ths-10q_20180630.htm

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 June 30, 2018.

or

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from                to

Commission File Number 001-32504

TreeHouse Foods, Inc.

(Exact name of the registrant as specified in its charter)

 

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

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting Company

(Do not check if a 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  

Number of shares of Common Stock, $0.01 par value, outstanding as of July 31, 2018: 56,244,978.

 

 


 

Table of Contents

 

 

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

37

 

 

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

57

 

 

Item 4 — Controls and Procedures

58

 

 

Report of Independent Registered Public Accounting Firm

59

 

 

Part II — Other Information

 

 

 

Item 1 — Legal Proceedings

60

 

 

Item 1A — Risk Factors

60

 

 

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

60

 

 

Item 6 — Exhibits

62

 

 

Signatures

63

 

2


 

Part I — Financial Information

Item 1. Financial Statements

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

98.9

 

 

$

132.8

 

Investments

 

 

14.0

 

 

 

14.1

 

Receivables, net

 

 

258.3

 

 

 

329.8

 

Inventories

 

 

944.3

 

 

 

918.3

 

Prepaid expenses and other current assets

 

 

118.5

 

 

 

89.7

 

Total current assets

 

 

1,434.0

 

 

 

1,484.7

 

Property, plant, and equipment, net

 

 

1,270.4

 

 

 

1,294.4

 

Goodwill

 

 

2,176.5

 

 

 

2,182.0

 

Intangible assets, net

 

 

737.0

 

 

 

773.0

 

Other assets, net

 

 

42.6

 

 

 

45.2

 

Total assets

 

$

5,660.5

 

 

$

5,779.3

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

698.7

 

 

$

589.7

 

Current portion of long-term debt

 

 

10.2

 

 

 

10.1

 

Total current liabilities

 

 

708.9

 

 

 

599.8

 

Long-term debt

 

 

2,390.8

 

 

 

2,535.7

 

Deferred income taxes

 

 

173.8

 

 

 

178.4

 

Other long-term liabilities

 

 

201.5

 

 

 

202.1

 

Total liabilities

 

 

3,475.0

 

 

 

3,516.0

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued

 

 

 

 

 

 

Common stock, par value $0.01 per share, 90.0 shares authorized, 56.3 and 56.6

   shares issued and outstanding, respectively

 

 

0.6

 

 

 

0.6

 

Treasury stock

 

 

(58.4

)

 

 

(28.7

)

Additional paid-in capital

 

 

2,131.9

 

 

 

2,107.0

 

Retained earnings

 

 

193.2

 

 

 

245.9

 

Accumulated other comprehensive loss

 

 

(81.8

)

 

 

(61.5

)

Total stockholders’ equity

 

 

2,185.5

 

 

 

2,263.3

 

Total liabilities and stockholders’ equity

 

$

5,660.5

 

 

$

5,779.3

 

 

See Notes to Condensed Consolidated Financial Statements.

3


 

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net sales

 

$

1,455.8

 

 

$

1,522.2

 

 

$

2,937.0

 

 

$

3,058.4

 

Cost of sales

 

 

1,220.0

 

 

 

1,245.6

 

 

 

2,469.3

 

 

 

2,495.4

 

Gross profit

 

 

235.8

 

 

 

276.6

 

 

 

467.7

 

 

 

563.0

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and distribution

 

 

91.7

 

 

 

94.8

 

 

 

200.1

 

 

 

199.4

 

General and administrative

 

 

72.9

 

 

 

82.9

 

 

 

154.0

 

 

 

162.0

 

Amortization expense

 

 

21.3

 

 

 

28.7

 

 

 

43.5

 

 

 

57.3

 

Other operating expense, net

 

 

46.7

 

 

 

94.0

 

 

 

75.6

 

 

 

100.8

 

Total operating expenses

 

 

232.6

 

 

 

300.4

 

 

 

473.2

 

 

 

519.5

 

Operating income (loss)

 

 

3.2

 

 

 

(23.8

)

 

 

(5.5

)

 

 

43.5

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

31.3

 

 

 

31.8

 

 

 

59.8

 

 

 

61.5

 

Interest income

 

 

(0.5

)

 

 

(0.3

)

 

 

(2.5

)

 

 

(3.1

)

Loss (income) on foreign currency exchange

 

 

1.9

 

 

 

(0.4

)

 

 

4.4

 

 

 

(0.3

)

Other (income) expense, net

 

 

(3.3

)

 

 

1.1

 

 

 

2.9

 

 

 

1.7

 

Total other expense

 

 

29.4

 

 

 

32.2

 

 

 

64.6

 

 

 

59.8

 

Loss before income taxes

 

 

(26.2

)

 

 

(56.0

)

 

 

(70.1

)

 

 

(16.3

)

Income taxes

 

 

(6.1

)

 

 

(21.8

)

 

 

(15.9

)

 

 

(10.3

)

Net loss

 

$

(20.1

)

 

$

(34.2

)

 

$

(54.2

)

 

$

(6.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.36

)

 

$

(0.60

)

 

$

(0.96

)

 

$

(0.11

)

Diluted

 

$

(0.36

)

 

$

(0.60

)

 

$

(0.96

)

 

$

(0.11

)

Weighted average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

56.4

 

 

 

57.0

 

 

 

56.4

 

 

 

57.0

 

Diluted

 

 

56.4

 

 

 

57.0

 

 

 

56.4

 

 

 

57.0

 

See Notes to Condensed Consolidated Financial Statements.

4


 

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME  

(In millions)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net loss

 

$

(20.1

)

 

$

(34.2

)

 

$

(54.2

)

 

$

(6.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments (1)

 

 

(9.4

)

 

 

12.9

 

 

 

(19.5

)

 

 

16.5

 

Pension and postretirement reclassification adjustment (2)

 

 

0.1

 

 

 

6.8

 

 

 

0.3

 

 

 

7.1

 

Adoption of ASU 2018-02 reclassification to retained earnings

 

 

 

 

 

 

 

 

(1.1

)

 

 

 

Other comprehensive (loss) income

 

 

(9.3

)

 

 

19.7

 

 

 

(20.3

)

 

 

23.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(29.4

)

 

$

(14.5

)

 

$

(74.5

)

 

$

17.6

 

 

 

(1)

Net of tax of $0.2 million for the three and six months ended June 30, 2018.  There was no tax impact for the three or six months ended June 30, 2017.   

 

(2)

Net of tax of $0.1 million and $4.2 million for the three months ended June 30, 2018 and 2017, respectively, and $0.1 million and $4.4 million for the six months ended June 30, 2018 and 2017, respectively.   

 

 

See Notes to Condensed Consolidated Financial Statements.

5


 

TREEHOUSE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(54.2

)

 

$

(6.0

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

128.9

 

 

 

139.0

 

Stock-based compensation

 

 

23.2

 

 

 

18.6

 

Loss on divestiture

 

 

 

 

 

85.2

 

Other

 

 

8.9

 

 

 

(6.5

)

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

Receivables

 

 

68.5

 

 

 

77.2

 

Inventories

 

 

(30.8

)

 

 

(65.7

)

Prepaid expenses and other assets

 

 

(19.4

)

 

 

(22.8

)

Accounts payable, accrued expenses, and other liabilities

 

 

106.2

 

 

 

108.4

 

Net cash provided by operating activities

 

 

231.3

 

 

 

327.4

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(79.3

)

 

 

(71.4

)

Additions to intangible assets

 

 

(9.0

)

 

 

(14.0

)

Proceeds from sale of fixed assets

 

 

3.3

 

 

 

1.7

 

Proceeds from divestiture

 

 

 

 

 

19.3

 

Other

 

 

(0.7

)

 

 

(0.6

)

Net cash used in investing activities

 

 

(85.7

)

 

 

(65.0

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings under Revolving Credit Facility

 

 

5.9

 

 

 

130.0

 

Payments under Revolving Credit Facility

 

 

(5.9

)

 

 

(251.0

)

Payments on capitalized lease obligations and other debt

 

 

(0.5

)

 

 

(1.9

)

Payment of deferred financing costs

 

 

(2.4

)

 

 

 

Payments on Term Loans

 

 

(7.0

)

 

 

(31.7

)

Repurchase of 2022 Notes

 

 

(21.4

)

 

 

 

Repurchase of 2024 Notes

 

 

(118.8

)

 

 

 

Repurchases of common stock

 

 

(29.6

)

 

 

 

Receipts related to stock-based award activities

 

 

4.7

 

 

 

9.9

 

Payments related to stock-based award activities

 

 

(3.0

)

 

 

(6.6

)

Net cash used in financing activities

 

 

(178.0

)

 

 

(151.3

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1.5

)

 

 

1.0

 

Net (decrease) increase in cash and cash equivalents

 

 

(33.9

)

 

 

112.1

 

Cash and cash equivalents, beginning of period

 

 

132.8

 

 

 

62.1

 

Cash and cash equivalents, end of period

 

$

98.9

 

 

$

174.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures

 

 

 

 

 

 

 

 

Interest paid

 

 

60.2

 

 

 

56.9

 

Income taxes paid, net of refunds

 

 

5.7

 

 

 

21.7

 

 

 

 

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

 

 

 

 

Accrued purchase of property and equipment

 

 

16.2

 

 

 

14.9

 

Accrued other intangible assets

 

 

5.9

 

 

 

5.0

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

6


TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the six months ended June 30, 2018

(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, 2017. Results of operations for interim periods are not necessarily indicative of annual results.

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to use our judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from these estimates.

A detailed description of the Company’s significant accounting policies can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

2. RESTRUCTURING PROGRAMS

 

The Company’s restructuring and margin improvement activities are part of an enterprise-wide transformation to improve long-term profitability of the Company. These activities are aggregated into three categories: (1) TreeHouse 2020 – a long-term growth and margin improvement strategy; (2) Structure to Win – a selling, general, and administrative reduction initiative; and (3) other restructuring and plant closing costs (collectively the “Restructuring Programs”).

 

The Restructuring Program costs by activity are outlined below:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

(In millions)

 

TreeHouse 2020

 

$

32.0

 

 

$

 

 

$

59.7

 

 

$

 

Structure to Win

 

 

17.8

 

 

 

 

 

 

26.2

 

 

 

 

Other Restructuring and Plant Closing Costs

 

 

0.8

 

 

 

7.8

 

 

 

3.3

 

 

 

18.8

 

Total Restructuring Programs

 

$

50.6

 

 

$

7.8

 

 

$

89.2

 

 

$

18.8

 

 

Expenses associated with these programs are recorded in the Cost of sales, General and administrative, and Other operating expense, net lines in the Condensed Consolidated Statements of Operations.  The Company does not allocate restructuring and margin improvement activities costs to reportable segments when evaluating the performance of its segments.  As a result, costs associated with restructuring and margin improvement activities are not presented by reportable segment. See Note 20 for more information. 

 

Below is a summary of the Restructuring Program costs by line item:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

2017

 

 

(In millions)

 

Cost of sales

 

$

1.9

 

 

$

(1.0

)

 

$

11.6

 

$

3.2

 

General and administrative

 

 

2.3

 

 

 

 

 

 

2.3

 

 

 

Other operating expense, net

 

 

46.4

 

 

 

8.8

 

 

 

75.3

 

 

15.6

 

Total

 

$

50.6

 

 

$

7.8

 

 

$

89.2

 

$

18.8

 

7

 


TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The table below presents the activity of the Restructuring Program liabilities as of June 30, 2018:  

 

 

 

Severance

 

 

Multiemployer Pension

Plan Withdrawal

 

 

Other Costs

 

 

Total Liabilities

 

 

 

(In millions)

 

Balance as of December 31, 2017

 

$

6.1

 

 

$

0.8

 

 

$

2.7

 

 

$

9.6

 

Expenses recognized

 

 

11.6

 

 

 

 

 

 

1.4

 

 

 

13.0

 

Cash payments

 

 

(7.2

)

 

 

(0.4

)

 

 

(2.0

)

 

 

(9.6

)

Adjustments

 

 

 

 

 

 

 

 

(0.7

)

 

 

(0.7

)

Balance as of June 30, 2018

 

$

10.5

 

 

$

0.4

 

 

$

1.4

 

 

$

12.3

 

 

Liabilities recorded as of June 30, 2018 associated with total exit cost reserves relate to severance, the partial withdrawal from a multiemployer pension plan, and lease termination costs. The severance and lease termination liabilities were included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets, while the multiemployer pension plan withdrawal liability was included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

 

(1) TreeHouse 2020

 

In the third quarter of 2017, the Company announced TreeHouse 2020, a program intended to accelerate long-term growth through optimization of our manufacturing network, transformation of our mixing centers and warehouse footprint, and leveraging of systems and processes to drive performance.  The Company’s workstreams related to these activities and selling, general, and administrative reductions will increase our capacity utilization, expand operating margins, and streamline our plant structure to optimize our supply chain.  

 

This program began in 2017 and will be executed through 2020.  In 2017, the Company announced the closure of the Brooklyn Park, Minnesota and Plymouth, Indiana facilities, as well as the downsizing of the Dothan, Alabama facility.  All facilities are successfully tracking toward their closure dates noted in the table below.  In the first quarter of 2018, the Company announced the closure of the Company’s Visalia, CA and Battle Creek, MI facilities.  

 

The key information regarding the Company’s announced facility closures related to TreeHouse 2020 is outlined in the table below:

 

Facility Location

 

Date of Closure

Announcement

 

Full Facility

Closure

 

Primary Products

Produced

 

Primary Segment(s)

Affected

 

Total

Costs to

Close

 

 

Total Cash

Costs to

Close

 

Dothan, Alabama

 

August 3, 2017

 

Partial closure Q2 2018

 

Trail mix and snack nuts

 

Snacks

 

$

5.7

 

 

$

3.0

 

Brooklyn Park, Minnesota

 

August 3, 2017

 

Completed in Q4 2017

 

Dry dinners

 

Meals

 

 

19.5

 

 

 

12.2

 

Plymouth, Indiana

 

August 3, 2017

 

Completed in Q4 2017

 

Pickles

 

Condiments

 

 

19.3

 

 

 

14.5

 

Battle Creek, Michigan

 

January 31, 2018

 

Mid-2019

 

Ready-to-eat cereal

 

Meals

 

 

18.2

 

 

 

11.8

 

Visalia, California

 

February 15, 2018

 

Q1 2019

 

Pretzels

 

Baked Goods

 

 

23.6

 

 

 

11.0

 

 

 

 

 

 

 

 

 

 

 

$

86.3

 

 

$

52.5

 

 

8


TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Below is a summary of costs by type associated with TreeHouse 2020:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Cumulative Costs

 

 

Total Expected

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

To Date

 

 

Costs

 

 

 

(In millions)

 

Asset-related

 

$

0.6

 

 

$

 

 

$

5.9

 

 

$

 

 

$

44.2

 

 

$

80.0

 

Employee-related

 

 

8.7

 

 

 

 

 

 

17.1

 

 

 

 

 

 

26.2

 

 

 

75.0

 

Other costs

 

 

22.7

 

 

 

 

 

 

36.7

 

 

 

 

 

 

47.0

 

 

 

210.0

 

Total

 

$

32.0

 

 

$

 

 

$

59.7

 

 

$

 

 

$

117.4

 

 

$

365.0

 

 

For the three and six months ended June 30, 2018, asset-related costs primarily consisted of accelerated depreciation; employee-related costs primarily consisted of severance; and other costs primarily consisted of consulting costs.  Asset-related costs are included in Cost of sales while employee-related and other costs are primarily included in Other operating expense, net of the Condensed Consolidated Statement of Operations. Total expected costs increased in the second quarter primarily due to higher anticipated consulting spend.  There were no costs related to TreeHouse 2020 during the three and six months ended June 30, 2017.

 

(2) Structure to Win

In the first quarter of 2018, the Company announced an operating expenses improvement program (“Structure to Win”) designed to align our organization structure with strategic priorities.  The program is intended to drive operational effectiveness, cost reduction, and position the Company for growth with a focus on a lean customer focused go-to-market team, centralized supply chain, and streamlined back office.  We expect to spend $31.6 million in 2018 primarily on employee-related costs and consulting services.  

Below is a summary of costs by type associated with the Structure to Win program:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Cumulative Costs

 

 

Total Expected

 

 

 

June 30, 2018

 

 

June 30, 2018

 

 

To Date

 

 

Costs

 

 

 

(In millions)

 

Asset-related

 

$

2.2

 

 

$

2.2

 

 

$

2.2

 

 

$

2.2

 

Employee-related

 

 

4.1

 

 

 

9.6

 

 

9.6

 

 

13.3

 

Other costs

 

 

11.5

 

 

 

14.4

 

 

14.4

 

 

16.1

 

Total

 

$

17.8

 

 

$

26.2

 

 

$

26.2

 

 

$

31.6

 

 

For the three and six months ended June 30, 2018, asset-related costs primarily related to asset write-offs, employee-related costs primarily consisted of severance, and other costs primarily consisted of consulting services. Asset-related costs are included in General and administrative expense and the employee-related and other costs are included in Other operating expense, net of the Condensed Consolidated Statement of Operations.  There were no costs related to this program during the three and six months ended June 30, 2017.

 

(3) Other Restructuring and Plant Closing Costs

 

The Company continually analyzes its plant network to align operations with the current and future needs of its customers. Facility closure decisions are made when the Company identifies opportunities to lower production costs or eliminate excess manufacturing capacity while maintaining a competitive cost structure, service levels, and product quality. Expenses associated with facility closures are primarily aggregated in Other operating expense, net of the Condensed Consolidated Statements of Operations, with the exception of asset-related costs, which are recorded in Cost of sales. The key information regarding the Company’s announced facility closures is outlined in the table below. 

 

9


TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The key information regarding the Company’s announced facility closures and downsizing that predate TreeHouse 2020 are outlined in the table below:

 

Facility Location

 

Date of Closure

Announcement

 

Full Facility

Closure

 

Primary Products

Produced

 

Primary Segment(s)

Affected

 

Total

Costs to

Close

 

 

Total

Cash

Costs to

Close

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

City of Industry, California

 

November 18, 2015

 

Completed in Q3 2016

 

Liquid non-dairy creamer and refrigerated salad dressings

 

Beverages, Condiments

 

$

6.8

 

 

$

3.6

 

Ayer, Massachusetts

 

April 5, 2016

 

Completed in Q3 2017

 

Mayonnaise

 

Condiments

 

 

5.6

 

 

 

4.0

 

Azusa, California

 

May 24, 2016

 

Completed in Q3 2017

 

Bars and fruit snacks

 

Snacks

 

 

21.2

 

 

 

17.0

 

Ripon, Wisconsin

 

May 24, 2016

 

Completed in Q4 2016

 

Sugar wafer cookies

 

Baked Goods

 

 

0.8

 

 

 

1.0

 

Delta, British Columbia

 

November 3, 2016

 

Completed in Q1 2018

 

Frozen griddle products

 

Baked Goods

 

 

3.7

 

 

 

2.7

 

Battle Creek, Michigan

 

November 3, 2016

 

(1)

 

Ready-to-eat cereal

 

Meals

 

 

10.4

 

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

$

48.5

 

 

$

30.5

 

 

 

(1)

The downsizing of this facility began in January 2017. On January 31, 2018, the Company announced the full closure of this facility, with a targeted completion date of mid-2019. The costs associated with the full closure are included in the TreeHouse 2020 section of this footnote.

Below is a summary of costs by type associated with the other restructuring and plant closing costs:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Cumulative Costs

 

 

Total Expected

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

To Date

 

 

Costs

 

 

 

(In millions)

 

Asset-related

 

$

0.4

 

 

$

(0.9

)

 

$

1.3

 

 

$

3.5

 

 

$

18.3

 

 

$

18.5

 

Employee-related

 

 

 

 

 

0.2

 

 

 

 

 

 

2.7

 

 

 

10.5

 

 

 

11.2

 

Other closure costs

 

 

0.1

 

 

 

7.8

 

 

 

 

 

 

10.3

 

 

 

18.6

 

 

 

19.3

 

Total

 

$

0.5

 

 

$

7.1

 

 

$

1.3

 

 

$

16.5

 

 

$

47.4

 

 

$

49.0

 

 

For the three and six months ended June 30, 2018, asset-related costs primarily consisted of inventory dispositions and were recorded in Cost of sales of the Condensed Consolidated Statement of Operations. Employee-related and other closure costs were recorded in Other operating expense, net.

 

Other cost reduction activities not related to our plant closings above totaled $0.3 million and $2.0 million, respectively, for the three and six months ended June 30, 2018 and were primarily the result of a Private Brands plant closure initiated prior to TreeHouse’s acquisition.  Other cost reduction activities were $0.7 million and $2.3 million for the three and six months ended June 30, 2017, respectively.   

 

3. REVENUE RECOGNITION

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective method. See Note 21 for additional information.  As a result of the adoption of Topic 606, we have updated our accounting policy for revenue recognition as follows:

 

Nature of products

 

We manufacture and sell the following:

 

private label products to retailers, such as supermarkets, mass merchandisers, and specialty retailers, for resale under the retailers’ own or controlled labels;

10


TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

private label and branded products to the foodservice industry, including foodservice distributors and national restaurant operators;

 

branded products under our own proprietary brands, primarily on a regional basis to retailers;

 

branded products under co-pack agreements to other major branded companies for their distributions; and

 

products to our industrial customer base for repackaging in portion control packages and for use as ingredients by other food manufacturers.

 

Disaggregation of revenue

 

Segment revenue disaggregated by product category groups are as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(In millions)

 

 

(In millions)

 

    Retail bakery

 

$

150.0

 

 

$

162.0

 

 

$

327.1

 

 

$

344.6

 

    Baked products

 

 

169.1

 

 

 

162.3

 

 

 

338.0

 

 

 

320.8

 

        Total Baked Goods

 

 

319.1

 

 

 

324.3

 

 

 

665.1

 

 

 

665.4

 

    Beverages

 

 

132.6

 

 

 

167.7

 

 

 

304.0

 

 

 

350.8

 

    Beverage enhancers

 

 

103.8

 

 

 

78.5