177.6	%	0.72		(0.74)		197.3	%

Non-GAAP Results (1)	Non-GAAP Results (1)							Non-GAAP Results (1)
Adjusted EBITDA from continuing operations	Adjusted EBITDA from continuing operations	76.6	85.8	(10.7)	167.0	218.5	(23.6)	Adjusted EBITDA from continuing operations	$	76.4	$	53.1	43.9	%	$	167.0	$	90.4	84.7	%
Adjusted EBITDA		89.4	106.9	(16.4)	213.3	304.2	(29.9)
Adjusted net income from continuing operations		17.1	23.4	(26.9)	10.6	40.0	(73.5)
Adjusted net income (loss) from continuing operations								Adjusted net income (loss) from continuing operations	23.8		2.7		781.5	%	62.2		(6.5)		1,056.9	%
Adjusted diluted EPS from continuing operations	Adjusted diluted EPS from continuing operations	0.30	0.42	(28.6)	0.19	0.71	(73.2)	Adjusted diluted EPS from continuing operations	0.42		0.05		740.0	%	1.10		(0.12)		1,016.7	%

(1)Adjusted EBITDA from continuing operations, ~~Adjusted EBITDA,~~ adjusted net income (loss) from continuing operations, and adjusted diluted EPS from continuing operations are Non-GAAP financial measures. Refer to the "Non-GAAP Measures" section for additional information.

~~Third~~Second Quarter ~~2022~~2023 Financial Highlights

The following are highlights in our net sales and earnings for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the three months ended ~~September~~June 30, ~~2021.~~2022. Refer to the "Results of Operations" section ~~below~~ for further discussion and analysis.

•Net sales increased ~~16.4%~~4.1% primarily due to ~~our~~favorable pricing ~~actions~~ to recover commodity ~~and freight cost inflation~~inflation. This was partially offset by decreased volume as ~~we continue~~a result of the Company's ability to ~~manage through~~fulfill certain customer orders earlier than planned in the ~~current inflationary macro environment. However, labor and supply chain disruption continued to constrain our capacity~~first quarter of 2023 due to service ~~increased demand for private label food and beverage products.~~improvements.

•Earnings ~~saw sequential margin improvement when compared~~increased primarily due to ~~the second quarter of 2022, but global labor and supply chain disruption have adversely impacted profitability when compared to the third quarter of 2021. This was partially offset by~~ the Company's pricing actions to recover commodity and freight inflation experienced in prior ~~periods.~~

periods, which was partially offset by increased costs to invest in the supply chain to improve service levels.

3127

Known Trends or Uncertainties

Macroeconomic Conditions

~~The private label value proposition is becoming increasingly important for consumers as inflation is reflected~~Consumers have faced significant inflationary pressure and rising interest rates which has resulted in ~~higher shelf price,~~an overall decline in food and webeverage consumption trends. Private brands, while also down on a unit basis, are performing modestly better than national brands and have ~~seen demand for private label strengthen. Our~~gained unit share. Supply chain disruption had previously been constraining our ability to service ~~this strengthening demand continues to be impacted by~~all of the ~~macro environment, including industry-wide~~customer orders received, but we have invested in the supply chain ~~disruption~~ and labor availability challenges. These items are not only impacting our sales volume, but they are also adversely impacting our profitability. These issues coupled with commodity inflation and increased freight costs, have increased our costinventory, which has resulted in improvements in service compared to ~~service~~ the ~~customer. In response, we have implemented pricing actions to recover costs that we expect will~~prior year. We continue to build throughout 2022. Additionally, rising interest rates during the nine months ended September 30, 2022 are challenges for both companies and consumers that are impacting the economy. The strengthening of the U.S. Dollar also adversely impacts the results ofmake steady progress in enhancing our ~~Canadian operations.~~

~~Supply Chain Disruption and Labor Shortages~~

~~During the nine months ended September 30, 2022, we have experienced significant disruptions in the global supply chain network when compared~~service levels to ~~nine months ended September 30, 2021. These disruptions include, but are not limited~~target to items such as freight transportation availability, labor challenges, and raw materials and packaging availability challenges, which have negatively impacted our margins and ability to service demand during the nine months ended September 30, 2022. In response, we have implemented labor and supply initiatives, which includes actions such as increasing hourly labor rates, awarding bonuses to our hourly employees in order to better attract and retain talent, implementing one-time retention programs, granting additional stock-based compensation awards to drive retention, securing additional suppliers, and engaging additional transportation partners. We will continue to actively monitor and manage our response to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our margins and service levels.capture private label demand.

Commodity Inflation

~~During the nine months ended September 30, 2022, the Company~~The inflationary environment continues to ~~experience significant cost increases compared~~be volatile and has led to ~~2021 across~~higher costs for raw materials and agricultural commodities, packaging materials, fuel, energy, and ~~agricultural commodities, including but not limited~~other supply chain components. As a result of the inflationary environment, we implemented waves of pricing actions during 2022 that remain in effect in 2023. The Federal Reserve has raised the federal funds interest rate throughout 2022 and has continued to ~~edible oils (soybean, palm, coconut,~~raise rates in 2023 in its effort to take action against domestic inflation. We will continue to monitor the inflationary environment and ~~canola), durum, wheat, oats, coffee, eggs, corn, cucumbers,~~its economic impact on pricing and ~~tomatoes, cucumbers, and eggs. In particular, the price of eggs has risen in 2022 in part due to a wave of avian flu which has impacted the supply of chickens and turkeys in the United States.~~consumer trends.

Additionally, ~~in February 2022~~ as a result of the invasion of Ukraine by Russia, the United States and other countries imposed economic sanctions on Russian financial institutions, oil and gas imports, and other businesses. TreeHouse Foods is a North American focused company with no direct exposure to Russia or Ukraine. As such, the impact to ~~TreeHouse~~the Company has not been material to date. However, sanctions imposed by the United States on Russia oil and gas imports, as well as disruption caused to Ukraine's wheat and other agricultural supply due to the ongoing military conflict, ~~is causing~~has caused further inflation to our commodity costs. We will continue to monitor any broader economic impact from the current conflict.

We manage the impact of cost increases, wherever possible, on commercially reasonable terms, by locking in prices on the quantities we expect are required to meet our production requirements. In addition, as input costs rise, we seek to recover inflation by implementing higher pricing. However, our pricing actions often lag commodity cost changes temporarily, or we may not be able to pass along the full effect of increases in raw materials and other input costs as we incur them.

~~Rising Interest Rates~~

The Federal Reserve has raised and is expected to continue to raise the federal funds interest rate throughout 2022 in its effort to take action against domestic inflation. The Company has long-term interest rate swap agreements to lock into a fixed LIBOR interest rate base in order to mitigate the Company's exposure to interest rate risk. As of September 30, 2022, we have an outstanding variable-rate debt balance of $1,405.0 million, and our interest rate swap agreements with a fixed LIBOR interest rate base are at $875.0 million. The rising interest rates have had a favorable impact to the fair value of the Company's interest rate swap agreements, and the Company recorded a $24.8 million and $77.0 million mark-to-market unrealized gain for the three and nine months ended September 30, 2022, respectively. Refer to Note 19 to our Condensed Consolidated Financial Statements for additional information. For additional information regarding the Company's exposure to interest rate risk, refer to Item 7A, ~~Quantitative and Qualitative Disclosures About Market Risk,~~ ~~within the Company's 2021 Annual Report on Form 10-K.~~

~~Foreign Currency Exchange Rate Fluctuations~~

The U.S. Dollar has been strengthening compared to most foreign currencies. The most significant currency affecting our continuing operating results is the Canadian Dollar. The Canadian Dollar exposures to revenue are greater than the exposure to input costs for foreign produced products. As such, a weaker Canadian Dollar leads to an unfavorable impact to the Company’s operating results. In addition to higher input costs, the Company is impacted by the re-measurement of the Canadian Dollar denominated intercompany loans and the translation of the Canadian Dollar financial statements. The Company recorded a $3.0 million loss on foreign currency exchange within the Condensed Consolidated Statements of Operations for both the three and nine months ended September 30, 2022, respectively, and the Company recorded a $14.5 million and $20.8 million loss on foreign currency translation within the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022, respectively. We will continue to monitor the impact of foreign currency to the Company's results of operations.

3328

Results of Operations

The following table presents certain information concerning our financial results, including information presented as a percentage of consolidated net sales:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
(Dollars in millions) (Dollars in millions)
Net sales $ 875.0 100.0 % $ 751.7 100.0 % $ 2,457.8 100.0 % $ 2,129.6 100.0 %
Cost of sales 745.7 85.2 625.8 83.3 2,118.8 86.2 1,784.8 83.8
Gross profit 129.3 14.8 125.9 16.7 339.0 13.8 344.8 16.2
Operating expenses:
Selling and distribution 52.0 5.9 50.1 6.7 167.9 6.8 143.8 6.8
General and administrative 51.5 5.9 38.1 5.1 160.5 6.5 142.0 6.7
Amortization expense 11.9 1.4 11.8 1.6 35.7 1.5 35.4 1.7
Other operating expense, net 23.4 2.7 16.9 2.2 66.4 2.7 57.8 2.7
Total operating expenses 138.8 15.9 116.9 15.6 430.5 17.5 379.0 17.9
Operating (loss) income (9.5) (1.1) 9.0 1.1 (91.5) (3.7) (34.2) (1.7)
Other expense (income):
Interest expense 17.5 2.0 16.5 2.2 51.2 2.1 55.5 2.6
Loss on extinguishment of debt — — — — — — 14.4 0.7
Loss (gain) on foreign currency exchange 3.0 0.3 0.6 0.1 3.0 0.1 (0.3) —
Other income, net (16.9) (1.9) (3.6) (0.5) (84.7) (3.4) (38.7) (1.8)
Total other expense (income) 3.6 0.4 13.5 1.8 (30.5) (1.2) 30.9 1.5
Loss before income taxes (13.1) (1.5) (4.5) (0.7) (61.0) (2.5) (65.1) (3.2)
Income tax expense (benefit) 2.0 0.2 (0.4) (0.1) (4.8) (0.2) (15.0) (0.7)
Net loss from continuing operations (15.1) (1.7) (4.1) (0.6) (56.2) (2.3) (50.1) (2.5)
Net (loss) income from discontinued operations (75.4) (8.6) 10.8 1.4 (66.7) (2.7) 66.7 3.1
Net (loss) income $ (90.5) (10.3) % $ 6.7 0.8 % $ (122.9) (5.0) % $ 16.6 0.6 %


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	(Dollars in millions)								(Dollars in millions)
Net sales	$	843.6	100.0	%	$	810.2	100.0	%	$	1,738.4	100.0	%	$	1,582.8	100.0	%
Cost of sales	710.8		84.3		699.2		86.3		1,453.3		83.6		1,373.1		86.8
Gross profit	132.8		15.7		111.0		13.7		285.1		16.4		209.7		13.2
Operating expenses:
Selling and distribution	39.9		4.7		54.8		6.8		84.9		4.9		115.9		7.3
General and administrative	54.1		6.4		56.1		6.9		107.5		6.2		109.0		6.9
Amortization expense	12.1		1.4		11.9		1.5		24.1		1.4		23.8		1.5

Other operating (income) expense, net	(2.8)		(0.3)		13.9		1.7		(0.2)		—		43.0		2.7
Total operating expenses	103.3		12.2		136.7		16.9		216.3		12.5		291.7		18.4
Operating income (loss)	29.5		3.5		(25.7)		(3.2)		68.8		3.9		(82.0)		(5.2)
Other (income) expense:
Interest expense	19.2		2.3		17.0		2.1		37.0		2.1		33.7		2.1
Interest income	(10.8)		(1.3)		(0.1)		—		(25.4)		(1.5)		(4.2)		(0.3)

(Gain) loss on foreign currency exchange	(3.3)		(0.4)		1.1		0.1		(3.0)		(0.2)		—		—
Other (income) expense, net	(6.2)		(0.7)		(11.9)		(1.5)		3.5		0.2		(63.6)		(4.0)
Total other (income) expense	(1.1)		(0.1)		6.1		0.7		12.1		0.6		(34.1)		(2.2)
Income (loss) before income taxes	30.6		3.6		(31.8)		(3.9)		56.7		3.3		(47.9)		(3.0)
Income tax expense (benefit)	8.9		1.1		(4.5)		(0.6)		15.8		0.9		(6.8)		(0.4)
Net income (loss) from continuing operations	21.7		2.5		(27.3)		(3.3)		40.9		2.4		(41.1)		(2.6)
Net income (loss) from discontinued operations	1.6		0.2		(2.1)		(0.3)		(2.4)		(0.1)		8.7		0.5
Net income (loss)	$	23.3	2.7	%	$	(29.4)	(3.6)	%	$	38.5	2.3	%	$	(32.4)	(2.1)	%

3429

Three Months Ended ~~September~~June 30, ~~2022~~2023 Compared to Three Months Ended ~~September~~June 30, ~~2021~~2022

Continuing Operations

Net Sales — Net sales for the ~~third~~second quarter of ~~2022~~2023 totaled ~~$875.0~~$843.6 million compared to ~~$751.7~~$810.2 million for the same period last year, an increase of ~~$123.3~~$33.4 million, or ~~16.4%~~4.1%. The change in net sales from ~~2021~~2022 to ~~2022~~2023 was due to the following:


		Dollars		Percent			Dollars		Percent
		(In millions)					(In millions)
2021 Net sales		$	751.7
2022 Net sales						2022 Net sales	$	810.2
Pricing	Pricing	155.8		20.7	%	Pricing	90.9		11.2	%
Volume/mix	Volume/mix	(31.3)		(4.2)		Volume/mix	(58.0)		(7.2)

Acquisition						Acquisition	2.1		0.3

Foreign currency						Foreign currency	(1.6)		(0.2)
2023 Net sales						2023 Net sales	$	843.6	4.1	%

Foreign currency		(1.2)		(0.1)
2022 Net sales		$	875.0	16.4	%

Acquisition						Acquisition			(0.3)

Foreign currency	Foreign currency			0.1		Foreign currency			0.2
Percent change in organic net sales (1)	Percent change in organic net sales (1)			16.5	%	Percent change in organic net sales (1)			4.0	%

(1)Organic net sales is a Non-GAAP financial measure. Refer to the "Non-GAAP Measures" section for additional information.


The net sales increase of ~~16.4%~~4.1% was primarily driven by favorable pricing to recover commodity inflation. This was partially offset by ~~labor and supply chain disruption, which constrained our~~decreased volume as a result of the Company's ability to ~~service demand. Additionally, decreases~~fulfill certain customer orders earlier than planned in ~~volume were~~the first quarter of 2023 due to ~~exiting~~service improvements. Additionally, declines in food and beverage consumption trends, the exit of lower margin business, ~~particularly in Pickles.~~and distribution losses contributed to the decrease.

Gross Profit — Gross profit as a percentage of net sales was ~~14.8%~~15.7% in the ~~third~~second quarter of 2023, compared to 13.7% in the second quarter of 2022, ~~compared to 16.7% in the third quarter~~an increase of ~~2021, a decrease of 1.9~~2.0 percentage points. The ~~decrease~~increase is primarily due to ~~incremental costs related to labor and supply chain disruption as a result of the macro environment as well as warehouse capacity challenges. This was partially offset by~~ the Company's pricing actions to recover commodity and freight inflation experienced in prior ~~periods~~periods. This was partially offset by increased costs to invest in the supply chain to improve service levels, which included increased costs for labor and ~~favorable category mix.~~manufacturing plant maintenance.

Total Operating Expenses — Total operating expenses were ~~$138.8~~$103.3 million in the ~~third~~second quarter of 2023 compared to $136.7 million in the second quarter of 2022, ~~compared to $116.9 million in the third quarter~~a decrease of ~~2021, an increase of $21.9~~$33.4 million. The ~~increase~~ decreaseis primarily ~~attributable~~due to ~~higher employee compensation costs to address retention and labor shortages. Professional~~$11.9 million of TSA income, lower professional fees ~~increased in connection with set-up costs~~ for a transition services agreement as part of the sale of a significant portion of the Meal Preparation business, and other divestiture related restructuring costs contributed to the increase. This was partially offset by lower spend in the strategic growth initiatives, lower retention bonus expense, and ~~other restructuring programs, which consisted primarily of professional fees.~~lower freight costs.

Total Other (Income) Expense ~~(Income)~~ — Total other expense ~~(income) was $3.6~~of $6.1 million in the ~~third~~second quarter of 2022 ~~compared~~decreased by $7.2 million to ~~$13.5~~be total other income of $1.1 million in the ~~third~~second quarter of ~~2021, a decrease of $9.9 million.~~2023. The decrease was primarily due to $10.7 million of interest income received from the Company's Note Receivable and favorable currency exchange rate impacts between the U.S. and Canada. This was partially offset by rising interest rates, which led to interest expense, higher costs with selling receivables in the Company's Receivables Sales Program, and higher costs in our pension plans. Additionally, offsetting was a less favorable change in non-cash mark-to-market impacts from hedging activities, largely driven by interest rate ~~swaps due to rising interest rates. This was partially offset by unfavorable foreign currency exchange rate impacts between the U.S. and Canadian dollar.~~swaps.

Income Taxes — Income taxes were recognized at an effective rate of ~~(15.3)%~~29.1% in the ~~third~~second quarter of ~~2022~~2023 compared to ~~8.9%~~14.2% recognized in the ~~third~~second quarter of ~~2021.~~2022. The change in the Company's effective tax rate is primarily driven by ~~a change in~~ the ~~valuation allowance recorded against certain deferred tax assets, tax expense recognized in 2022 due to the restructuring~~estimated amount of ~~certain Canadian subsidiaries, and tax expense recognized in 2021 due to the enactment of the CARES Act.~~annual pre-tax earnings.

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.

3530

Discontinued Operations


Discontinued Operations — Net income (loss) ~~income~~ from discontinued operations was ~~a $75.4 million loss in the third quarter of 2022 compared to $10.8~~$1.6 million of income in the ~~third~~second quarter of ~~2021,~~2023 compared to a ~~decrease~~$2.1 million loss in the second quarter of ~~$86.2~~2022, an increase of $3.7 million. The ~~decrease~~increase is ~~due to an expected loss on disposal~~primarily a result of ~~$73.8 million, an increase in professional fees associated with~~ the divestiture of a significant portion of the Meal Preparation business ~~an increase in interest expense due to rising interest rates,~~on October 3, 2022 and ~~unfavorable foreign currency exchange rate impacts between~~a favorable loss on disposal adjustment of $1.0 million during the ~~U.S. and Canadian dollar.~~second quarter of 2023 as the purchase price was finalized. Refer to Note 75 of our Condensed Consolidated Financial Statements for additional details.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022

Continuing Operations

Net Sales — Net sales for the first ~~nine~~six months of ~~2022~~2023 totaled ~~$2,457.8~~$1,738.4 million compared to ~~$2,129.6~~$1,582.8 million for the same period last year, ana increase of ~~$328.2~~$155.6 million, or ~~15.4%~~9.8%. The change in net sales from ~~2021~~2022 to ~~2022~~2023 was due to the following:


		Dollars		Percent			Dollars		Percent
		(In millions)					(In millions)
2021 Net sales		$	2,129.6
2022 Net sales						2022 Net sales	$	1,582.8
Pricing	Pricing	331.6		15.6	%	Pricing	219.7		13.9	%
Volume/mix	Volume/mix	(0.9)		—		Volume/mix	(62.2)		(3.9)

Acquisition						Acquisition	2.1		0.1

Foreign currency	Foreign currency	(2.5)		(0.2)		Foreign currency	(4.0)		(0.3)
2022 Net sales		$	2,457.8	15.4	%
2023 Net sales						2023 Net sales	$	1,738.4	9.8	%

Acquisition						Acquisition			(0.1)

Foreign currency	Foreign currency			0.2		Foreign currency			0.3
Percent change in organic net sales	Percent change in organic net sales			15.6	%	Percent change in organic net sales			10.0	%

The net sales increase of ~~15.4%~~9.8% was primarily driven by favorable pricing to recover commodity ~~and freight cost~~ inflation. This was partially offset by ~~labor~~declines in food and ~~supply chain disruption, which constrained our ability to service demand.~~beverage consumption trends, the exit of lower margin business, and distribution losses.

Gross Profit — Gross profit as a percentage of net sales was ~~13.8%~~16.4% in the first ~~nine~~six months of 2023, compared to 13.2% in the first six months of 2022, ~~compared to 16.2% in the first nine months~~an increase of ~~2021, a decrease of 2.4~~3.2 percentage points. The ~~decrease~~increase is primarily due to incremental costs related to labor and supply chain disruption as a result of the macro environment. Additionally, inbound freight cost inflation and warehouse capacity challenges contributed to the decrease. This was partially offset by the Company's pricing actions to recover commodity and freight inflation experienced in prior periods and favorable category ~~mix, and lower~~mix. This was partially offset by increased costs to invest in the supply chain to improve service levels, which included increased costs for ~~purchases of personal protective equipment for employees~~labor and ~~additional sanitation measures.~~manufacturing plant maintenance.

Total Operating Expenses — Total operating expenses were ~~$430.5~~$216.3 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$379.0~~$291.7 million in the first ~~nine~~six months of ~~2021, an increase~~2022, a decrease of ~~$51.5~~$75.4 million. The ~~increase~~ decreaseis primarily ~~attributable~~due to ~~higher~~$25.3 million of TSA income, lower freight costs, ~~of $22.0 million due to freight cost inflation and~~ lower ~~utilization of full truck load shipments due to supply chain disruption. Professional~~professional fees increased in connection with set-up costs for a transition services agreement as part of the sale of a significant portion of the Meal Preparation business. Additionally, higher employee compensation costs to address retention and labor shortages as well as other divestiture related restructuring costs contributed to the increase. This was partially offset by lower spend in thefrom strategic growth initiatives, lower retention bonus expense, and ~~other restructuring programs, which consisted primarily of professional fees.~~lower severance expense.

Total Other (Income) Expense ~~(Income)~~ — Total other ~~expense~~income of ~~$30.9~~$34.1 million in the first ~~nine~~six months of ~~2021~~2022 decreased by ~~$61.4~~$46.2 million to be total other ~~income~~expense of ~~$30.5~~$12.1 million in the first ~~nine~~six months of ~~2022.~~2023. The decrease was primarily due to ~~higher favorable~~a $58.8 million unfavorable change in non-cash mark-to-market impacts from hedging activities, ~~of $79.3 in the first nine months of 2022 compared to $33.1 in the first nine months of 2021,~~ largely driven by an unfavorable change to interest rate swaps ~~due to~~and less favorable impacts from commodity contracts. Additionally, rising interest rates ~~and commodity contracts. Additionally, the non-recurrence of a loss on extinguishment of debt of $14.4 million~~led to higher costs with selling receivables in the ~~first quarter of 2021 as a result of debt refinancing completed~~Company's Receivables Sales Program, higher costs in ~~the first quarter of 2021 contributed to the decrease.~~our pension plans, and higher interest expense. This was partially offset by ~~unfavorable foreign currency exchange rate impacts between~~$21.4 million of interest income received from the ~~U.S. and Canadian dollar.~~Company's Note Receivable.

Income Taxes — Income taxes were recognized at an effective rate of ~~7.9%~~27.9% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~23.0%~~14.2% recognized in the first ~~nine~~six months of ~~2021.~~2022. The change in the Company's effective tax rate is primarily driven by ~~a change in~~ the ~~valuation allowance recorded against certain deferred tax assets, tax expense recognized in 2021 due to the enactment of the CARES Act, and a change in the~~estimated amount of ~~non-deductible executive compensation.~~annual pre-tax earnings.

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.

Discontinued Operations

Discontinued Operations — Net income (loss) ~~income~~ from discontinued operations was a ~~$66.7~~$2.4 million loss in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$66.7~~$8.7 million of income in the first ~~nine~~six months of ~~2021,~~2022, a decrease of ~~$133.4~~$11.1 million. The decrease is primarily ~~due to~~a result of the divestiture of a significant portion of the Meal Preparation business on October 3, 2022 and an expected loss on disposal adjustment of ~~$73.8~~$3.5 million ~~a decrease in gross margin~~during the first six months of $30.2 million, and the completion of the sale of the Ready-to-eat Cereal business on June 1, 2021, which resulted in the non-recurrence of a pre-tax gain of $18.4 million. Gross margin was adversely impacted by commodity and freight cost inflation, which was offset by favorable pricing actions to recover inflation, and incremental costs related to labor and supply chain disruption. An increase in interest expense due to rising interest rates and unfavorable foreign currency exchange rate impacts between the U.S. and Canadian dollar also contributed to the decrease.2023. Refer to Note 75 of our Condensed Consolidated Financial Statements for additional details.

Liquidity and Capital Resources

~~Cash Flow~~

Management assesses the Company's liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities. The Company remains in a strong financial position, with resources available for reinvesting in existing businesses, including our strategic growth initiatives, conducting acquisitions, and managing its capital structure on a short and long-term basis.

Seller Note Credit Agreement

On October 3, 2022, the Company ~~completed the sale of a significant portion of the Company’s Meal Preparation for a base purchase price of $950.0 million, subject to certain adjustmentsThe purchase price consists of approximately $527.5 million in cash and approximately $422.5 million in~~entered into a five-year secured ~~seller-secured promissory note (the “Seller~~Seller Promissory Note ("Seller Note Credit ~~Agreement”~~Agreement") ~~issued by certain entities affiliated with the buyer.~~

which matures on October 1, 2027. The Seller Note Credit Agreement sets forth the terms of the ~~seller promissory note~~Seller Promissory Note and the loan evidenced thereby (the ~~“Seller Loan”~~"Seller Loan"). ~~The Seller Loan matures on October 1, 2027.~~The Seller Loan bears interest at a rate per annum equal to 10% for the first two years thereof, 11% for the third year thereof, 12% for the fourth year thereof, and 13% thereafter, payable quarterly in arrears. For the first year of the Seller Loan, a portion of the interest, of up to 1% per annum, may be paid in kind; all other interest for the first year, and all interest thereafter, will be paid in cash. Starting on March 31, 2025, the Loan Parties shall commence ~~paying back~~repayment of the principal amount of the Seller Loan on a quarterly basis at 0.25% of the principal adjusted for prepayments. The Seller Loan has a balance of $424.1 million as ~~set forth in the~~of June 30, 2023. See Note 6 to our Condensed Consolidated Financial Statements for additional information regarding our Seller Note Credit Agreement.

Receivables Sales Program

The Company has the ability to strategically manage customer payment terms and counterparty risk by selling receivables in a cost-effective manner through its Receivables Sales Program. Approximately ~~$122.0~~$194.6 million was available under the Receivables Sales Program limit as of ~~September~~June 30, ~~2022.~~2023. See Note 53 to our Condensed Consolidated Financial Statements for additional information regarding our Receivables Sales Program. Our Receivables Sales Program provides us lower cost access to liquidity when compared to the Revolving Credit Facility.

As a result of the sale of a significant portion of the Company’s Meal Preparation business, the Company was required to reduce the sale of receivables related to the divested business. Subsequent to the Transaction, the Company will continue to evaluate the extent of the use of the Receivables Sales Program for its cash resource needs.

Revolving Credit Facility

If additional borrowings are needed, approximately ~~$714.2~~$267.5 million was available under the Revolving Credit Facility as of ~~September~~June 30, ~~2022. In October 2022,~~2023. On June 30, 2023, we completed the ~~Company reduced~~Coffee Roasting Capability acquisition for $92.2 million in cash and funded the ~~revolving credit commitment~~purchase through borrowings from ~~$750.0 million to an aggregate amount of $500.0 million.~~the Company’s Revolving Credit Facility. See Note 1210 to our Condensed Consolidated Financial Statements for additional information regarding our Revolving Credit Facility. We are in compliance with the terms of the Revolving Credit Facility and expect to meet foreseeable financial requirements.

CARES Act

Our cash earnings and liquidity have been impacted by global macroeconomic challenges with commodity inflation and supply chain disruption, but we anticipate our current cash balances, cash flows from operations, and our available sources of liquidity will be sufficient to meet our cash requirements. Under the CARES Act, we deferred the payment of ~~$22.8~~$21.7 million in payroll taxes in 2020, with $12.3 million paid in 2021 and 2022, and the remaining ~~$10.5~~$9.4 million ~~to be~~was paid in the first quarter of 2023. We filed refund claims from the Internal Revenue Service of $73.5 million and $8.3 million related to the net operating loss carryback provisions of the CARES Act for the 2019 and 2020 federal tax losses, respectively. We received $71.4 million in the fourth quarter of 2020 and the remaining $2.1 million in the third quarter of 2022 related to the 2019 refund claim, and we received $8.3 million in the fourth quarter of 2021 related to the 2020 refund claim. Given the macro environment, we will continue to assess our liquidity needs while additionally managing our discretionary spending and investment strategies.

Cash Flow

The following table is derived from our Condensed Consolidated Statement of Cash Flows:


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
		(In millions)					(In millions)
Net Cash Flows Provided By (Used In):	Net Cash Flows Provided By (Used In):					Net Cash Flows Provided By (Used In):
Operating activities of continuing operations	Operating activities of continuing operations	$	(90.4)	$	(57.0)	Operating activities of continuing operations	$	(49.8)	$	(70.7)
Investing activities of continuing operations	Investing activities of continuing operations	(56.5)		(53.1)		Investing activities of continuing operations	(156.9)		(38.6)
Financing activities of continuing operations	Financing activities of continuing operations	(21.8)		(357.9)		Financing activities of continuing operations	193.2		(19.9)
Cash flows from discontinued operations	Cash flows from discontinued operations	(59.9)		171.3		Cash flows from discontinued operations	(15.2)		20.5

3833

Operating Activities From Continuing Operations


Net cash used in operating activities from continuing operations was ~~$90.4~~$49.8 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$57.0~~$70.7 million in the first ~~nine~~six months of ~~2021, an increase~~2022, a decrease in cash used of ~~$33.4~~$20.9 million. The ~~increase~~cash flow improvement was primarily attributable to ~~lower~~higher cash earnings ~~which reflect~~reflecting the ~~impact of~~Company's pricing actions to recover commodity and freight ~~cost inflation. Working capital changes have been impacted by higher sales as a result of price increases~~inflation experienced in ~~response to commodity and freight cost inflation, which have increased receivables and inventories.~~prior periods. This was partially offset by an increase in cash flow from accounts payable due to improved working capital management, lower incentive compensation paid in the first quarter of 2022 compared to the first quarter of 2021 based on prior year performance, lower cash paid on interest due to debt refinancing in 2021, and an increasea decrease in cash flows from the Receivables Sales ~~Program.~~Program and payment timing in accounts payable. Refer to Note 53 to our Condensed Consolidated Financial Statements for additional ~~information. The Company's working capital management emphasis continues to be focused on driving faster collection of receivables and extending vendor terms.~~information regarding the Receivables Sales Program.

Investing Activities From Continuing Operations


Net cash used in investing activities from continuing operations was ~~$56.5~~$156.9 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$53.1~~$38.6 million in the first ~~nine~~six months of ~~2021,~~2022, an increase in cash used of ~~$3.4~~$118.3 million. This was primarily driven by $102.2 million of cash used for the ~~non-recurrence~~acquisitions of ~~proceeds received from~~ the ~~sale~~seasoned pretzel and coffee roasting capabilities, which were completed on April 1, 2023 and June 30, 2023, respectively. Additionally, the exercise of a purchase option on the lease of our investments during the first quarter of 2021 as the Company entered into a total return swap contract to hedge the market risk associated with the unfunded portion of the Company's deferred compensation liability (refer to Note 19 to our Condensed Consolidated Financial StatementsCambridge, Maryland facility for ~~additional information). This was partially offset by lower~~$8.1 million, higher capital expenditures for growth and ~~increased~~supply chain initiatives as well as infrastructure and maintenance at our manufacturing plants, and non-recurring proceeds received from the sale of fixed ~~assets.~~assets in the first quarter of 2022 contributed to the increase in cash used.

Financing Activities From Continuing Operations


Net cash provided by financing activities from continuing operations was $193.2 million in the first six months of 2023 compared to $19.9 million net cash used in financing activities from continuing operations ~~was $21.8 million~~ in the first ~~nine~~six months of 2022, ~~compared~~an increase in cash provided of $213.1 million. The increase in cash provided is due to ~~$357.9~~a $199.5 million increase in cash drawn on the Revolving Credit Facility in the first ~~nine months~~half of ~~2021,~~2023 to fund business acquisitions and invest in inventory to improve service levels. Additionally, as a ~~decrease in cash used~~result of ~~$336.1 million. The decrease in cash used is attributable to~~ the ~~debt refinancing~~prepayment of $500.0 million on the Term Loans in the ~~prior year, which included~~fourth quarter of 2022, principal amortization payments are no longer due on a quarterly basis, and the ~~redemption~~remaining principal balance is due at maturity. As such, cash provided increased due to a non-recurring payment of $14.3 million on the ~~2024 Notes of $602.9 million. Additionally, there was $25.0 million of common stock repurchases during~~Term Loans in the first ~~nine months~~quarter of 2021, which contributed to the decrease in cash used. This was partially offset by the Amendment to the Credit Agreement in the prior year, which resulted in an increase in Term Loan balances of $304.0 million.2022.

Cash Flows From Discontinued Operations


~~Net~~There was $15.2 million cash used inby discontinued operations ~~was $59.9 million~~ in the first ~~nine~~six months of 2023 compared to $20.5 million of cash provided in the first six months of 2022, ~~compared to net~~a decrease in cash provided of $35.7 million. The decrease in cash provided by discontinued operations ~~of $171.3 million, an increase in cash used of $231.2 million. The increase in cash used in the first nine months of 2021~~ is ~~primarily~~ due to ~~the non-recurrence from the proceeds received of $88.0 million from~~ the completion of the sale of ~~the Ready-to-eat Cereal business on June 1, 2021. Additionally, the increase was attributable to lower cash earnings from~~ a significant portion of the Meal Preparation business on October 3, 2022 and the finalization of the purchase price of the business, which ~~reflect~~resulted in a cash payment of $15.2 million to the impact of commodity and freight cost inflation. Working capital changes have been impacted by higher sales as a result of price increases in response to commodity and freight cost inflation, which have increased receivables and inventories. This was partially offset by an increase in cash flow from accounts payable due to improved working capital management.buyer. Refer to Note 75 to our Condensed Consolidated Financial Statements for additional information.

Debt Obligations

At ~~September~~June 30, ~~2022,~~2023, we had ~~$491.3~~$199.5 million outstanding under the Revolving Credit Facility, $316.4 million outstanding under Term Loan A, ~~$913.7~~$588.6 million outstanding under Term Loan A-1, $500.0 million of the 2028 Notes outstanding, and ~~$1.3~~$0.9 million of finance lease obligations. In October 2022, the Company paid down debt of $500.0 million which consisted of $174.8 million on Term Loan A and $325.2 million on Term Loan A-1 The cash used to pay down the term loans was from the net proceeds of the divestiture of a significant portion of the Meal Preparation business. Refer to Note 7 and Note 12 of our Condensed Consolidated Financial Statements for additional information.

As of ~~September~~June 30, ~~2022, $714.2~~2023, the Company had $199.5 million drawn from its $500.0 million Revolving Credit Facility. The Company had remaining availability of ~~the aggregate commitment of $750.0~~$267.5 million ofunder the Revolving Credit Facility, ~~was available. Under the Credit Agreement, the Revolving Credit Facility matures on March 26, 2026. In addition, as of September 30, 2022,~~and there were ~~$35.8~~$33.0 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. ~~In October 2022, the Company reduced the revolving credit commitment from $750.0 million to an aggregate amount of $500.0 million.~~

The ~~Company’s average interest rate on debt outstanding under its Credit Agreement for the three months ended September 30, 2022 was 4.10%. Including the impact of~~Company has long-term interest rate swap agreements to fix the interest rate base in ~~effect~~order to mitigate the Company's exposure to interest rate risk. As of June 30, 2023, we have an outstanding variable-rate debt balance of $1,104.5 million, and our interest rate swap agreements have a notional value of $875.0 million and mature on February 28, 2025. As a result, our variable-rate term loan debt is nearly fully hedged with our fixed rate interest rate swaps. Subsequent to June 30, 2023, SOFR will become the reference rate for the Company's interest rate swap agreements as a result of ~~September 30, 2022, the average rate is 4.54%.~~LIBOR ceasing to be a representative rate.

The Credit Agreement contains various financial and restrictive covenants and requires that the Company maintain a consolidated net leverage ratio of no greater than 4.50 to 1.0, and our debt obligations contain customary representations and events of default. 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 and Amendment No. 5.~~ We are in compliance with all applicable debt covenants as of ~~September~~June 30, ~~2022.~~2023.

See Note 1210 to our Condensed Consolidated Financial Statements for information on our debt obligations.

Guarantor Summarized Financial Information

The 2028 Notes issued by TreeHouse Foods, Inc. are fully and unconditionally, as well as jointly and severally, guaranteed by our directly and indirectly owned domestic subsidiaries, which are collectively known as the "Guarantor Subsidiaries." The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances, only upon the occurrence of certain customary conditions. There are no significant restrictions on the ability of the parent company or any guarantor to obtain funds from its subsidiaries by dividend or loan.

The following tables present summarized financial information of TreeHouse Foods, Inc. and the Guarantor Subsidiaries on a combined basis. The combined summarized financial information eliminates intercompany balances and transactions among TreeHouse Foods, Inc. and the Guarantor Subsidiaries and equity in earnings and investments in any Guarantor Subsidiaries or Non-Guarantor Subsidiaries. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and Guarantor Subsidiaries.


	TreeHouse Foods, Inc. and Guarantor Subsidiaries
Summarized Statement of Operations	~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023
	(~~unaudited,~~Unaudited, in millions)
Net sales	$	~~2,423.8~~1,683.1
Gross profit (1)	~~329.5~~278.6
Net ~~loss~~income from continuing operations	~~(34.9)~~46.1
Net ~~loss~~income from discontinued operations	~~(72.8)~~(2.4)
Net ~~loss~~income	~~(107.7)~~43.7


		TreeHouse Foods, Inc. and Guarantor Subsidiaries					TreeHouse Foods, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet	Summarized Balance Sheet	September 30, 2022		December 31, 2021		Summarized Balance Sheet	June 30, 2023		December 31, 2022
		(unaudited, in millions)					(Unaudited, in millions)
Current assets	Current assets	$	1,929.7	$	1,910.0	Current assets	$	778.8	$	725.0
Noncurrent assets	Noncurrent assets	2,769.2		2,813.7		Noncurrent assets	3,284.5		3,215.3
Current liabilities	Current liabilities	1,144.6		1,047.2		Current liabilities	630.1		742.3
Noncurrent liabilities (2)	Noncurrent liabilities (2)	2,115.2		2,164.8		Noncurrent liabilities (2)	1,849.5		1,665.2

(1)For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, TreeHouse Foods, Inc. and Guarantor Subsidiaries recorded ~~$63.2~~$14.9 million of net sales to the Non-Guarantor Subsidiaries and ~~$205.0~~$128.3 million of purchases from the Non-Guarantor Subsidiaries.

(2)Includes an amount due ~~from/(to)~~from Non-Guarantor Subsidiaries of ~~$33.1~~$46.4 million and ~~$(0.3)~~$13.2 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Non-GAAP Measures

We have included in this report measures of financial performance that are not defined by GAAP ("Non-GAAP"). A Non-GAAP financial measure is a numerical measure of financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the Company's Condensed Consolidated Financial Statements. WeAs described further below, we believe these measures provide useful information to the users of the financial ~~statements as we also have included these measures in other communications and publications.~~statements.

For each of these Non-GAAP financial measures, we provide a reconciliation between the Non-GAAP measure and the most directly comparable GAAP measure, an explanation of why management believes the Non-GAAP measure provides useful information to financial statement users, and any additional purposes for which management uses the Non-GAAP measure. This Non-GAAP financial information is provided as additional information for the financial statement users and is not in accordance with, or an alternative to, GAAP. These Non-GAAP measures may be different from similar measures used by other companies.

Organic Net Sales

Organic net sales is defined as net sales excluding the impacts of acquisitions, divestitures, and foreign currency. This information is provided in order to allow investors to make meaningful comparisons of the Company's sales between periods and to view the Company's business from the same perspective as Company management.

Adjusted Earnings Per Diluted Share From Continuing Operations, Adjusting for Certain Items Affecting Comparability

Adjusted earnings (loss) per diluted share from continuing operations ("adjusted diluted EPS") reflects adjustments to GAAP ~~loss~~earnings (loss) per diluted share from continuing operations to identify items that, in management's judgment, significantly affect the assessment of earnings results between periods. ~~Adjusted diluted EPS is presented as continuing operations, discontinued operations, and total.~~ This information is provided in order to allow investors to make meaningful comparisons of the Company's earnings performance between periods and to view the

Company's business from the same perspective as Company management. As the Company cannot predict the timing and amount of charges that include, but are not limited to, items such as divestiture, acquisition, integration, and related costs, mark-to-market adjustments on derivative contracts, foreign currency exchange impact on the re-measurement of intercompany notes, growth, reinvestment, and restructuring programs, ~~impairment of assets, the impact of the COVID-19 pandemic,~~ and other items that may arise from time to time that would impact comparability, management does not consider these costs when evaluating the Company's performance, when making decisions regarding the allocation of resources, in determining incentive compensation, or in determining earnings estimates.

The reconciliation of adjusted diluted EPS from continuing operations, excluding certain items affecting comparability, to the relevant GAAP measure of diluted EPS from continuing operations as presented in the Condensed Consolidated Statements of Operations, is as follows:

Three Months Ended
September 30, 2022 Nine Months Ended
September 30, 2022
Continuing Operations Discontinued Operations Total Continuing Operations Discontinued Operations Total
(unaudited) (unaudited)
Diluted earnings (loss) per share (GAAP) $ (0.27) $ (1.34) $ (1.61) $ (1.00) $ (1.19) $ (2.19)
Loss (gain) on sale of business (1) — 1.31 1.31 — 1.31 1.31
Growth, reinvestment, restructuring programs & other (2) 0.40 0.02 0.42 1.18 0.09 1.26
Central services and conveyed employee costs (3) 0.38 (0.38) — 1.15 (1.15) —
Divestiture, acquisition, integration, and related costs (4) 0.15 0.17 0.31 0.33 0.55 0.88
Foreign currency loss (gain) on re-measurement of intercompany notes (5) 0.03 0.06 0.09 0.02 0.05 0.07
Shareholder activism (6) 0.01 — 0.01 0.04 — 0.04
Litigation matter (7) — — — 0.01 — 0.01
Tax indemnification (8) — — — — — —
Mark-to-market adjustments (9) (0.30) — (0.30) (1.41) — (1.41)
COVID-19 (10) — — — — — —
Loss on extinguishment of debt (11) — — — — — —
Taxes on adjusting items (0.10) 0.05 (0.05) (0.13) 0.16 0.03
Adjusted diluted EPS (Non-GAAP) $ 0.30 $ (0.11) $ 0.18 $ 0.19 $ (0.18) $ —

~~The sum of the individual per share amounts may not add due to rounding.~~


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
		(Unaudited)				(Unaudited)
Diluted EPS from continuing operations (GAAP)		$	0.38	$	(0.49)	$	0.72	$	(0.74)
Growth, reinvestment, and restructuring programs	(1)	0.16		0.25		0.42		0.79
Divestiture, acquisition, integration, and related costs	(2)	0.08		0.13		0.15		0.18
Shareholder activism	(3)	—		0.02		0.01		0.03
Tax indemnification	(4)	—		—		0.01		—
Foreign currency (gain) loss on re-measurement of intercompany notes	(5)	(0.04)		0.01		(0.05)		(0.01)
Mark-to-market adjustments	(6)	(0.17)		(0.20)		(0.06)		(1.11)
Central services and conveyed employee costs	(7)	—		0.39		—		0.78
Litigation matter	(8)	—		—		—		0.01
Taxes on adjusting items		0.01		(0.06)		(0.10)		(0.05)

Adjusted diluted EPS from continuing operations (Non-GAAP)		$	0.42	$	0.05	$	1.10	$	(0.12)

4236

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company entered into transactions that affected the year-over-year comparison of its financial results from continuing operations as follows:


(1)			For the three and nine months ended September 30, 2022, the Company recognized an expected loss on disposal of a significant portion of the Meal Preparation business of $73.8 million. For the nine months ended September 30, 2021, the Company recognized a gain on the sale of the RTE Cereal business of $18.4 million.

			~~Refer to Note 7 to our Condensed Consolidated Financial Statements for additional information.~~

~~(2)~~			The Company's growth, reinvestment, and restructuring activities are part of an enterprise-wide transformation to improve long-term growth and profitability for the Company. For the three months ended September 30, 2022 and 2021, the Company incurred growth, reinvestment, and restructuring program costs of approximately $23.6 million and $17.4 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company incurred growth, reinvestment, and restructuring program costs of approximately $71.3 million and $59.3 million, respectively. Additionally, the Company recognized other items affecting comparability including regulatory compliance cost reimbursements related to changes in nutrition labeling requirements. There were no other items recognized during the three and nine months ended September 30, 2022. These other items were approximately $(0.1) million for the nine months ended September 30, 2021.

			Refer to Note 32 to our Condensed Consolidated Financial Statements for additional ~~information on a continuing operations basis.~~information.

(2)			Divestiture, acquisition, integration, and related costs represent costs associated with completed and potential divestitures, completed and potential acquisitions, and the related integration of the acquisitions.

			Refer to Note 5 to our Condensed Consolidated Financial Statements for additional information.

(3)			The Company incurred fees related to shareholder activism which include directly applicable third-party advisory and professional service fees.

(4)			Tax indemnification represents the non-cash write off of indemnification assets that were recorded in connection with acquisitions from prior years. These write-offs arose as a result of the related uncertain tax position being released due to the statute of limitation lapse or settlement with taxing authorities.

(5)			The Company has foreign currency denominated intercompany loans and incurred foreign currency gains/losses to re-measure the loans at quarter end. These amounts are non-cash and the loans are eliminated in consolidation.

(6)			The Company's derivative contracts are marked-to-market each period. The non-cash unrealized changes in fair value recognized in Other (income) expense, net within the Condensed Consolidated Statements of Operations are treated as Non-GAAP adjustments. As the contracts are settled, realized gains and losses are recognized, and only the mark-to-market impacts are treated as Non-GAAP adjustments.

			Refer to Note 17 to our Condensed Consolidated Financial Statements for additional information.

(7)			As a result of the sale of a significant portion of the Meal Preparation business, the Company identified two items affecting comparability – 1) central service costs and 2) conveyed employee costs. 1) The Company has historically provided central services to the Meal Preparation business including, but not limited to, IT and financial shared services, procurement and order processing, customer service, warehousing, logistics, and customs. These costs were historically incurred by TreeHouse and include employee and non-employee expenses to support the services. ~~For~~There were no costs for the three and six months ended ~~September~~June 30, ~~2022~~2023. For three and ~~2021,~~six months ended June 30, 2022, central service costs were approximately $13.4 million ~~in both periods. For the nine months ended September 30, 2022~~ and ~~2021, central service costs were approximately $40.2~~$26.8 million, ~~in both periods.~~respectively. 2) Conveyed employee costs represent compensation costs for employees that were not historically dedicated to the sold business and transferred to the buyer after the sale. There were no costs for the three and six months ended June 30, 2023. For the three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ conveyed employee costs were approximately ~~$8.1~~$8.3 million and ~~$4.7 million, respectively. For the nine months ended September 30, 2022 and 2021, conveyed employee costs were approximately $24.8 million and $20.9~~$16.7 million, respectively.

~~(4)~~			Divestiture, acquisition, integration, and related costs represent costs associated with completed and potential divestitures, completed and potential acquisitions, and the related integration of the acquisitions.

			~~Refer to Note 7 to our Condensed Consolidated Financial Statements for additional information.~~

~~(5)~~			The Company has foreign currency denominated intercompany loans and incurred foreign currency losses of $5.0 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, to re-measure the loans at quarter end. For the nine months ended September 30, 2022 and 2021, the Company incurred foreign currency losses of $4.1 million and foreign currency gains of $0.7 million, respectively. These charges are non-cash and the loans are eliminated in consolidation.

~~(6)~~			~~The Company incurred fees related to shareholder activism which include directly applicable third-party advisory and professional service fees.~~


~~(7)~~(8)			During the ~~nine~~six months ended ~~September~~June 30, 2022, the Company recognized $0.4 million incremental expense for the settlement payment of the $9.0 million accrual related to a litigation matter challenging wage and hour practices at three former manufacturing facilities in California.

~~(8)~~			Tax indemnification represents the non-cash write off of indemnification assets that were recorded in connection with acquisitions from prior years. These write-offs arose as a result of the related uncertain tax position being released due to the statute of limitation lapse or settlement with taxing authorities.

~~(9)~~			The Company's derivative contracts are marked-to-market each period. The non-cash unrealized changes in fair value recognized in Other income, net within the Condensed Consolidated Statements of Operations are treated as Non-GAAP adjustments. As the contracts are settled, realized gains and losses are recognized, and only the mark-to-market impacts are treated as Non-GAAP adjustments.

			~~Refer to Note 19 to our Condensed Consolidated Financial Statements for additional information.~~

~~(10)~~			During 2021, the Company incurred incremental expenses directly attributable to our response to the COVID-19 pandemic, which included additional protective equipment for employees and additional sanitation measures. These costs were approximately $1.1 million and $14.6 million for the three and nine months ended September 30, 2021, respectively. Additionally, the Company incurred income tax expense due to a change in the amount of the total benefit recognized from the enactment of the CARES Act of approximately $1.9 million for the three and nine months ended September 30, 2021.

~~(11)~~			For the nine months ended September 30, 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 and Credit Agreement refinancing.

			~~Refer to Note 12 to our Condensed Consolidated Financial Statements for additional information.~~

The tax impact on adjusting items is calculated based upon the tax laws and statutory tax rates applicable in the tax jurisdiction of the underlying Non-GAAP adjustments.

Adjusted Net Income (Loss), from Continuing Operations, Adjusted EBIT from Continuing Operations, Adjusted EBITDA from Continuing Operations, Adjusted EBITDAS from Continuing Operations, Adjusted Net Income (Loss) Margin from Continuing Operations, Adjusted EBIT Margin from Continuing Operations, Adjusted EBITDA Margin from Continuing Operations, and Adjusted EBITDAS Margin from Continuing Operations, Adjusting for Certain Items Affecting Comparability

Adjusted net income (loss) from continuing operations represents GAAP net income (loss) ~~income~~from continuing operations as reported in the Condensed Consolidated Statements of Operations adjusted for items that, in management's judgment, significantly affect the assessment of earnings results between periods as outlined in the adjusted diluted EPS ~~section above. Adjusted net income (loss) is presented as~~from continuing operations ~~discontinued operations, and total.~~section above. This information is provided in order to allow investors to make meaningful comparisons of the Company's earnings performance between periods and to view the Company's business from the same perspective as Company management. This measure is also used as a component of the Board of Directors' measurement of the Company's performance for incentive compensation purposes and is the basis of calculating the adjusted diluted EPS from continuing operations metric outlined above.

Adjusted EBIT from continuing operations represents adjusted net income (loss) from continuing operations before interest expense, interest income, and income tax expense. Adjusted EBITDA from continuing operations represents adjusted net income (loss) from continuing operations before interest expense, interest income, income tax expense, and depreciation and amortization expense. Adjusted EBITDAS from continuing operations represents adjusted EBITDA from continuing operations before non-cash stock-based compensation expense. Adjusted EBIT from continuing operations, adjusted EBITDA from continuing operations, and adjusted EBITDAS from continuing operations are performance measures commonly used by management to assess operating performance and incentive compensation, and the Company believes they are commonly reported and widely used by investors and other interested parties as a measure of a company's operating performance between periods and as a component of our debt covenant calculations. ~~Adjusted EBIT, adjusted EBITDA, and adjusted EBITDAS are presented as continuing operations, discontinued operations, and total.~~

Adjusted net income (loss) margin from continuing operations, adjusted EBIT margin from continuing operations, adjusted EBITDA margin from continuing operations, and adjusted EBITDAS margin from continuing operations are calculated as the respective metric defined above as a percentage of net sales as reported in the Condensed Consolidated Statements of Operations for Continuing Operations and net sales reported in the Discontinued Operations footnote within the Condensed Consolidated Financial Statements for Discontinued Operations adjusted for items that, in management's judgment, significantly affect the assessment of earnings results between periods as outlined in the adjusted diluted EPS section above. Adjusted net income (loss) margin, adjusted EBIT margin, adjusted EBITDA margin, and adjusted EBITDAS margin are presented as continuing operations, discontinued operations, and total.Operations.

The following table reconciles the Company's net ~~loss~~income (loss) from continuing operations as presented in the Condensed Consolidated Statements of Operations, the relevant GAAP measure, to Adjusted net income (loss), from continuing operations, Adjusted EBIT from continuing operations, Adjusted EBITDA from continuing operations, and Adjusted EBITDAS from continuing operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
		(Unaudited, in millions)
Net income (loss) from continuing operations (GAAP)		$	21.7		$	(27.3)		$	40.9		$	(41.1)
Growth, reinvestment, and restructuring programs	(1)	8.9			13.9			24.2			44.0
Divestiture, acquisition, integration, and related costs	(2)	4.8			7.2			8.6			10.2
Shareholder activism	(3)	—			1.1			0.3			1.7
Tax indemnification	(4)	0.1			—			0.3			—
Foreign currency (gain) loss on re-measurement of intercompany notes	(5)	(2.5)			0.4			(2.7)			(0.4)
Mark-to-market adjustments	(6)	(9.4)			(11.5)			(3.5)			(62.3)
Central services and conveyed employee costs	(7)	—			21.7			—			43.5
Litigation matter	(8)	—			—			—			0.4
Less: Taxes on adjusting items		0.2			(2.8)			(5.9)			(2.5)
Adjusted net income (loss) from continuing operations (Non-GAAP)		23.8			2.7			62.2			(6.5)
Interest expense		19.2			17.0			37.0			33.7
Interest income		(10.8)			(0.2)			(25.4)			(4.3)
Income taxes		8.9			(4.5)			15.8			(6.8)
Add: Taxes on adjusting items		(0.2)			2.8			5.9			2.5
Adjusted EBIT from continuing operations (Non-GAAP)		40.9			17.8			95.5			18.6
Depreciation and amortization		35.5			35.3			71.5			71.8
Adjusted EBITDA from continuing operations (Non-GAAP)		76.4			53.1			167.0			90.4
Stock-based compensation expense	(9)	3.5			3.6			8.5			6.9
Adjusted EBITDAS from continuing operations (Non-GAAP)		$	79.9		$	56.7		$	175.5		$	97.3

Net income (loss) margin from continuing operations		2.6		%	(3.4)		%	2.4		%	(2.6)		%
Adjusted net income (loss) margin from continuing operations		2.8		%	0.3		%	3.6		%	(0.4)		%
Adjusted EBIT margin from continuing operations		4.8		%	2.2		%	5.5		%	1.2		%
Adjusted EBITDA margin from continuing operations		9.1		%	6.6		%	9.6		%	5.7		%
Adjusted EBITDAS margin from continuing operations		9.5		%	7.0		%	10.1		%	6.1		%

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Continuing Operations Discontinued Operations Total Continuing Operations Discontinued Operations Total
(unaudited in millions)
Net (loss) income (GAAP) $ (15.1) $ (75.4) $ (90.5) $ (56.2) $ (66.7) $ (122.9)
Loss (gain) on sale of business (1) — 73.8 73.8 — 73.8 73.8
Growth, reinvestment, restructuring programs & other (2) 22.4 1.2 23.6 66.4 4.9 71.3
Central services and conveyed employee costs (3) 21.5 (21.5) — 65.0 (65.0) —
Divestiture, acquisition, integration, and related costs (4) 8.2 9.4 17.6 18.4 31.0 49.4
Foreign currency loss (gain) on re-measurement of intercompany notes (5) 1.8 3.2 5.0 1.4 2.7 4.1
Shareholder activism (6) 0.4 — 0.4 2.1 — 2.1
Litigation matter (7) — — — 0.4 — 0.4
Tax indemnification (8) — — — — 0.1 0.1
Mark-to-market adjustments (9) (17.1) (0.1) (17.2) (79.4) (0.1) (79.5)
COVID-19 (10) — — — — — —
Loss on extinguishment of debt (11) — — — — — —
Less: Taxes on adjusting items (5.0) 2.6 (2.4) (7.5) 9.3 1.8
Adjusted net income (loss) (Non-GAAP) 17.1 (6.8) 10.3 10.6 (10.0) 0.6
Interest expense 17.5 5.3 22.8 51.2 11.4 62.6
Interest income (0.1) — (0.1) (4.4) — (4.4)
Income taxes 2.0 0.6 2.6 (4.8) 4.6 (0.2)
Add: Taxes on adjusting items 5.0 (2.6) 2.4 7.5 (9.3) (1.8)
Adjusted EBIT (Non-GAAP) 41.5 (3.5) 38.0 60.1 (3.3) 56.8
Depreciation and amortization (12) 35.1 16.3 51.4 106.9 49.6 156.5
Adjusted EBITDA (Non-GAAP) 76.6 12.8 89.4 167.0 46.3 213.3
Stock-based compensation expense (13) 3.8 0.7 4.5 10.7 2.2 12.9
Adjusted EBITDAS (Non-GAAP) $ 80.4 $ 13.5 $ 93.9 $ 177.7 $ 48.5 $ 226.2
Net (loss) income margin (1.7) % (17.8) % (7.0) % (2.3) % (5.7) % (3.4) %
Adjusted net income (loss) margin 2.0 % (1.6) % 0.8 % 0.4 % (0.8) % — %
Adjusted EBIT margin 4.7 % (0.8) % 2.9 % 2.4 % (0.3) % 1.6 %
Adjusted EBITDA margin 8.8 % 3.0 % 6.9 % 6.8 % 3.9 % 5.9 %
Adjusted EBITDAS margin 9.2 % 3.2 % 7.2 % 7.2 % 4.1 % 6.2 %

4539

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Continuing Operations Discontinued Operations Total Continuing Operations Discontinued Operations Total
(unaudited in millions)
Net (loss) income (GAAP) $ (4.1) $ 10.8 $ 6.7 $ (50.1) $ 66.7 $ 16.6
Loss (gain) on sale of business (1) — — — — (18.4) (18.4)
Growth, reinvestment, restructuring programs & other (2) 16.9 0.5 17.4 57.5 1.7 59.2
Central services and conveyed employee costs (3) 18.1 (18.1) — 61.1 (61.1) —
Divestiture, acquisition, integration, and related costs (4) 2.4 5.2 7.6 3.0 16.8 19.8
Foreign currency loss (gain) on re-measurement of intercompany notes (5) 0.8 1.3 2.1 (0.2) (0.5) (0.7)
Shareholder activism (6) 0.9 — 0.9 4.0 — 4.0
Litigation matter (7) — — — — — —
Tax indemnification (8) 1.5 1.2 2.7 1.7 1.2 2.9
Mark-to-market adjustments (9) (4.7) (0.6) (5.3) (33.3) 0.2 (33.1)
COVID-19 (10) 2.5 0.5 3.0 13.6 2.9 16.5
Loss on extinguishment of debt (11) — — — 14.4 — 14.4
Less: Taxes on adjusting items (10.9) 1.5 (9.4) (31.7) 12.9 (18.8)
Adjusted net income (loss) (Non-GAAP) 23.4 2.3 25.7 40.0 22.4 62.4
Interest expense 16.5 2.3 18.8 55.5 7.5 63.0
Interest income — — — (4.1) — (4.1)
Income taxes (excluding COVID-19 income tax adjustments) (2.3) 1.9 (0.4) (16.9) 19.8 2.9
Add: Taxes on adjusting items 10.9 (1.5) 9.4 31.7 (12.9) 18.8
Adjusted EBIT (Non-GAAP) 48.5 5.0 53.5 106.2 36.8 143.0
Depreciation and amortization (12) 37.3 16.1 53.4 112.3 48.9 161.2
Adjusted EBITDA (Non-GAAP) 85.8 21.1 106.9 218.5 85.7 304.2
Stock-based compensation expense (13) 1.1 0.6 1.7 8.3 2.2 10.5
Adjusted EBITDAS (Non-GAAP) $ 86.9 $ 21.7 $ 108.6 $ 226.8 $ 87.9 $ 314.7
Net (loss) income margin (0.5) % 3.1 % 0.6 % (2.4) % 6.0 % 0.5 %
Adjusted net income (loss) margin 3.1 % 0.7 % 2.3 % 1.9 % 2.0 % 1.9 %
Adjusted EBIT margin 6.5 % 1.4 % 4.9 % 5.0 % 3.3 % 4.4 %
Adjusted EBITDA margin 11.4 % 6.0 % 9.7 % 10.3 % 7.7 % 9.4 %
Adjusted EBITDAS margin 11.6 % 6.2 % 9.9 % 10.6 % 7.9 % 9.7 %

Location in Condensed Three Months Ended September 30, Nine Months Ended September 30,
Consolidated Statements of Operations 2022 2021 2022 2021
(unaudited in millions)
(1) Loss (gain) on sale of business Net (loss) income from discontinued operations $ 73.8 $ — $ 73.8 $ (18.4)
(2) Growth, reinvestment, restructuring programs & other Other operating expense, net 22.4 16.9 66.4 57.6
Cost of sales — — — (0.1)
Net (loss) income from discontinued operations 1.2 0.5 4.9 1.7
(3) Central services and conveyed employee costs General and administrative 16.5 14.3 50.1 47.6
Cost of sales 5.0 3.8 14.9 13.5
Net (loss) income from discontinued operations (21.5) (18.1) (65.0) (61.1)
(4) Divestiture, acquisition, integration, and related costs General and administrative 7.2 2.2 15.7 2.5
Cost of sales — 0.2 1.6 0.4
Other operating expense, net 1.0 — 1.1 0.1
Net (loss) income from discontinued operations 9.4 5.2 31.0 16.8
(5) Foreign currency loss (gain) on re-measurement of intercompany notes Loss (gain) on foreign currency exchange 1.8 0.8 1.4 (0.2)
Net (loss) income from discontinued operations 3.2 1.3 2.7 (0.5)
(6) Shareholder activism General and administrative 0.4 0.9 2.1 4.0
(7) Litigation matter General and administrative — — 0.4 —
(8) Tax indemnification Other income, net — 1.5 — 1.7
Net (loss) income from discontinued operations — 1.2 0.1 1.2
(9) Mark-to-market adjustments Other income, net (17.1) (4.7) (79.4) (33.3)
Net (loss) income from discontinued operations (0.1) (0.6) (0.1) 0.2
(10) COVID-19 Cost of sales — 0.6 — 11.7
Income tax expense (benefit) — 1.9 — 1.9
Net (loss) income from discontinued operations — 0.5 — 2.9
(11) Loss on extinguishment of debt Loss on extinguishment of debt — — — 14.4
(12) Depreciation and amortization included as an adjusting item Net (loss) income from discontinued operations (11.0) — (11.0) —
(13) Stock-based compensation expense included as an adjusting item Other operating expense, net 2.3 0.3 4.5 1.8
Net (loss) income from discontinued operations — (0.3) (0.5) (1.0)


		Location in Condensed	Three Months Ended June 30,				Six Months Ended June 30,
		Consolidated Statements of Operations	2023		2022		2023		2022
			(Unaudited, in millions)
(1)	Growth, reinvestment, and restructuring programs	Other operating (income) expense, net	$	8.9	$	13.9	$	24.2	$	44.0



(2)	Divestiture, acquisition, integration, and related costs	General and administrative	4.6		6.6		7.7		8.5
		Other operating (income) expense, net	0.2		0.1		0.9		0.1
		Cost of sales	—		0.5		—		1.6

(3)	Shareholder activism	General and administrative	—		1.1		0.3		1.7


(4)	Tax indemnification	Other (income) expense, net	0.1		—		0.3		—
(5)	Foreign currency (gain) loss on re-measurement of intercompany notes	(Gain) loss on foreign currency exchange	(2.5)		0.4		(2.7)		(0.4)
(6)	Mark-to-market adjustments	Other (income) expense, net	(9.4)		(11.5)		(3.5)		(62.3)
(7)	Central services and conveyed employee costs	Cost of sales	—		4.9		—		9.9
		General and administrative	—		16.8		—		33.6

(8)	Litigation matter	General and administrative	—		—		—		0.4




(9)	Stock-based compensation expense included as an adjusting item	Other operating (income) expense, net	2.4		1.7		4.6		2.2

Free Cash Flow From Continuing Operations

In addition to measuring our cash flow generation and usage based upon the operating, investing, and financing classifications included in the Condensed Consolidated Statements of Cash Flows, we also measure free cash flow from continuing operations (a Non-GAAP measure) which represents net cash used in operating activities from continuing operations less capital expenditures. We believe free cash flow is an important measure of operating performance because it provides management and investors a measure of cash generated from operations that is available for mandatory payment obligations and investment opportunities such as funding acquisitions, repaying debt, repurchasing public debt, and repurchasing our common stock.

The following table reconciles cash flow used in operating activities from continuing operations (a GAAP measure) to our free cash flow from continuing operations (a Non-GAAP measure).

Nine Months Ended
September 30,
2022 2021
(In millions)
Cash flow used in operating activities from continuing operations (GAAP) $ (90.4) $ (57.0)
Less: Capital expenditures (61.3) (70.4)
Free cash flow from continuing operations (Non-GAAP) $ (151.7) $ (127.4)


	Six Months Ended June 30,
	2023		2022
	(In millions)
Cash flow used in operating activities from continuing operations	$	(49.8)	$	(70.7)
Less: Capital expenditures	(54.7)		(43.4)
Free cash flow from continuing operations	$	(104.5)	$	(114.1)

Other Commitments and Contingencies

The Company also has selected levels of property and casualty risks, primarily related to employee health care, workers' compensation claims, and other casualty losses, in addition to contingent liabilities related to the ordinary course of litigation, investigations, and tax audits.

See Note 1816 to our Condensed Consolidated Financial Statements included herein and Note 1920 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 for additional information about our commitments and contingent obligations.

Recent Accounting Pronouncements

~~Information regarding~~The Company has considered all recent accounting pronouncements ~~is provided in Note 2 to~~and has concluded there are no new pronouncements that had or will have a material impact on the ~~Company's Condensed Consolidated Financial Statements.~~Company’s results of operations, comprehensive income, financial condition, cash flows, shareholders’ equity or related disclosures based on current information.

Critical Accounting Estimates

A description of the Company's critical accounting estimates is contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There were no material changes to the Company's critical accounting estimates in the three and ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

Cautionary Statement Regarding Forward Looking Statements

From time to time, we and our representatives may provide information, whether orally or in writing, including certain statements in this Quarterly Report on Form 10-Q, which are deemed to be "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act"). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.

The words "believe," "estimate," "project," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could," and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, or intended. We do not intend to update these forward-looking statements following the date of this report. In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q and other public statements we make. Such factors include, but are not limited to: risks related to the impact that the divestiture of a significant portion of our Meal Preparation Business or any such divestiture might have on the Company’s operations; ~~risks related~~disruptions or inefficiencies in our supply chain and/or operations; loss of key suppliers; raw material and commodity costs due to ~~the impact of the ongoing COVID-19 outbreak on our business, suppliers, consumers, customers,~~inflation; labor strikes or work stoppages; multiemployer pension plans; labor shortages and ~~employees; the~~increased competition for labor; success of our growth, reinvestment, and restructuring programs; our level of indebtedness and related obligations; disruptions in the financial markets; interest rates; changes in foreign currency exchange rates; collectibility of our note receivable, customer concentration and consolidation; ~~raw material and commodity costs;~~ competition; ~~loss of key suppliers; disruptions or inefficiencies in~~ our ~~supply chain and/or operations, including from the ongoing COVID-19 outbreak;~~ability to execute on our business strategy; our ability to continue to make acquisitions and execute on divestitures ~~in accordance with our business strategy~~ or effectively manage the growth from acquisitions; impairment of goodwill or long lived assets; changes and developments affecting our industry, including customer preferences; the outcome of litigation and regulatory proceedings to which we may be a party; product recalls; changes in laws and regulations applicable to us; shareholder activism; disruptions in or failures of our information technology systems; changes in weather conditions, climate changes, and natural disasters; ~~labor strikes or work stoppages; multiemployer pension plans; labor shortages and increased competition for labor;~~ and other risks that are set forth in the Risk Factors section, the Legal Proceedings section, the Management's Discussion and Analysis of Financial Condition and Results of Operations section, and other sections of this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, and from time to time in our filings with the Securities and Exchange Commission ("SEC").

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain market risks, which exist as part of its ongoing business operations. The Company uses derivative instruments, where appropriate, to manage these risks. Refer to Note 1917 to our Condensed Consolidated Financial Statements for additional information regarding these derivative instruments.

For additional information regarding the Company's exposure to certain market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, within the Company's ~~2021~~2022 Annual Report on Form 10-K. There have been no significant changes in the Company's portfolio of financial instruments or market risk exposures from the ~~2021~~2022 year-end.

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and ~~Interim~~ Chief Financial Officer ("CFO"), to allow timely decisions regarding required disclosures.

As of ~~September~~June 30, ~~2022,~~2023, management, with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. The scope of management’s assessment of the effectiveness of our disclosure controls and procedures includes all of the Company’s subsidiaries with the exception of the internal control over financial reporting of the operations of the acquisitions of the seasoned pretzel and coffee roasting capabilities, which were completed on April 1, 2023 and June 30, 2023, respectively. This exclusion is in accordance with the general guidance from the Staff of the SEC that an assessment of a recently acquired business's internal control over financial reporting may be omitted from the scope of management’s assessment for a period of up to one year following the acquisition. We are in the process of implementing the Company’s internal control over financial reporting of the acquisitions. The net sales and total assets of the acquisitions represented approximately 0.1% and 2.4%, respectively, of the Condensed Consolidated Financial Statement amounts as of and for the six months ended June 30, 2023.

There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2022~~2023 that has materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

4942

Part II — Other Information

Item 1. Legal Proceedings

Information regarding legal proceedings is available in Note 1816 to the Condensed Consolidated Financial Statements in this report.

Item 1A. Risk Factors

Information regarding risk factors appears in Management's Discussion and Analysis of Financial Condition and Results of Operations — Information Related to Forward-Looking Statements, in Part I — Item 2 of this Form 10-Q, and in Part I — Item 1A of the TreeHouse Foods, Inc. Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes from the risk factors previously disclosed in the TreeHouse Foods, Inc. Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Not applicable.

Item 5. Other Information

During the quarter ended June 30, 2023, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

Item 6. Exhibits


~~2.1~~			Stock Purchase Agreement among TreeHouse Foods, Inc., Rushmore Investment III LLC, and 1373978 B.C., ULC, dated as of August 10, 2022, is incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated August 11, 2022.
3.1			~~Amended and~~ Restated Certificate of Incorporation of TreeHouse Foods, Inc., as amended ~~April 28, 2011,~~May 26, 2023, is incorporated by reference to Exhibit ~~3.1~~3.2 to the Company’s Current Report on Form 8-K dated ~~April 28, 2011.~~May 30, 2023.
3.2			Amended and Restated By-Laws of TreeHouse Foods, Inc. is incorporated by reference to Exhibit ~~3.2~~3.3 of the Company’s Current Report on Form 8-K dated ~~April 28, 2011.~~May 30, 2023.
~~10.1~~10.1*			Amendment No. 51 to ~~Second Amended and~~ ~~Restated Credit Agreement, dated~~ a ~~s of~~ ~~August 10, 2022,~~ ~~is incorporated by reference to Exhibit~~ 10 ~~.1 to the Company’s Current Report on Form 8-K dated August 11, 2022.~~
~~10.2~~			Seller Note Credit Agreement, dated ~~as of October 3, 2022,~~April 4, 2023, by and among TreeHouse Foods, Inc., Rushmore Investment II LLC, and Rushmore Investment III ~~LLC, is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 7, 2022.~~LLC.
22*			List of Guarantor Subsidiaries.
31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*			Inline XBRL Instance Document.
101.SCH*			Inline XBRL Taxonomy Extension Schema Document.
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*			The cover page from TreeHouse Foods, Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101).

*Filed herewith.

**Management contract or compensatory plan or arrangement.

5143

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			TREEHOUSE FOODS, INC.

Date: ~~November~~August 7, ~~2022~~2023			/s/ Patrick M. O'Donnell
			Patrick M. O'Donnell
			~~Interim~~Executive Vice President and Chief Financial Officer ~~and Chief Accounting Officer~~


			Page
Part I — Financial Information

Item 1 — Financial Statements (Unaudited)			3

Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations			3026

Item 3 — Quantitative and Qualitative Disclosures About Market Risk			4942

Item 4 — Controls and Procedures			4942



Part II — Other Information

Item 1 — Legal Proceedings			5043

Item 1A — Risk Factors			5043

Item 2 — Unregistered Sale of Equity Securities and Use of Proceeds			5043

Item 5 — Other Information			43

Item 6 — Exhibits			5143

Signatures			5244


	Balance Sheet Classification	September 30, 2022		December 31, 2021
		(In millions)
Assets
Operating	Operating lease right-of-use assets	$	182.9	$	138.1
Finance	Property, plant, and equipment, net	1.3		2.2
Total assets		$	184.2	$	140.3

Liabilities
Current liabilities
Operating	Accrued expenses	$	38.1	$	33.1
Finance	Current portion of long-term debt	0.6		1.0
Total current liabilities		38.7		34.1
Noncurrent liabilities
Operating	Operating lease liabilities	158.6		119.0
Finance	Long-term debt	0.7		1.2
Total noncurrent liabilities		159.3		120.2
Total lease liabilities		$	198.0	$	154.3


Weighted-average discount rate	September 30, 2022		December 31, 2021
Operating leases	4.3	%	4.3	%
Finance leases	2.7	%	2.9	%


		Three Months Ended September 30,				Nine Months Ended September 30,
	Statement of Operations Classification	2022		2021		2022		2021
		(In millions)
Operating lease cost	Cost of sales and General and administrative	$	12.1	$	8.5	$	29.0	$	25.8
Finance lease cost:
Amortization of right-of-use assets	Cost of sales and General and administrative	0.3		0.3		0.9		1.1
Interest on lease liabilities	Interest expense	—		—		—		0.1
Total finance lease cost		0.3		0.3		0.9		1.2
Variable lease cost (1)	Cost of sales and General and administrative	3.7		4.2		11.9		11.6
Net lease cost		$	16.1	$	13.0	$	41.8	$	38.6


	Operating Leases (1)		Finance Leases
	(In millions)
Three months ended December 31, 2022	$	11.3	$	0.2
2023	44.2		0.5
2024	38.8		0.4
2025	35.6		0.2
2026	34.8		—
Thereafter	59.6		—
Total lease payments	224.3		1.3
Less: Interest	(27.6)		—
Present value of lease liabilities	$	196.7	$	1.3


	Nine Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2021
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	27.8	$	27.6

Financing cash flows from finance leases	1.0		1.3


		Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
		Continuing Operations		Discontinued Operations		Total		Continuing Operations		Discontinued Operations		Total
		(unaudited)						(unaudited)
Diluted earnings (loss) per share (GAAP)		$	(0.27)	$	(1.34)	$	(1.61)	$	(1.00)	$	(1.19)	$	(2.19)
Loss (gain) on sale of business	(1)	—		1.31		1.31		—		1.31		1.31
Growth, reinvestment, restructuring programs & other	(2)	0.40		0.02		0.42		1.18		0.09		1.26
Central services and conveyed employee costs	(3)	0.38		(0.38)		—		1.15		(1.15)		—
Divestiture, acquisition, integration, and related costs	(4)	0.15		0.17		0.31		0.33		0.55		0.88
Foreign currency loss (gain) on re-measurement of intercompany notes	(5)	0.03		0.06		0.09		0.02		0.05		0.07
Shareholder activism	(6)	0.01		—		0.01		0.04		—		0.04
Litigation matter	(7)	—		—		—		0.01		—		0.01
Tax indemnification	(8)	—		—		—		—		—		—
Mark-to-market adjustments	(9)	(0.30)		—		(0.30)		(1.41)		—		(1.41)
COVID-19	(10)	—		—		—		—		—		—
Loss on extinguishment of debt	(11)	—		—		—		—		—		—
Taxes on adjusting items		(0.10)		0.05		(0.05)		(0.13)		0.16		0.03
Adjusted diluted EPS (Non-GAAP)		$	0.30	$	(0.11)	$	0.18	$	0.19	$	(0.18)	$	—


		Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
		Continuing Operations		Discontinued Operations		Total		Continuing Operations		Discontinued Operations		Total
		(unaudited)						(unaudited)
Diluted earnings (loss) per share (GAAP)		$	(0.07)	$	0.19	$	0.12	$	(0.90)	$	1.19	$	0.30
Loss (gain) on sale of business	(1)	—		—		—		—		(0.33)		(0.33)
Growth, reinvestment, restructuring programs & other	(2)	0.30		0.01		0.31		1.02		0.03		1.05
Central services and conveyed employee costs	(3)	0.32		(0.32)		—		1.09		(1.09)		—
Divestiture, acquisition, integration, and related costs	(4)	0.04		0.09		0.14		0.05		0.30		0.35
Foreign currency loss (gain) on re-measurement of intercompany notes	(5)	0.01		0.02		0.04		—		(0.01)		(0.01)
Shareholder activism	(6)	0.02		—		0.02		0.07		—		0.07
Litigation matter	(7)	—		—		—		—		—		—
Tax indemnification	(8)	0.02		0.02		0.04		0.03		0.02		0.05
Mark-to-market adjustments	(9)	(0.08)		(0.01)		(0.09)		(0.59)		—		(0.59)
COVID-19	(10)	0.05		0.01		0.06		0.24		0.05		0.29
Loss on extinguishment of debt	(11)	—		—		—		0.26		—		0.26
Taxes on adjusting items		(0.19)		0.03		(0.18)		(0.56)		0.24		(0.33)
Adjusted diluted EPS (Non-GAAP)		$	0.42	$	0.04	$	0.46	$	0.71	$	0.40	$	1.11


		Three Months Ended September 30, 2022									Nine Months Ended September 30, 2022
		Continuing Operations			Discontinued Operations			Total			Continuing Operations			Discontinued Operations			Total
		(unaudited in millions)
Net (loss) income (GAAP)		$	(15.1)		$	(75.4)		$	(90.5)		$	(56.2)		$	(66.7)		$	(122.9)
Loss (gain) on sale of business	(1)	—			73.8			73.8			—			73.8			73.8
Growth, reinvestment, restructuring programs & other	(2)	22.4			1.2			23.6			66.4			4.9			71.3
Central services and conveyed employee costs	(3)	21.5			(21.5)			—			65.0			(65.0)			—
Divestiture, acquisition, integration, and related costs	(4)	8.2			9.4			17.6			18.4			31.0			49.4
Foreign currency loss (gain) on re-measurement of intercompany notes	(5)	1.8			3.2			5.0			1.4			2.7			4.1
Shareholder activism	(6)	0.4			—			0.4			2.1			—			2.1
Litigation matter	(7)	—			—			—			0.4			—			0.4
Tax indemnification	(8)	—			—			—			—			0.1			0.1
Mark-to-market adjustments	(9)	(17.1)			(0.1)			(17.2)			(79.4)			(0.1)			(79.5)
COVID-19	(10)	—			—			—			—			—			—
Loss on extinguishment of debt	(11)	—			—			—			—			—			—
Less: Taxes on adjusting items		(5.0)			2.6			(2.4)			(7.5)			9.3			1.8
Adjusted net income (loss) (Non-GAAP)		17.1			(6.8)			10.3			10.6			(10.0)			0.6
Interest expense		17.5			5.3			22.8			51.2			11.4			62.6
Interest income		(0.1)			—			(0.1)			(4.4)			—			(4.4)
Income taxes		2.0			0.6			2.6			(4.8)			4.6			(0.2)
Add: Taxes on adjusting items		5.0			(2.6)			2.4			7.5			(9.3)			(1.8)
Adjusted EBIT (Non-GAAP)		41.5			(3.5)			38.0			60.1			(3.3)			56.8
Depreciation and amortization	(12)	35.1			16.3			51.4			106.9			49.6			156.5
Adjusted EBITDA (Non-GAAP)		76.6			12.8			89.4			167.0			46.3			213.3
Stock-based compensation expense	(13)	3.8			0.7			4.5			10.7			2.2			12.9
Adjusted EBITDAS (Non-GAAP)		$	80.4		$	13.5		$	93.9		$	177.7		$	48.5		$	226.2

Net (loss) income margin		(1.7)		%	(17.8)		%	(7.0)		%	(2.3)		%	(5.7)		%	(3.4)		%
Adjusted net income (loss) margin		2.0		%	(1.6)		%	0.8		%	0.4		%	(0.8)		%	—		%
Adjusted EBIT margin		4.7		%	(0.8)		%	2.9		%	2.4		%	(0.3)		%	1.6		%
Adjusted EBITDA margin		8.8		%	3.0		%	6.9		%	6.8		%	3.9		%	5.9		%
Adjusted EBITDAS margin		9.2		%	3.2		%	7.2		%	7.2		%	4.1		%	6.2		%


		Three Months Ended September 30, 2021									Nine Months Ended September 30, 2021
		Continuing Operations			Discontinued Operations			Total			Continuing Operations			Discontinued Operations			Total
		(unaudited in millions)
Net (loss) income (GAAP)		$	(4.1)		$	10.8		$	6.7		$	(50.1)		$	66.7		$	16.6
Loss (gain) on sale of business	(1)	—			—			—			—			(18.4)			(18.4)
Growth, reinvestment, restructuring programs & other	(2)	16.9			0.5			17.4			57.5			1.7			59.2
Central services and conveyed employee costs	(3)	18.1			(18.1)			—			61.1			(61.1)			—
Divestiture, acquisition, integration, and related costs	(4)	2.4			5.2			7.6			3.0			16.8			19.8
Foreign currency loss (gain) on re-measurement of intercompany notes	(5)	0.8			1.3			2.1			(0.2)			(0.5)			(0.7)
Shareholder activism	(6)	0.9			—			0.9			4.0			—			4.0
Litigation matter	(7)	—			—			—			—			—			—
Tax indemnification	(8)	1.5			1.2			2.7			1.7			1.2			2.9
Mark-to-market adjustments	(9)	(4.7)			(0.6)			(5.3)			(33.3)			0.2			(33.1)
COVID-19	(10)	2.5			0.5			3.0			13.6			2.9			16.5
Loss on extinguishment of debt	(11)	—			—			—			14.4			—			14.4
Less: Taxes on adjusting items		(10.9)			1.5			(9.4)			(31.7)			12.9			(18.8)
Adjusted net income (loss) (Non-GAAP)		23.4			2.3			25.7			40.0			22.4			62.4
Interest expense		16.5			2.3			18.8			55.5			7.5			63.0
Interest income		—			—			—			(4.1)			—			(4.1)
Income taxes (excluding COVID-19 income tax adjustments)		(2.3)			1.9			(0.4)			(16.9)			19.8			2.9
Add: Taxes on adjusting items		10.9			(1.5)			9.4			31.7			(12.9)			18.8
Adjusted EBIT (Non-GAAP)		48.5			5.0			53.5			106.2			36.8			143.0
Depreciation and amortization	(12)	37.3			16.1			53.4			112.3			48.9			161.2
Adjusted EBITDA (Non-GAAP)		85.8			21.1			106.9			218.5			85.7			304.2
Stock-based compensation expense	(13)	1.1			0.6			1.7			8.3			2.2			10.5
Adjusted EBITDAS (Non-GAAP)		$	86.9		$	21.7		$	108.6		$	226.8		$	87.9		$	314.7

Net (loss) income margin		(0.5)		%	3.1		%	0.6		%	(2.4)		%	6.0		%	0.5		%
Adjusted net income (loss) margin		3.1		%	0.7		%	2.3		%	1.9		%	2.0		%	1.9		%
Adjusted EBIT margin		6.5		%	1.4		%	4.9		%	5.0		%	3.3		%	4.4		%
Adjusted EBITDA margin		11.4		%	6.0		%	9.7		%	10.3		%	7.7		%	9.4		%
Adjusted EBITDAS margin		11.6		%	6.2		%	9.9		%	10.6		%	7.9		%	9.7		%