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What changed in TreeHouse Foods, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TreeHouse Foods, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+314 added−320 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-13)

Top changes in TreeHouse Foods, Inc.'s 2023 10-K

314 paragraphs added · 320 removed · 223 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

52 edited+20 added−8 removed14 unchanged
Biggest changeFor sales of private label products to retailers, the principal competitive factors are product quality, reliability of service, and price. For sales of products to food-away-from-home, co-manufacturing customers, industrial, and export customers, the principal competitive factors are price, product quality, specifications, and reliability of service. In addition, while we primarily manufacture private label products, we do manufacture some branded products.
Biggest changeIn addition, while we primarily manufacture private brands products, we do manufacture some branded products. The principal competitive factors for sales of our branded products to consumers are brand recognition and loyalty, product quality, promotion, and price. Some of our branded competitors have significantly greater resources and brand recognition than we do.
In addition, we offer employees dental and vision coverage, health savings and flexible spending accounts, paid time off, leave, care benefits (including back-up child/elder care), tuition reimbursement programs, a 401(k) retirement savings plan with matching company contributions, life insurance, and voluntary short-term and long-term disability insurance.
In addition, we offer employees dental and vision coverage, health savings and flexible spending accounts, paid time off, leave, care benefits (including back-up child/elder care), tuition reimbursement programs, a 401(k) retirement plan with matching company contributions, life insurance, and voluntary short-term and long-term disability insurance.
We are not, however, including the information contained on our website, or information that may be accessed through links to our website, as part of, or incorporating such information by reference into, this Form 10-K. Copies of any materials the Company files with the SEC can be obtained free of charge through the SEC’s website at http://www.sec.gov . 9
We are not, however, including the information contained on our website, or information that may be accessed through links to our website, as part of, or incorporating such information by reference into, this Form 10-K. Copies of any materials the Company files with the SEC can be obtained free of charge through the SEC’s website at http://www.sec.gov .
We are committed to and invest heavily in providing employees with comprehensive, market-competitive benefits that support our employees’ health, wealth, and balance. For US employees, we offer a variety of medical plans (including prescription drug coverage) with a range of coverage levels and costs which allows our employees to select the plan that best meets their individual needs.
We are committed to and invest heavily in providing employees with comprehensive, market-competitive benefits that support our employees’ health, wealth, and balance. For US employees, we offer a variety of medical plans (including prescription drug coverage) with a range of coverage levels and costs that allows our employees to select the plan that best meets their individual needs.
Additionally, the impact on profitability from our seasonality was disrupted by commodity inflation, supply chain disruption, and labor shortages in 2021 and 2022. For additional discussion on product consumption patterns due to commodity inflation, supply chain disruption, and labor shortages, see Part II, Item 7 - Known Trends or Uncertainties .
In 2021 and 2022, the impact on profitability from our seasonality was disrupted by commodity inflation, supply chain disruption, and labor shortages. For additional discussion on product consumption patterns due to commodity inflation and supply chain disruption, see Part II, Item 7 - Known Trends or Uncertainties .
We have not experienced any material interruptions of operations due to disputes with our employees and consider our relations with our employees to be satisfactory. Key areas of focus for the Company include: 8 Health and Safety: The safety of our employees is a top priority.
We have not experienced any material interruptions of operations due to disputes with our employees and consider our relations with our employees to be satisfactory. Key areas of focus for the Company include: Health and Safety: The safety of our employees is a top priority.
We believe these ingredients and packaging materials are generally available from a number of suppliers, although supply chain disruption in 2021 and 2022 has challenged and delayed timing of availability from our suppliers.
We believe these ingredients and packaging materials are generally available from a number of suppliers, although supply chain disruption in 2021 and 2022 challenged and delayed timing of availability from our suppliers.
Recent Divestitures On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business (the "Business"), including pasta, pourable and spoonable dressing, preserves, red sauces, syrup, dry blends and baking, dry dinners, pie filling, pita chips and other sauces.
On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business (the "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.
We believe this consolidation of products enables us to improve customer service by offering our customers a single order, invoice, and shipment. Some customers also pick up their orders at our production facilities or distribution centers. 6 A relatively limited number of customers account for a large percentage of our consolidated net sales.
We believe this consolidation of products enables us to improve customer service by offering our customers a single order, invoice, and shipment. Some customers also pick up their orders at our production facilities or distribution centers. 6 A relatively limited number of customers account for a large percentage of our consolidated net sales from continuing operations.
Through our customer focus and category experience, we strive to deliver excellent service and build capabilities and insights to drive mutually profitable growth for both TreeHouse and our customers. Our purpose is supported by investments in depth, capabilities and operational efficiencies which are aimed to capitalize on the long-term growth prospects in the categories in which we operate.
Through our customer focus and category experience, we strive to deliver excellent service, build capabilities and provide insights to drive mutually profitable growth for both TreeHouse and our customers. Our purpose is supported by investments in depth, capabilities and operational efficiencies which are aimed to capitalize on the long-term growth prospects within the categories where we operate.
Our business could not operate without our team members, and our plant employees are essential to the success of our company. TreeHouse is committed to creating a culture of Environmental, Health, Safety ("EHS") Excellence through personal ownership, risk prevention, and business partnership. We have established a common plant structure for our EHS organization at our facilities.
Our business could not operate without our team members, and our plant employees are essential to the success of our company. TreeHouse is committed to creating a culture of Environmental, Health, Safety ("EHS") Excellence through personal responsibility and risk prevention. We have established a common plant structure for our EHS organization at our facilities.
Item 1. Busines s Overview References herein to "we," "us," "our," "Company," and "TreeHouse" refer to TreeHouse Foods, Inc. and its consolidated subsidiaries unless the context specifically states or implies otherwise. TreeHouse is a leading private label snacking and beverages manufacturer in North America. Our purpose is to engage and delight - one customer at a time.
Item 1. Busines s Overview References herein to "we," "us," "our," "Company," and "TreeHouse" refer to TreeHouse Foods, Inc. and its consolidated subsidiaries unless the context specifically states or implies otherwise. TreeHouse is a leading private brands snacking and beverage manufacturer in North America. Our purpose is to engage and delight - one customer at a time.
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 has been classified as a discontinued operation. On June 1, 2021, the Company completed the sale of its RTE Cereal business to Post Holdings, Inc. ("Post").
The Meal Preparation Business consists of consumer packaged food manufacturers operating 14 manufacturing facilities in the United States, Canada, and Italy servicing primarily retail grocery customers. The Meal Preparation Business had been classified as a discontinued operation. On June 1, 2021, the Company completed the sale of its RTE Cereal business to Post Holdings, Inc. ("Post").
Human Capital Creating a values-led, high performance workforce and becoming a talent leader is critical to achieving success in our growth strategy. Our human capital initiatives are grounded in our set of values called The TreeHouse Way, which includes: Own It, Commit to Excellence, Be Agile, Speak Up, and Better Together.
Human Capital We believe creating a values-led, high performance workforce and becoming a talent leader is key to achieving success in our growth strategy. Our human capital initiatives are grounded in our set of values called The TreeHouse Way, which includes: Own It, Commit to Excellence, Be Agile, Speak Up, and Better Together.
We strive to do this by: • having an unrelenting focus on the customer at the heart of everything that we do, recognizing our customers' needs and challenges; • understanding how we can better grow together; • continuing to produce products that meet quality and safety standards and are competitively priced; • providing relevant category and consumer insights; and • executing on our commitments with the highest level of service. • Talent Leader.
We strive to do this by: • maintaining an unrelenting focus on the customer at the heart of everything that we do, recognizing our customers' needs and challenges; • understanding how we can collaborate to better grow together; • continuing to produce products that meet quality and safety standards and are competitively priced; • providing timely, relevant category and consumer insights; and • executing on each of our commitments with the highest level of service. • Talent Leader.
No other customer accounted for 10% or more of the Company’s consolidated net sales. Markets and Competition The private label food and beverage market has been growing. Over the last several decades, private label has had a history of consistently gaining market share, with share gains more prominent during recessionary periods when consumers seek value.
No other customer accounted for 10% or more of the Company’s consolidated net sales from continuing operations. Markets and Competition The private brands food and beverage market has been growing. Over the last several decades, private brands have had a history of consistently gaining market share, with share gains more prominent during recessionary periods when consumers seek value.
We are making investments to support both our suppliers in delivering key inputs and our manufacturing capacity to not only fulfill the growing demand for private label, but the flexibility to meet our customers' and consumers' needs as they change. Delivering the best quality, cost, and service to our customers are critical to achieving our strategic ambition. • Category Leadership.
We are making investments to support both our suppliers in delivering key inputs and our manufacturing capacity to not only fulfill the growing demand for private brands, but the flexibility to meet our customers' and consumers' needs as they change. Delivering the best quality, cost, and service to our customers are critical to achieving our strategic ambition. • Platform Depth.
Over the last two years, consumers have faced significant inflationary pressure, which has strengthened the private label value proposition and supported private label unit share gains in our categories across the retail channel.
Over the last several years, consumers have faced significant inflationary pressure, which has strengthened the private brands value proposition and supported private brands unit share gains in our categories across the retail channel.
It is of the utmost importance that we proactively engage with those customers with whom our goals are aligned - to drive both growth and profitability through a focused private brands strategy. Our goal is to drive outsized, profitable growth for both TreeHouse and our customers.
It is of the utmost importance that we proactively engage with those customers with whom our goals are aligned - to drive both growth and profitability through a focused private brands strategy.
Products that show a higher level of seasonality include creamer, coffee, specialty teas, hot cereal, in-store bakery items, and refrigerated dough products, all of which generally have higher sales in the first and fourth quarters.
Products that show a higher level of seasonality include non-dairy creamer, coffee, tea, hot cereal, in-store bakery items, and refrigerated dough products, all of which generally have higher sales in the first and fourth quarters.
As of December 31, 2022, our work force consisted of approximately 7,500 full-time employees, with 6,100 in the United States and 1,400 in Canada. Approximately 1,700 were salaried, and 5,800 were hourly employees. Approximately 2,000 were unionized, and 5,500 were non-union employees.
As of December 31, 2023, our work force consisted of approximately 7,400 full-time employees, with 6,000 in the United States and 1,400 in Canada. Approximately 1,900 were salaried, and 5,500 were hourly employees. Approximately 2,100 were unionized, and 5,300 were non-union employees.
By having a range of relevant capabilities in attractive growth categories, we believe we are better positioned to drive growth, not only for TreeHouse, but also for our customers. • Strategic Customer Partnerships . We serve as the supply chain for our customers' brands.
By supplementing our capabilities in attractive growth categories, we believe we are better positioned to drive growth, not only for TreeHouse, but also for our customers. • Strategic Customer Partnerships . We serve as the supply chain for our customers' brands.
As a result of our product portfolio and the related seasonality, our financing needs are generally highest in the first and third quarters, while cash flow is highest in the second and fourth quarters following the seasonality of our sales.
As a result of our product portfolio and the related seasonality, our financing needs are generally highest in the first half of the year, while cash flow is highest in the second half of the year following the seasonality of our sales.
Our short-term financing needs are primarily for financing working capital and are generally highest in the first and third quarters as inventory levels increase relative to other quarters, due to the seasonal nature of our business.
Our short-term financing needs are primarily for financing working capital and are generally highest in the first half of the year as inventory levels increase relative to the second half of the year, due to the seasonal nature of our business.
Additionally, sales of broth are generally higher in the fourth quarter, and sales of cookies, crackers, pretzels, and cheese & pudding are generally higher in the third and fourth quarters. Retail griddle waffles and pancakes are generally less seasonal with consistency across each quarter.
Additionally, sales of broth are generally higher in the fourth quarter, and sales of candy, cookies, crackers, pretzels, and cheese & pudding are generally higher in the third and fourth quarters. Frozen griddle items are generally less seasonal with consistency across each quarter.
Resources Raw Materials and Supplies: Our raw materials consist of ingredients and packaging materials. Principal ingredients used in our operations include casein, cheese, cocoa, coconut oil, coffee, corn and corn syrup, cucumbers, eggs, fruit, non-fat dry milk, oats, palm oil, peppers, soybean oil, sugar, tea, and wheat.
Principal ingredients used in our operations include casein, cheese, cocoa, coconut oil, coffee, corn and corn syrup, cucumbers, eggs, fruit, non-fat dry milk, oats, palm oil, peppers, soybean oil, sugar, tea, and wheat.
Warmer weather products such as pickles typically have higher sales in the second quarter, while drink mixes, ready-to-drink beverages, candy, and bars generally show higher sales in the second and third quarters.
Warmer weather products such as pickles typically have higher sales in the second quarter, while ready-to-drink beverages, powdered beverages, other blends generally show higher sales in the second and third quarters.
We educate our leaders and employees on how best to contribute to an inclusive culture through continuing education and training to increase DEI awareness and to foster an employee experience where everyone feels a sense of belonging.
We educate our leaders and employees on how best to contribute to an inclusive culture through continuing education and training to increase DEI awareness and to foster an employee experience where everyone feels a sense of belonging. Additionally, our ERGs help us make progress on our DEI Strategic Roadmap.
The Company sells its products to retail, co-manufacturing, and food-away-from-home customers in shelf stable, refrigerated, and frozen formats. TreeHouse also 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 Company sells its products across various channels including retail grocery, co-manufacturing, and food-away-from-home customers in shelf stable, refrigerated, and frozen formats. TreeHouse also offers its customer partners a range of value and nutritional solutions, including natural, organic and gluten free offerings, providing each the capability to meet the unique needs of their consumers.
The portfolio includes snacking offerings (crackers, pretzels, in-store bakery items, frozen griddle items, cookies, snack bars, and unique candy offerings), beverage & drink mix offerings (non-dairy creamer, single serve beverages, broths/stocks, powdered beverages and other blends, tea, and ready-to-drink-beverages), and grocery offerings (pickles, refrigerated dough, hot cereal, and cheese & pudding).
Our portfolio includes snacking offerings (crackers, pretzels, in-store bakery items, frozen griddle 4 items, cookies, and unique candy offerings), beverages & drink mix offerings (non-dairy creamer, coffee, broths/stocks, powdered beverages and other blends, tea, and ready-to-drink-beverages), as well as other grocery offerings (pickles, refrigerated dough, hot cereal, and cheese & pudding).
Available Information We make available, free of charge, through the "Investors" link then "Financials" then "SEC Filings" on our Internet website at www.treehousefoods.com , our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Canadian employees are also eligible for paid time off, employee assistance, virtual healthcare, and tuition reimbursement programs. 9 Available Information We make available, free of charge, through the "Investors" link then "Financials" then "SEC Filings" on our Internet website at www.treehousefoods.com , our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
We strive to build and further develop capabilities such as innovation pipelines, additional manufacturing capacity, and/or category and consumer insights, in order to drive growth and category leadership.
We are making investments throughout our business to build and further develop capabilities such as innovation pipelines, additional manufacturing capacity, and/or category and consumer insights, in order to drive growth and category leadership.
Key factors driving private label growth include improved quality, unique product offerings, and greater retailer emphasis and strategic focus on building store brands and experiences through private label.
Key factors driving private brands growth include growing consumer adoption, improved quality, unique product offerings, and greater retailer emphasis and strategic focus on building shopper loyalty and experiences through private brands.
For the year ended December 31, 2022, our ten largest customers accounted for approximately 56.6% of our consolidated net sales. For the years ended December 31, 2022, 2021 and 2020, our largest customer, Walmart Inc. and its affiliates, accounted for approximately 22.1%, 21.9%, and 23.0%, respectively, of our consolidated net sales.
For the year ended December 31, 2023, our ten largest customers accounted for approximately 56.7% of our consolidated net sales from continuing operations. For the years ended December 31, 2023, 2022 and 2021, our largest customer, Walmart Inc. and its affiliates, accounted for approximately 22.4%, 21.1%, and 20.6%, respectively, of our consolidated net sales from continuing operations.
Co-manufacturing agreements are entered into with certain customers to add volume capacity by manufacturing and packaging our customers' product. Industrial and export channels include food manufacturers and repackagers of foodservice products. Most of our customers purchase products from us either by purchase order or pursuant to contracts that generally are terminable at will.
Industrial and export channels include food manufacturers and repackagers of foodservice products. Most of our customers purchase products from us either by purchase order or pursuant to contracts that generally are terminable at will.
Our people and talent are critical to achieving our strategic ambition. Our focus on being the employer of choice, by developing our talent and engaging employees, demonstrates our commitment and understanding of the importance of having a strong workforce. In addition, we seek to develop a higher performance culture by aligning our employee incentive plans to our strategic growth pillars.
Our people and talent are critical to achieving our strategic ambition. Our focus on being the employer of choice, by developing our talent and engaging employees, demonstrates our commitment and understanding of the importance of having a strong workforce.
Diversity, Equity, & Inclusion ("DEI"): We are committed to building a diverse team, fostering an inclusive culture, and investing in equity across our organization. We believe building a team diverse in ideas, experiences, and backgrounds enables us to be more successful in our jobs and better address the needs of customers and consumers.
We believe building a team diverse in ideas, experiences, and backgrounds enables us to be more successful in our jobs and better address the needs of customers and consumers.
Some of our branded competitors have significantly greater resources and brand recognition than we do. We believe our strategies for competing in private label, which include providing superior product quality, effective cost control, an efficient supply chain, successful innovation programs, and competitive pricing, allow us to compete effectively.
We believe our strategies for competing in private brands, which include providing superior product quality, effective cost control, an efficient supply chain, successful innovation programs, and competitive pricing, allow us to compete effectively. Resources Raw Materials and Supplies: Our raw materials consist of ingredients and packaging materials.
The work of our DEI Council is guided by the pillars of our DEI Strategic Plan: Represent, Educate & Employee Experience. We invest time and resources to ensure our workforce is representative of the communities in which they are located, and we utilize best practices to recruit and retain our diverse talent.
Our DEI work is guided by the pillars of this DEI Strategic Roadmap: Representation, Education, and Career Advancement. In furtherance of our DEI Strategic Roadmap, we invest time and resources to create a workforce that is representative of the communities in which they are located, and we utilize best practices to recruit and retain our diverse talent.
For Canadian employees, we provide group benefits including health and dental, life, family life, accidental death and dismemberment insurance and disability coverage, and group retirement savings plans with matching company contributions. Canadian employees are also eligible for paid time off, employee assistance, virtual healthcare, emergency childcare, and tuition reimbursement programs.
For Canadian employees, we provide group benefits including health and dental, life, family life, accidental death and dismemberment insurance and disability coverage, and group retirement savings plans with matching company contributions.
Our business has also seen strong demand during this time; however, labor and materials availability, and supply chain disruption have constrained our ability to service all of the customer orders we have received. We are making steady progress in enhancing our service levels to target to capture incremental private label demand. We have several competitors in each of our channels.
Our retail business has also seen strong demand during this time period; however, labor and materials availability, and industry-wide supply chain disruption had constrained our ability to service all of the customer orders we have received in the last several years.
The spin-off was completed on June 27, 2005, after which TreeHouse operated largely as a private label aggregator, acquiring new businesses and categories in order to expand its product offerings. In 2016, TreeHouse purchased the private brands business from Conagra Brands, representing the largest acquisition in its history and nearly doubling the size of the Company.
TreeHouse was incorporated on January 25, 2005 by Dean Foods Company to accomplish a spin-off of certain specialty businesses to its shareholders. The spin-off was completed on June 27, 2005, after which TreeHouse operated largely as a private brands aggregator, acquiring new businesses and categories in order to expand its product offerings.
Sales, Distribution, and Customers We sell our products through various distribution channels, including retailers, foodservice distributors, co-manufacturers, and industrial and export channels. Retailers include grocery, supermarkets, mass merchandisers, club stores, e-commerce grocers, non-traditional grocers, and other small outlets. The Company's primary sales channel is through the retail grocery channel, with approximately 80% of net sales sold through this channel.
Retailers include grocery, supermarkets, mass merchandisers, club stores, e-commerce grocers, non-traditional grocers, and other small outlets. The Company's primary sales channel is through the retail grocery channel, with approximately 80% of net sales sold through this channel. Foodservice distributors are included in our food-away-from-home sales channel, which primarily includes restaurants and other public venues.
Foodservice distributors are included in our food-away-from-home sales channel, which primarily includes restaurants and other public venues. We have an internal sales force that manages customer relationships and a broker network for sales to retail, food-away-from-home, and export accounts. Industrial food products are generally sold directly to customers without the use of a broker.
We have an internal sales force that manages customer relationships and a broker network for sales to retail, food-away-from-home, and export accounts. Industrial food products are generally sold directly to customers without the use of a broker. Co-manufacturing agreements are entered into with certain customers to add volume capacity by manufacturing and packaging our customers' product.
The acquisition required that TreeHouse focus on becoming an integrated, more efficient and effective operating company. Following the acquisition, the Company consolidated its manufacturing, distribution and IT systems, built and launched a new commercial organization, centralized its operations, and better optimized the portfolio through a number of divestitures.
Following the acquisition, the Company consolidated its manufacturing, distribution and IT systems, built and launched a new commercial organization, centralized its operations, and better optimized the portfolio through a number of divestitures. More recently, the Company has refined its strategic priorities to become a more focused category leader.
Our DEI Council, which guides our work in this area, is composed of individuals from various levels and functions throughout the organization, working together to shape and advance our DEI commitments. Our DEI Strategic Road Map is a multiyear, enterprise-wide approach to accelerating our DEI journey.
Our DEI & Culture Council, which is the subcommittee that guides our work in this area, is led by our Director of DEI and is composed of individuals from various levels and functions throughout the organization, including the leaders of each of our four Employee Resource Groups ("ERGs"), working together to shape and advance our DEI commitments.
RTE Cereal operated as two manufacturing plants located in Lancaster, Ohio and Sparks, Nevada. The RTE Cereal business had been classified as a discontinued operation.
RTE Cereal operated as two manufacturing plants located in Lancaster, Ohio and Sparks, Nevada. The RTE Cereal business had been classified as a discontinued operation. Refer to Note 7 to our Consolidated Financial Statements for additional information. 5 Our Strategy Our strategic ambition is platform leadership in consumer trending categories.
More recently, the Company has refined its strategic priorities to become a more focused category leader. In 2022, TreeHouse completed the divestiture of a significant portion of its Meal Preparation business to better focus the portfolio on snacking and beverage offerings. TreeHouse believes it is well positioned across attractive snacking and beverage growth categories fueled by strong consumer demand trends.
In 2022, TreeHouse completed the divestiture of a significant portion of its Meal Preparation business to better focus the portfolio on higher-growth, higher-margin snacking and beverage categories. The Company continues to evaluate strategic growth opportunities to invest in its commercial organization.
As of December 31, 2022, 42% and 48% of our hourly and salaried workforce, respectively, were women, and 40% and 19% of our hourly and salaried workforce, respectively, were from racially or ethnically underrepresented groups. Learning and Development: Employee development is critical to provide our people with the skills and opportunities they need to excel and be engaged at work.
As of December 31, 2023, 42% and 48% of our hourly and salaried workforce, respectively, were women, and 39% and 21% of our hourly and salaried workforce, respectively, were from racially or ethnically underrepresented groups.
We continue to focus on advancing our environment, social, and governance ("ESG") initiatives and have integrated those efforts across our strategic growth pillars. We recognize the importance of measurement and accountability, and we will continue to provide transparent disclosure of our progress along our ESG journey.
In addition, we seek to develop a higher performance culture by aligning our employee incentive plans to our four strategic growth pillars. We continue to focus on advancing our environment, social, and governance ("ESG") initiatives and have integrated those efforts across our strategic growth pillars.
This increased transparency, paired with the development of frontline employee safety committees, allows our employees at all levels to take ownership over creating a safety-first workplace and culture. Safety is incorporated into our TreeHouse Management Operating System ("TMOS") and under TMOS, our plants are accountable to EHS Improvement Plans, Environmental Compliance Plans and standardized Incident Investigation and Communication processes.
Safety is incorporated into our TreeHouse Management Operating System ("TMOS") and under TMOS, our plants are accountable to EHS Improvement Plans, Environmental Compliance Plans and standardized Incident Investigation and Communication processes. 8 Culture: We are committed to building a diverse team, fostering an inclusive culture, and investing in equity across our organization.
As a part of our Learning & Growing program, we have rolled out tools to help our employees and managers have meaningful career conversations, as well as effective performance management discussions focused on growth and development. Compensation and Benefits: TreeHouse offers competitive pay and benefit packages, designed to drive our performance-based culture and celebrate our collective organizational success.
Beyond DevelopU, we pursue a multifaceted approach to career development and continuous learning that also includes a comprehensive onboarding program, formal training, career development tools and leadership development, with particular attention paid to developing leadership capability. Compensation and Benefits: TreeHouse offers competitive pay and benefit packages, designed to drive our performance-based culture and celebrate our collective organizational success.
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Our purpose underscores our mission, to make high quality food and beverages affordable to all. TreeHouse was incorporated on January 25, 2005 by Dean Foods Company to accomplish a spin-off of certain specialty businesses to its shareholders.
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In 2016, TreeHouse purchased the Private Brands business from ConAgra Foods (currently known as Conagra Brands), representing the largest acquisition in its history and nearly doubling the size of the Company. The acquisition required that TreeHouse focus on becoming an integrated, more efficient and effective operating company.
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On April 17, 2020, the Company completed the sale of two of its In-Store Bakery facilities located in Fridley, Minnesota and Lodi, California, which manufacture breads, rolls, and cakes for in-store retail bakeries and food-away-from-home customers.
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TreeHouse believes it is well positioned across attractive snacking and beverage growth categories fueled by strong underlying consumer demand trends.
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Refer to Note 7 to our Consolidated Financial Statements for additional information. 5 Our Strategy Our strategic ambition is profitable growth driven by leadership in consumer trending categories.
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Recent Acquisitions and Divestitures On January 2, 2024, the Company completed the acquisition of pickle branded assets, including Bick’s pickles, Habitant pickled beets, Woodman’s horseradish, and McLarens pickled onions brands, from The J.M. Smucker Co., a North American producer of coffee, consumer foods, dog snacks, and cat food.
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Competition to obtain shelf space for our branded products with retailers generally is based on the expected or historical performance of our product sales relative to our competitors. The principal competitive factors for sales of our branded products to consumers are brand recognition and loyalty, product quality, promotion, and price.
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The acquisition is consistent with our strategy and builds depth in our Pickles category by expanding into Canada. On September 29, 2023, the Company completed the sale of its Snack Bars business (the "Snack Bars Transaction" or the "Snack Bars Business"). The Snack Bars Business consists of manufacturing, packaging, and selling snack bars and operated in the Lakeville, Minnesota plant.
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Due to shelter-in-place and social distancing measures as a result of the COVID-19 pandemic, we saw significant changes in product consumption patterns on our seasonality as consumers stocked their pantries and modified their purchasing habits in response to the pandemic, particularly in March and April 2020. This change in consumption demand in 2020 impacted comparability year-over-year.
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The Snack Bars Transaction represents a component of the single plan of disposal from the Company’s strategic review process, which also resulted in the divestiture of a significant portion of the Meal Preparation business during the fourth quarter of 2022.
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This allows us to leverage best practices and streamline our EHS oversight processes and better focus our resources on safety risk identification and mitigation. We also adapted our safety communications to clearly convey the roles and responsibilities for this new organization and to deliver consistent safety messaging.
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Beginning in the third quarter of 2023, the Snack Bars Business is presented as a component of discontinued operations and has been excluded from continuing operations for all periods presented.
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Each year, we conduct an Employee Engagement Survey, continuing to refine our employee engagement process and analytics to ensure we are improving the employee experience, work culture, and programs. Our areas of focus included strategy, collaboration, and career growth.
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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.
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Our Learning & Growing program provides employees with the tools and resources they need to learn and grow their career at TreeHouse with clarity around the behaviors, experiences, and expectations of our employees.
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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. On April 1, 2023, the Company completed the acquisition of a seasoned pretzel capability.
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The acquisition is in line with our strategy to build category leadership, depth and capabilities to drive profitable growth. The seasoned pretzel acquisition expands our current portfolio of traditional, filled and enrobed pretzels and extends our capabilities into this growing sub-sector of the Pretzels category.
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We recognize the importance of measurement and accountability, and we will continue to provide transparent disclosure of our progress along our ESG journey. Sales, Distribution, and Customers We sell our products through various distribution channels, including retailers, foodservice distributors, co-manufacturers, and industrial and export channels.
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In 2023, as the industry-wide labor and supply chain disruption eased, we returned service back to target levels across many of our categories. We have several competitors in each of our channels. For sales of private brands products to our customers, the principal competitive factors are product quality, reliability of service, and price.
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This allows us to proactively identify improvement opportunities by leveraging best practices and better focus our resources on safety risk identification and mitigation. Paired with the development of frontline employee safety committees, our employees at all levels are able to take ownership over creating a safety-first workplace and culture.
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The importance placed on diversity, equity, and inclusion begins at the top of our organization and is exemplified by our Board of Directors (the "Board"), where three of nine directors are women and two of nine directors are racially or ethnically diverse.
Added
Our Board oversees our ESG strategy, including through its Nominating and Corporate Governance Committee, which regularly reviews the Company’s ESG activities, developments, goals and objectives, including the Company’s ESG programs and disclosures. The Compensation Committee of our Board meets with the Company’s ESG Steering Committee to review human capital activities, developments, goals and objectives incorporated into the Company’s ESG initiatives.
Added
Our ESG Steering Committee drives our activities in this space, and is composed of our Executive Leadership Team, including our Chairman, CEO, and President. This committee is supported by four subcommittees and our ESG team, which is led by our VP, ESG & Deputy General Counsel, who reports to our EVP, Chief Human Resources Officer & General Counsel.
Added
To continue to drive our diversity goals and build a culture of inclusion, we have established a multi-year DEI Strategic Roadmap and a governance model that engages leadership at all levels of the organization. Our DEI Strategic Roadmap is an enterprise-wide approach to accelerating our DEI journey.
Added
In 2023, we expanded our diversity recruitment strategies focused on strengthening the diversity of candidate slates by attending various career fairs, including the National Black MBA Association Career Expo, Hispanic-Serving Institution Career Fair and Service Academy Career Conference.
Added
In 2023, we maintained four ERGs: Parents & Caregivers Network, TreeHouse’s Black Employee Resource Group, Women at TreeHouse and Free To Be Me (our LGBTQIA+ resource group). These ERGs play a critical role in attracting diverse talent, providing mentorship and career development opportunities, delivering commercial business insights and connecting people to the Company and the communities where we do business.
Added
Learning and Development: Each year, we conduct an Employee Engagement Survey, leveraging those results to continue to work to improve the employee experience and value proposition. One of our most significant investments, in response to our Employee Engagement Survey and other feedback mechanisms, is in an educational platform we refer to internally as DevelopU.
Added
Knowing that development is important in enhancing our employees' skills, knowledge and capabilities to drive performance, employee engagement and to contribute to continued success, we have designed DevelopU with learning automation, a robust content library of more than 10,000 courses, and flexible learning solutions.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+11 added−20 removed71 unchanged
Biggest changeFurther, over the past several years, the retail grocery and foodservice industries have experienced a consolidation trend, which has resulted in mass merchandisers and non-traditional grocers, such as e-commerce grocers with direct-to-consumer channels, gaining market share. As our customer base continues to consolidate, we expect competition to intensify as we compete for the business of the remaining consolidated customers.
Biggest changeIf our product sales to one or more of these customers decline, this reduction may have a material adverse effect on our business, results of operations, and financial condition. 11 Further, over the past several years, the retail grocery and foodservice industries have experienced a consolidation trend, which has resulted in mass merchandisers and non-traditional grocers, such as e-commerce grocers with direct-to-consumer channels, gaining market share.
Any of these events, including a significant product liability judgment against us, could result in a loss of confidence in our food products, which could have an adverse effect on our financial condition, results of operations, or cash flows. 12 Our private label and regionally branded products may not be able to compete successfully with nationally branded products.
Any of these events, including a significant product liability judgment against us, could result in a loss of confidence in our food products, which could have an adverse effect on our financial condition, results of operations, or cash flows. Our private label and regionally branded products may not be able to compete successfully with nationally branded products.
Any failure to achieve the goals and commitments we have and may in the future set with respect to reducing our impact on the environment or perception of a failure to act responsibly with respect to the environment, could, in addition to regulatory and legal risks related to compliance, lead to adverse publicity, which could damage our reputation, which in turn could adversely impact our results of operations.
Any failure, or perceived failure, to achieve the goals and commitments we have and may in the future set with respect to reducing our impact on the environment or perception of a failure to act responsibly with respect to the environment, could, in addition to regulatory and legal risks related to compliance, lead to adverse publicity, which could damage our reputation, which in turn could adversely impact our results of operations.
The costs and other effects of potential and pending litigation and administrative actions against us, and new legal requirements, cannot be determined with certainty and may differ from expectations. We are subject to product liability claims for misbranded, adulterated, contaminated, or spoiled food products.
The costs and other effects of potential and pending litigation and administrative actions against us, and new legal requirements, cannot be determined with certainty and may differ from expectations. 12 We are subject to product liability claims for misbranded, adulterated, contaminated, or spoiled food products.
Some of our competitors have substantial financial, marketing, and other resources, and competition with them in our various business segments and product lines could cause us to reduce prices, increase capital, marketing or other expenditures, or lose sales, which could have a material adverse effect on our business and financial results.
Some of our competitors have substantial financial, marketing, technological, and other resources, and competition with them in our various business segments and product lines could cause us to reduce prices, increase capital, marketing or other expenditures, or lose sales, which could have a material adverse effect on our business and financial results.
For example, our Company could face allegations of false or deceptive advertising or other criticisms which could end up in litigation and result in potential liabilities or costs. In addition, we could incur substantial costs and fees in defending ourselves or in asserting our rights in these actions or meeting new legal requirements.
For example, our Company could face allegations of false or deceptive advertising or other criticisms which could end up in litigation and result in potential liabilities or costs. In addition, we could incur substantial costs and fees in defending ourselves and our customers or in asserting our rights in these actions or meeting new legal requirements.
Competition could cause us to lose talented employees, and unplanned turnover could deplete our institutional knowledge and result in increased costs such as our recent implementation of retention programs due to increased competition for employees. Our results of operations are adversely affected by labor shortages, turnover, and labor cost increases.
Competition could cause us to lose talented employees, and unplanned turnover could deplete our institutional knowledge and result in increased costs such as our recent implementation of retention programs due to increased competition for employees. 10 Our results of operations are adversely affected by labor shortages, turnover, and labor cost increases.
Changes in these laws or regulations, or the introduction of new laws or regulations, could increase the costs of doing business for the Company, our customers, or suppliers, or restrict our actions, causing our results of operations to be adversely affected. 14 Our indebtedness and our ability to service our debt adversely affect our business and financial condition.
Changes in these laws or regulations, or the introduction of new laws or regulations, could increase the costs of doing business for the Company, our customers, or suppliers, or restrict our actions, causing our results of operations to be adversely affected. Our indebtedness and our ability to service our debt adversely affect our business and financial condition.
In addition, in instances of declining input costs, customers may look for price reductions in situations where we have locked into purchases at higher costs. We may be unable to anticipate changes in consumer preferences, which may result in decreased demand for our products.
In addition, in instances of declining input costs, customers may look for price reductions in situations where we have locked into purchases at higher costs. 14 We may be unable to anticipate changes in consumer preferences, which may result in decreased demand for our products.
If a strike or work stoppage were to occur, our results of operations could be adversely affected. 13 Market and Other External Risks Increases in input costs, such as ingredients, packaging materials, and fuel costs, adversely affect earnings.
If a strike or work stoppage were to occur, our results of operations could be adversely affected. Market and Other External Risks Increases in input costs, such as ingredients, packaging materials, and fuel costs, adversely affect earnings.
Any or all of these risks could impact the Company’s financial results and business reputation. 18 We may not realize some or all of the anticipated benefits of our growth, reinvestment, and restructuring programs in the anticipated time frame or at all.
Any or all of these risks could impact the Company’s financial results and business reputation. We may not realize some or all of the anticipated benefits of our growth, reinvestment, and restructuring programs in the anticipated time frame or at all.
A product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals, product recalls, destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation.
A product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals, product recalls, product rework, destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation.
These climate changes have a negative effect on agricultural productivity, and we are subject to decreased availability or less favorable pricing for certain raw materials that are necessary for our products, including, but not limited to, coconut oil, coffee, corn and corn syrup, cucumbers, fruit, oats, palm oil, peppers, rice, soybean oil, sugar, tea, and wheat.
These climate changes have a negative effect on agricultural productivity, and we may be subject to decreased availability or less favorable pricing for certain raw materials that are necessary for our products, including, but not limited to, coconut oil, coffee, corn and corn syrup, cucumbers, fruit, oats, palm oil, peppers, rice, soybean oil, sugar, tea, and wheat.
During 2021 and 2022, the overall global economy has experienced significant inflation in packaging materials, fuel, energy, and across several agricultural commodities, and there can be no assurance that our hedging activities will result in the optimal price. When feasible, we attempt to offset the effect of such increases by raising prices to our customers.
During 2022 and 2023, the overall global economy has experienced significant inflation in packaging materials, fuel, energy, and across several agricultural commodities, and there can be no assurance that our hedging activities will result in the optimal price. When feasible, we attempt to offset the effect of such increases by raising prices to our customers.
We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. In addition, we and our subsidiaries may incur significant additional indebtedness in the future.
We may not be able to affect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. In addition, we and our subsidiaries may incur significant additional indebtedness in the future.
Our inability to offer competitive products to these customer segments could have an adverse impact on our results of operations. As we are dependent upon a limited number of customers, the loss of a significant customer or consolidation of our customer base could adversely affect our operating results.
Our inability to offer competitive and innovative products to these customer segments could have an adverse impact on our results of operations. As we are dependent upon a limited number of customers, the loss of a significant customer or consolidation of our customer base could adversely affect our operating results.
Additionally, an inability to enhance or develop robotic technology to automate processes in our manufacturing and distribution facilities could make us dependent on a labor force in tighter markets. Any substantial increase in these costs negatively impact on our profitability. 10 We operate in the highly competitive and rapidly changing food industry.
Additionally, an inability to enhance robotic technology to automate processes in our manufacturing and distribution facilities could make us dependent on a labor force in tighter markets. Any substantial increase in these costs negatively impact on our profitability. We operate in the highly competitive and rapidly changing food industry.
As of December 31, 2022, the aggregate principal amount of our debt instruments with exposure to interest rate risk was approximately $905.0 million, based on the outstanding debt balance of our Credit Agreement.
As of December 31, 2023, the aggregate principal amount of our debt instruments with exposure to interest rate risk was approximately $905.0 million, based on the outstanding debt balance of our Credit Agreement.
As a result, climate change, including legal and market pressures to address climate change, could have a material adverse affect to our businesses, financial condition, capital expenditures, results of operations, cash flows, and supply chain. 17 Shareholder activism has caused us to incur significant expense, caused disruption to our business, and impacted our stock price.
As a result, climate change, including legal and market pressures to address climate change, could have a material adverse effect to our businesses, financial condition, capital expenditures, results of operations, cash flows, and supply chain. Shareholder activism has caused us to incur significant expense, caused disruption to our business, and impacted our stock price.
Fluctuations in foreign currencies may adversely affect earnings. The Company is exposed to fluctuations in foreign currency exchange rates. The Company’s foreign subsidiaries purchase and sell various inputs that are based in U.S. dollars; accordingly, the profitability of the foreign subsidiaries are subject to foreign currency transaction gains and losses that affect earnings.
The Company is exposed to fluctuations in foreign currency exchange rates. The Company’s foreign subsidiaries purchase and sell various inputs that are based in U.S. dollars; accordingly, the profitability of the foreign subsidiaries is subject to foreign currency transaction gains and losses that affect earnings.
Potential risks associated with these transactions include the inability to consummate a transaction on favorable terms, the diversion of management’s attention from other business concerns, the potential loss of key employees and customers of current or acquired companies, the inability to integrate or divest operations successfully, the possible assumptions of unknown liabilities, potential disputes with buyers or sellers, potential impairment charges or losses if purchase assumptions are not achieved or if a business is expected to be divested at a loss, restructuring and other disposal charges, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience.
Potential risks associated with these transactions include the inability to consummate a transaction on favorable terms, the diversion of management’s attention from other business concerns, the potential loss of key employees and customers of current or acquired companies, the inability to integrate or divest operations successfully, potential stranded costs following a Transition Services Agreement ("TSA"), the possible assumptions of unknown liabilities, potential disputes with buyers or sellers, potential impairment charges or losses if purchase assumptions are not achieved or if a business is expected to be divested at a loss, restructuring and other disposal charges, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience.
The inability of any supplier of raw materials or packaging, independent co-packer, or third-party distributor to deliver or perform for us in a timely or cost-effective manner could cause our operating costs to increase and our profit margins to decrease, especially as it relates to our products that have a short shelf life.
The inability of any supplier of raw materials or packaging, independent co-packer, or third-party distributor to deliver or perform for us in a timely or cost-effective manner, while also meeting quality standards, could cause our operating costs to increase and our profit margins to decrease, especially as it relates to our products that have a short shelf life.
Changes in weather conditions or climate changes, natural disasters such as floods, droughts, frosts, earthquakes, hurricanes, tornados, fires, or pestilence, geopolitical events such as a Russia-Ukraine war, and other catastrophic events may affect the cost and supply of commodities and raw materials.
Changes in weather conditions or climate changes, natural disasters such as floods, droughts, frosts, earthquakes, hurricanes, tornados, fires, or pestilence, geopolitical events such as the Russia-Ukraine war and conflict in the Middle East, and other catastrophic events may affect the cost and supply of commodities and raw materials.
We are subject to damage or disruption to raw material supplies or our manufacturing or distribution capabilities (in particular, to the extent that our raw materials are sourced globally) due to weather, including any potential effects of climate change, natural disaster, fire, terrorism, war, adverse geopolitical events such as a Russia-Ukraine war, pandemics and public health crises (such as the COVID-19 pandemic), strikes, labor shortages, freight transportation availability and transport capacity constraints, disruption in logistics, import restrictions, or other factors that impair our ability to manufacture or sell our products.
We are subject to damage or disruption to raw material supplies or our manufacturing or distribution capabilities (in particular, to the extent that our raw materials are sourced globally) due to weather, including any potential effects of climate change, natural disaster, fire, terrorism, war, adverse geopolitical events such as the Russia-Ukraine war and conflict in the Middle East, pandemics and public health crises, strikes, labor shortages, freight transportation availability and transport capacity constraints, disruption in logistics, import restrictions, or other factors that impair our ability to manufacture, move, or sell our products.
Labor shortages may also negatively impact us from servicing all demand or operating our manufacturing and distribution facilities efficiently. Pandemics or public health crises (such as the COVID-19 pandemic) have caused illness as well as travel and government restrictions that have negatively impacted our operations by causing labor shortages and shutdowns of manufacturing facilities.
Labor shortages may also negatively impact us from servicing all demand or operating our manufacturing and distribution facilities efficiently. Pandemics or public health crises have caused illness as well as travel and government restrictions that have negatively impacted our operations by causing labor shortages and shutdowns of manufacturing facilities.
As of December 31, 2022, we had $1,406.2 million of outstanding indebtedness, including a $588.6 million term loan ("Term Loan A-1") maturing on March 26, 2026, a $316.4 million term loan ("Term Loan A" and, together with Term Loan A-1, the "Term Loans") maturing on March 26, 2028, $500.0 million of 4.0% notes due September 1, 2028 (the "2028 Notes"), and $1.2 million of finance lease obligations.
As of December 31, 2023, we had $1,405.6 million of outstanding indebtedness, including a $588.6 million term loan ("Term Loan A-1") maturing on March 26, 2026, a $316.4 million term loan ("Term Loan A" and, together with Term Loan A-1, the "Term Loans") maturing on March 26, 2028, $500.0 million of 4.0% notes due September 1, 2028 (the "2028 Notes"), and $0.6 million of finance lease obligations.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism. Strategic Risks Our inability to execute our business strategy could adversely affect our business. As we roll-out and execute on our business strategy, we have redesigned our operating model to deliver our growth objectives.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism. 17 Strategic Risks Our inability to execute our business strategy could adversely affect our business. We have redesigned our operating model to deliver our growth objectives.
During 2022, the Company incurred approximately $85.1 million in growth, reinvestment, and restructuring program costs from continuing operations. See Note 3 of the Consolidated Financial Statements for additional information.
During 2023, the Company incurred approximately $46.1 million in growth, reinvestment, and restructuring program costs from continuing operations. See Note 3 of the Consolidated Financial Statements for additional information.
Such conditions include job actions, labor shortages or strikes by employees of suppliers, weather, crop conditions, transportation shortages and interruptions, natural disasters, sustainability issues, pandemics and public health crises (such as the COVID-19 pandemic), geopolitical events, or other catastrophic events.
Such conditions include job actions, labor shortages or strikes by employees of suppliers, weather, crop conditions, transportation shortages and interruptions, natural disasters, sustainability issues, pandemics and public health crises, geopolitical events, or other catastrophic events.
We have recently been subject to shareholder activism and may be subject to such activism in the future, which could result in substantial costs and divert management's and our Board's attention and resources from our business.
We may be subject to shareholder activism in the future, which could result in substantial costs and divert management's and our Board's attention and resources from our business.
For the year ended December 31, 2022, our ten largest customers accounted for approximately 56.6% of our consolidated net sales from continuing operations, and our largest customer, Walmart Inc. and its affiliates, accounted for approximately 22.1% of our consolidated net sales from continuing operations. No other customer accounted for 10% or more of the Company’s consolidated net sales.
For the year ended December 31, 2023, our ten largest customers accounted for approximately 56.7% of our consolidated net sales from continuing operations, and our largest customer, Walmart Inc. and its affiliates, accounted for approximately 22.4% of our consolidated net sales from continuing operations. No other customer accounted for 10% or more of the Company’s consolidated net sales.
Additionally, as a result of state-sponsored cyber threats including those stemming from the Russia-Ukraine war, we may face increased cybersecurity risks as companies based in the United States and its allied countries have become targets of malicious cyber activity.
Also, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. Additionally, as a result of state-sponsored cyber threats including those stemming from the Russia-Ukraine war, we may face increased cybersecurity risks as companies based in the United States and its allied countries have become targets of malicious cyber activity.
Each one percentage point change in LIBOR rates would result in an approximate $0.3 million change in the annual cash interest expense, before any principal payment, on our financial instruments with exposure to interest rate risk, including the impact of the $875.0 million in interest rate swap agreements that were effective in 2022.
Each one percentage point change in SOFR rates would result in an approximate $0.3 million change in the annual cash interest expense, before any principal payment, on our financial instruments with exposure to interest rate risk, including the impact of the interest rate swap agreements that were effective in 2023. Fluctuations in foreign currencies may adversely affect earnings.
The recognition of impairment charges on goodwill or long-lived assets adversely impact our financial reporting and results of operations. As of December 31, 2022, we have $1,817.6 million of goodwill and $296.0 million of other intangible assets. Additionally, we have $666.5 million of property, plant, and equipment and $184.4 million of operating lease right-of-use assets as of December 31, 2022.
The recognition of impairment charges on goodwill or long-lived assets adversely impact our financial reporting and results of operations. As of December 31, 2023, we have $1,824.7 million of goodwill and $257.4 million of other intangible assets. Additionally, we have $737.6 million of property, plant, and equipment and $193.0 million of operating lease right-of-use assets as of December 31, 2023.
However, input costs could continue with volatility due to other external events such as the invasion of Ukraine by Russia or any other geopolitical conflicts. Although we have no direct exposure to Russia or Ukraine, our supply chain has been, and may continue to be, adversely impacted by the Russia-Ukraine war.
However, input costs could continue to be volatile due to other external events such as the Russia-Ukraine war, conflict in the Middle East, or any other geopolitical conflicts. Although we have no direct exposure to Russia, Ukraine, or the Middle East, our supply chain may be adversely impacted by the Russia-Ukraine war and conflict in the Middle East.
Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain.
Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain. 16 Climate change, including increasingly stringent legal and market measures to address climate change, presents challenges to our business and could materially adversely affect our businesses, reputation, operations and supply chain.
New laws or regulations or changes in existing laws or regulations could adversely affect our business. The food industry is subject to a variety of federal, state, local, and foreign laws and regulations, including, but not limited to, those related to food safety, food labeling, and environmental matters.
The food industry is subject to a variety of federal, state, local, and foreign laws and regulations, including, but not limited to, those related to food safety, food labeling, and environmental matters.
As a result, higher interest rates will increase the cost of servicing our financial instruments with exposure to interest rate risk, and could reduce our profitability and cash flows. As of December 31, 2022, the Company had entered into $875.0 million of long-term interest rate swap agreements to lock into a fixed LIBOR interest rate base.
As a result, higher interest rates will increase the cost of servicing our financial instruments with exposure to interest rate risk, and could reduce our profitability and cash flows. As of December 31, 2023, the Company had entered into long-term interest rate swap agreements to mitigate its variable debt exposures.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems, including the internet, to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes.
Our business operations could be disrupted if our information technology systems fail to perform adequately or are breached. The efficient operation of our business depends on our information technology systems. We rely on our information technology systems, including the internet, to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of our financing. 15 Our note receivable may have collectibility risk.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of our financing. Increases in interest rates may negatively affect earnings.
Category sales and growth could also be adversely impacted if we are not successful in introducing new products. Some customer buying decisions are based on a periodic bidding process in which the successful bidder is reasonably assured of the sale of its selected product to the food retailer, super center, mass merchandiser, or food-away-from-home distributors, until the next bidding process.
Some customer buying decisions are based on a periodic bidding process in which the successful bidder is reasonably assured of the sale of its selected product to the food retailer, super center, mass merchandiser, or food-away-from-home distributors, until the next bidding process.
We depend on our ability to evolve and grow, and as changes in our business environments occur, we may adjust our business plans by introducing new growth, reinvestment, and restructuring programs, from time to time, to meet these changes, such as our Strategic Growth Initiatives, a growth and reinvestment strategy, Structure to Win, an operating expense improvement program, and TreeHouse 2020, a long-term growth and margin improvement strategy involving plants and distribution locations.
We depend on our ability to evolve and grow, and as changes in our business environments occur, we may adjust our business plans by introducing new growth, reinvestment, and restructuring programs, from time to time, to meet these changes, such as our Strategic Growth Initiatives, a growth and reinvestment strategy.
These include, but are not limited to, at-home vs. food-away-from home consumption, consumer income and government stimulus, inflation, and unemployment. Consumer preferences change from time to time, and our failure to timely anticipate, identify, or react to these changes could result in reduced demand for our products, which would adversely affect our operating results and profitability.
Consumer preferences change from time to time, and our failure to timely anticipate, identify, or react to these changes could result in reduced demand for our products, which would adversely affect our operating results and profitability.
Our variable-rate debt is nearly fully hedged with our fixed rate interest rate swaps, but rising interest rates can impact other areas of the business, including, but not limited to, our pension plans or our suppliers.
The notional amount of these agreements is $1,175.0 million as of December 31, 2023 and $875.0 million as of December 31, 2022. Our variable-rate debt is nearly fully hedged through 2025 with our fixed rate interest rate swaps, but rising interest rates can impact other areas of the business, including, but not limited to, our pension plans or our suppliers.
We expect that the execution of our strategy will require change management activities to align our operating model for our new portfolio following the sale of a significant portion of the Company’s Meal Preparation business. Our capital investment plan to drive long term growth will be based on our new strategy.
We expect that the execution of our strategy, which includes disciplined capital allocation strategy in deploying proceeds to drive long term growth based on our new strategy, will require change management activities to align our operating model for our new portfolio following the divestitures of the Snack Bars business and a significant portion of the Company’s Meal Preparation business and the acquisitions of the Coffee Roasting Capability and the Seasoned Pretzel Capability.
In addition, an event of default under the Credit Agreement may permit our lenders to terminate all commitments to extend further credit under those facilities. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
Our success depends in part on our ability to anticipate the tastes, quality demands, eating habits, and overall purchasing trends of consumers and to offer products that appeal to their preferences. Purchasing trends are influenced by macro environment factors, particularly during the COVID-19 pandemic.
Our success depends in part on our ability to anticipate the tastes, quality demands, eating habits, and overall purchasing trends of consumers and to offer products that appeal to their preferences. Purchasing trends are influenced by macro environment factors. These include, but are not limited to, at-home vs. food-away-from home consumption, consumer income and government stimulus, inflation, and unemployment.
A breach of the covenants or restrictions under the agreements governing our indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross acceleration or cross default provision applies.
Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross acceleration or cross default provision applies. In addition, an event of default under the Credit Agreement may permit our lenders to terminate all commitments to extend further credit under those facilities.
Climate change, including increasingly stringent legal and market measures to address climate change, presents challenges to our business and could materially adversely affect our businesses, reputation, operations and supply chain. The effects of climate change expose us to both physical and transition risk and create financial and operational risks to our business, both directly and indirectly.
The effects of climate change expose us to both physical and transition risk and create financial and operational risks to our business, both directly and indirectly.
In addition, our Credit Agreement requires us to maintain a certain consolidated net leverage ratio tested on a quarterly basis. Our ability to meet these financial covenants can be affected by events beyond our control, and we may be unable to meet the required ratio.
In addition, our Credit Agreement requires us to maintain a certain consolidated net leverage ratio tested on a quarterly basis.
As this consolidation trend continues and such customers grow larger, they may seek to leverage their growth and position to improve their profitability through improved efficiency, lower pricing, or increased promotional programs. If we are unable to use our scale, product innovation, and category leadership positions to respond to these demands, our profitability or volume growth could be negatively impacted.
As our customer base continues to consolidate, we expect competition to intensify as we compete for the business of the remaining consolidated customers. As this consolidation trend continues and such customers grow larger, they may seek to leverage their growth and position to improve their profitability through improved efficiency, lower pricing, or increased promotional programs.
Accordingly, we are exposed to volatility in the translation of foreign currency denominated earnings due to fluctuations in the values of the Canadian dollar, which may negatively impact the Company’s results of operations and financial position. 16 Changes in weather conditions, natural disasters, geopolitical events, and other catastrophic events beyond our control could adversely affect our results of operations.
We translate the Canadian assets, liabilities, revenues, and expenses into U.S. dollars at applicable exchange rates. Accordingly, we are exposed to volatility in the translation of foreign currency denominated earnings due to fluctuations in the values of the Canadian dollar, which may negatively impact the Company’s results of operations and financial position.
In addition, over the years we have made public commitments regarding our intended reduction of carbon emissions and other near- and mid-term environmental sustainability goals. Although we intend to meet these goals, we may be required to expend significant resources to do so, which could significantly increase our operational costs.
Although we intend to meet these goals, we may be required to expend significant resources to do so, which could significantly increase our operational costs.
Some of our branded competitors have significantly greater resources and brand recognition than we do.
Some of our branded competitors have significantly greater resources and brand recognition than we do. There can be no assurance that retailers will provide sufficient, or any, shelf space for our products.
For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases. 11 Our business operations could be disrupted if our information technology systems fail to perform adequately or are breached.
Consolidation also increases the risk that adverse changes in our customers' business operations or financial performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases.
Multiemployer pension plans could adversely affect our business. We participate in various multiemployer pension plans administered by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants.
We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants.
Additionally, if the surviving entity of a consolidation or similar transaction is not a current customer of the Company, we may lose significant business once held with the acquired retailer. Consolidation also increases the risk that adverse changes in our customers' business operations or financial performance will have a corresponding material adverse effect on us.
Additionally, the potential for the consolidation of our suppliers increases the risk that adverse changes in their business operations or financial performance will have a corresponding material adverse effect on our operating results.
We have made several acquisitions and divestitures in recent years that align with our strategic initiative of delivering long-term value to shareholders. See Note 7 of the Consolidated Financial Statements for additional information.
If we are unsuccessful in implementing or executing one or more of our business strategies, our business could be adversely affected. Our operations are subject to the general risks associated with acquisitions, divestitures, and other strategic transactions. We have made several acquisitions and divestitures in recent years that align with our strategic initiative of delivering long-term value to shareholders.
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If our product sales to one or more of these customers decline, this reduction may have a material adverse effect on our business, results of operations, and financial condition.
Added
Category sales and growth could also be adversely impacted if we are not successful in monitoring trends and introducing new products.
Removed
For the year ended December 31, 2021, on a continuing operations basis, we incurred a total of $9.2 million of non-cash impairment charges related to the Bars asset group. These impairments and future impairments on goodwill or long-lived assets have adversely impacted and could impact our future financial position and results of operations.
Added
Our customers may also consider opportunities for dual sourcing, resulting in additional competition and a potential decline in sales.
Removed
While individual input cost changes varied throughout the year, with certain costs increasing and others decreasing, input costs were in the aggregate unfavorable in 2022 compared to 2021. The Federal Reserve has recently taken action to reduce domestic inflation by raising interest rates.
Added
If we are unable to use our scale, product innovation, and category leadership positions to respond to these demands, our profitability or volume growth could be negatively impacted. Additionally, if the surviving entity of a consolidation or similar transaction is not a current customer of the Company, we may lose significant business once held with the acquired retailer.
Removed
On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business. A portion of the consideration transferred came in the form of a note receivable.
Added
Even if we obtain shelf space or preferable shelf placement, our new and existing products may fail to achieve the sales expectations set by our retailers, potentially causing these retailers to remove our products from their shelves.
Removed
A $425.9 million five-year Secured Promissory Note (the "Seller Note Credit Agreement") was issued by Rushmore Investment II LLC ("Holdings"), Rushmore Investment III LLC ("US Buyer") and 1373978 B.C. The Seller Note Credit Agreement sets forth the terms of the Seller Promissory Note and the loan evidenced thereby (the "Seller Loan").
Added
Future impairments on goodwill or long-lived assets could impact our future financial position and results of operations. 13 Multiemployer pension plans could adversely affect our business. We participate in various multiemployer pension plans administered by labor unions representing some of our employees.
Removed
The Seller Loan matures on October 1, 2027 and is guaranteed by Holdings and certain subsidiaries of US Buyer (collectively with Holdings and US Buyer, the "Loan Parties") and secured by a first-priority lien on substantially all of the Loan Parties' assets (subject to customary exceptions and limitations, including in connection with an asset-based revolving credit facility entered into by Holdings, US Buyer, certain of its subsidiaries and Bank of America, N.A., as administrative agent).
Added
While we have seen some commodities move lower relative to recent all-time highs, many of our ingredients and packaging inputs still remain elevated compared to historical levels. The Federal Reserve has previously taken actions to reduce domestic inflation by raising interest rates.
Removed
See Note 8 of the Consolidated Financial Statements for additional information. While we believe the Seller Loan is collectible, deterioration in the liquidity of the Loan Parties could impact the collectibility of this Seller Loan note receivable. Disruptions in the financial markets could impair our ability to fund our operations or limit our ability to expand our business.
Added
Additionally, the increased use and/or prevalence of certain weight loss drugs, which may suppress a person’s appetite and/or impact a person's preferences, may impact the demand or consumption patterns for certain of our products. New laws or regulations or changes in existing laws or regulations could adversely affect our business.
Removed
United States capital credit markets have experienced volatility, dislocations, and liquidity disruptions that caused tightened access to capital markets and other sources of funding.
Added
Our ability to meet these financial covenants can be affected by events beyond our control, and we may be unable to meet the required ratio. 15 A breach of the covenants or restrictions under the agreements governing our indebtedness could result in an event of default under the applicable indebtedness.
Removed
Capital and credit markets and the U.S. and global economies have been affected by additional volatility and negative economic conditions, including inflation, rising interest rates and lower consumer confidence, and the impacts of the ongoing conflict in Ukraine.
Added
Changes in weather conditions, natural disasters, geopolitical events, and other catastrophic events beyond our control could adversely affect our results of operations.
Removed
These events have affected and could continue to affect the credit markets and have an adverse effect on other financial markets in the United States, which may make it more difficult or costly for us to raise capital through the issuance of common stock or other equity securities.
Added
At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “anti-ESG” legislation or policies. In addition, over the years we have made public commitments regarding our intended reduction of carbon emissions and other near- and mid-term environmental sustainability goals.
Removed
There can be no assurance that future volatility or disruption in the capital and credit markets will not impair our liquidity or increase our costs of borrowing. Our business could also be negatively impacted if our suppliers or customers experience disruptions resulting from tighter capital and credit markets, or a slowdown in the general economy.
Added
See Note 7 of the Consolidated Financial Statements for additional information.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed2 unchanged
Biggest changeThe following chart lists the location and principal products produced at our production facilities as of December 31, 2022: United States: Forest Park, Georgia (Refrigerated dough) Chicago, Illinois (Pickles) Dixon, Illinois (Aseptic cheese sauces and puddings) Pecatonica, Illinois (Non-dairy powdered creamer) South Beloit, Illinois (Cookies) Cedar Rapids, Iowa (Hot cereal) New Hampton, Iowa (Non-dairy powdered creamer) Princeton, Kentucky (Crackers) Wayland, Michigan (Non-dairy powdered creamer) Lakeville, Minnesota (Bars) Cambridge, Maryland** (Broth and ready-to-drink beverages) Tonawanda, New York (Cookies) Faison, North Carolina (Pickles) Hanover, Pennsylvania (Pretzels) Lancaster, Pennsylvania (Pretzels) Womelsdorf, Pennsylvania (Candy) Carrollton, Texas (Refrigerated dough) Dallas, Texas* (Single serve hot beverages) Ogden, Utah* (In-store bakery and frozen griddle) Green Bay, Wisconsin (Pickles) Manawa, Wisconsin (Powdered drinks, single serve hot beverages and hot cereals) Canada: Delta, British Columbia* (Specialty tea) Brantford, Ontario (Frozen griddle) Georgetown, Ontario (Crackers) Kitchener, Ontario (Crackers) Richmond Hill, Ontario* (Broth) *The Company leases these facilities. **Subsequent to December 31, 2022, the Company purchased the Cambridge, Maryland facility.
Biggest changeThe following chart lists the location and principal products produced at our production facilities as of December 31, 2023: United States: Forest Park, Georgia (Refrigerated dough) Chicago, Illinois (Pickles) Dixon, Illinois (Cheese and pudding) Pecatonica, Illinois (Non-dairy creamer) South Beloit, Illinois (Cookies) Cedar Rapids, Iowa (Hot cereal) New Hampton, Iowa (Non-dairy creamer) Princeton, Kentucky (Crackers) Cambridge, Maryland (Broths/stocks and ready-to-drink beverages) Wayland, Michigan (Non-dairy creamer) Tonawanda, New York (Cookies) Faison, North Carolina (Pickles) Hanover, Pennsylvania (Pretzels) Lancaster, Pennsylvania (Pretzels) Womelsdorf, Pennsylvania (Candy) Sioux Falls, South Dakota* (Pretzels) Carrollton, Texas (Refrigerated dough) Northlake, Texas (Coffee) Ogden, Utah* (In-store bakery and frozen griddle) Green Bay, Wisconsin (Pickles) Manawa, Wisconsin (Powdered beverages and other blends, coffee, and hot cereal) Canada: Delta, British Columbia* (Tea) Brantford, Ontario (Frozen griddle) Georgetown, Ontario (Crackers) Kitchener, Ontario (Crackers) Richmond Hill, Ontario* (Broths/stocks) *The Company leases these facilities.
Removed
The Company was leasing this facility as of December 31, 2022. 19

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−0 removed3 unchanged
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers On November 2, 2017, the Company announced that the Board of Directors adopted a stock repurchase program. The stock repurchase program authorizes the Company to repurchase up to $400 million of the Company’s common stock at any time, or from time to time.
Biggest changeThe declaration of dividends is at the discretion of our Board of Directors. 20 Purchases of Equity Securities by the Issuer and Affiliated Purchasers On November 2, 2017, the Company announced that the Board of Directors adopted a stock repurchase program.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "THS." On January 31, 2023, there were 1,755 shareholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "THS." On January 31, 2024, there were 1,622 shareholders of record of our common stock.
We have not paid any cash dividends on the common stock and currently anticipate that, for the foreseeable future, we will retain any earnings for the development of our business. Accordingly, no dividends are expected to be declared or paid on the common stock. The declaration of dividends is at the discretion of our Board of Directors.
We have not paid any cash dividends on the common stock and currently anticipate that, for the foreseeable future, we will retain any earnings for the development of our business. Accordingly, no dividends are expected to be declared or paid on the common stock.
The Company has the ability to make discretionary repurchases up to an annual cap of $150 million under the $400 million total authorization of which $266.7 million remained available under the stock repurchase program. Any shares repurchased will be held as treasury stock. There were no shares repurchased during the year ended December 31, 2022.
The Company has the ability to make discretionary repurchases up to an annual cap of $150 million under the $400 million total authorization of which $166.7 million remained available under the stock repurchase program. Any shares repurchased will be held as treasury stock.
The graph assumes an investment of $100 on December 31, 2017 in each of TreeHouse Foods’ common stock, the stocks comprising the S&P SmallCap 600 Index, and the S&P Food & Beverage Select Index. 20 Comparison of Cumulative Total Return of $100 among TreeHouse Foods, Inc., S&P SmallCap 600 Index, S&P MidCap 400 Index, and the S&P Food & Beverage Select Index Base Period INDEXED RETURNS Years Ending Company Name/Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 TreeHouse Foods, Inc. 100 $ 102.53 $ 98.06 $ 85.91 $ 81.95 $ 99.84 S&P SmallCap 600 Index 100 91.52 112.37 125.05 158.59 133.06 S&P Food & Beverage Select Index 100 90.80 111.06 133.00 153.96 152.01 The performance graph and related table above is furnished and not filed for purposes of Section 18 of the Exchange Act and will not be incorporated by reference into any registration statement filed under the 1933 Act unless specifically identified therein as being incorporated therein by reference.
The graph assumes an investment of $100 on December 31, 2018 in each of TreeHouse Foods’ common stock, the stocks comprising the S&P SmallCap 600 Index, and the S&P Food & Beverage Select Index. 21 Comparison of Cumulative Total Return of $100 among TreeHouse Foods, Inc., S&P SmallCap 600 Index, and the S&P Food & Beverage Select Index Base Period INDEXED RETURNS Years Ending Company Name/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 TreeHouse Foods, Inc. 100 $ 95.64 $ 83.79 $ 79.93 $ 97.38 $ 81.74 S&P SmallCap 600 Index 100 122.78 136.64 173.29 145.39 168.73 S&P Food & Beverage Select Index 100 122.31 146.48 169.56 167.41 171.01 The performance graph and related table above is furnished and not filed for purposes of Section 18 of the Exchange Act and will not be incorporated by reference into any registration statement filed under the 1933 Act unless specifically identified therein as being incorporated therein by reference.
Performance Graph The price information reflected for our common stock in the following performance graph and accompanying table represents the closing sales prices of the common stock for the period from December 31, 2017 through December 31, 2022.
Weighted average price per share excludes any excise tax imposed on stock repurchases as part of the Inflation Reduction Act of 2022. Performance Graph The price information reflected for our common stock in the following performance graph and accompanying table represents the closing sales prices of the common stock for the period from December 31, 2018 through December 31, 2023.
Added
The stock repurchase program authorizes the Company to repurchase up to $400 million of the Company’s common stock at any time, or from time to time.
Added
There were 2.3 million shares of common stock repurchased for a total of $100.0 million during the year ended December 31, 2023.
Added
The following table presents the total number of shares of common stock purchased during the quarter ended December 31, 2023, the average price paid per share, the number of shares that were purchased as part of a publicly announced repurchase program, and the approximate dollar value of the maximum number of shares that may yet be purchased under the share repurchase program: Period Weighted Average Price Paid per Share Total Number of Shares Purchased Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Maximum Number of Shares that may not yet be Purchased under the Program (In millions) October 1 through October 31, 2023 $ — — — $ 216.7 November 1 through November 30, 2023 40.07 0.8 0.8 182.5 December 1 through December 31, 2023 41.72 0.4 0.4 166.7 For the Quarter Ended December 31, 2023 $ 40.58 1.2 1.2 $ 166.7 For the quarter ended December 31, 2023, the Company repurchased approximately 1.2 million shares of common stock for a total of $50.0 million, excluding excise tax.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+54 added−67 removed38 unchanged
Biggest changeAdjusted net income 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 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 from continuing operations section above. 40 The following table reconciles the Company’s net loss from continuing operations as presented in the Consolidated Statements of Operations, the relevant GAAP measure, to Adjusted net income from continuing operations, Adjusted EBIT from continuing operations, Adjusted EBITDA from continuing operations, and Adjusted EBITDAS from continuing operations for the years ended December 31, 2022, 2021, and 2020: Year Ended December 31, 2022 2021 2020 (unaudited in millions) Net loss from continuing operations (GAAP) $ (16.1) $ (80.9) $ (54.8) Growth, reinvestment, restructuring programs & other (1) 85.1 84.2 70.6 Central services and conveyed employee costs (2) 65.0 81.6 86.0 Divestiture, acquisition, integration, and related costs (3) 13.8 4.0 2.0 Loss on extinguishment of debt (4) 4.5 14.4 1.2 Shareholder activism (5) 2.7 4.6 — Foreign currency loss (gain) on remeasurement of intercompany notes (6) 0.8 (0.5) (0.2) Litigation matter (7) 0.4 — 9.0 Mark-to-market adjustments (8) (75.1) (37.3) 30.0 Tax indemnification (9) — 1.6 3.7 COVID-19 (10) — 14.5 16.3 Impairment (11) — 9.2 — Change in regulatory requirements (12) — (0.1) 1.0 Executive management transition (13) — — 0.4 Less: Taxes on adjusting items (15.0) (42.2) (62.2) Adjusted net income from continuing operations (Non-GAAP) 66.1 53.1 103.0 Interest expense 69.9 72.1 92.6 Interest income (excluding COVID-19 interest income adjustments) (15.5) (4.7) (4.1) Income taxes (excluding COVID-19 income tax adjustments) 8.3 (23.2) (31.3) Add: Taxes on adjusting items 15.0 42.2 62.2 Adjusted EBIT from continuing operations (Non-GAAP) 143.8 139.5 222.4 Depreciation and amortization (14) 143.2 148.8 148.1 Adjusted EBITDA from continuing operations (Non-GAAP) 287.0 288.3 370.5 Stock-based compensation expense (15) 13.3 11.7 22.4 Adjusted EBITDAS from continuing operations (Non-GAAP) $ 300.3 $ 300.0 $ 392.9 Net loss margin from continuing operations (0.5) % (2.7) % (1.8) % Adjusted net income margin from continuing operations 1.9 % 1.8 % 3.4 % Adjusted EBIT margin from continuing operations 4.2 % 4.7 % 7.4 % Adjusted EBITDA margin from continuing operations 8.3 % 9.8 % 12.4 % Adjusted EBITDAS margin from continuing operations 8.7 % 10.2 % 13.1 % 41 Location in Consolidated Statements of Operations Year Ended December 31, 2022 2021 2020 (unaudited in millions) (1) Growth, reinvestment, restructuring programs & other Other operating expense, net $ 84.6 $ 84.2 $ 68.9 Cost of sales 0.5 — 0.8 General and administrative — — 0.9 (2) Central services and conveyed employee costs General and administrative 50.1 63.5 66.5 Cost of sales 14.9 18.1 19.5 (3) Divestiture, acquisition, integration, and related costs Cost of sales 1.6 0.5 0.1 General and administrative 19.1 3.4 1.5 Other operating expense, net (6.9) 0.1 0.4 (4) Loss on extinguishment of debt Loss on extinguishment of debt 4.5 14.4 1.2 (5) Shareholder activism General and administrative 2.7 4.6 — (6) Foreign currency loss (gain) on remeasurement of intercompany notes Loss (gain) on foreign currency exchange 0.8 (0.5) (0.2) (7) Litigation matter General and administrative 0.4 — 9.0 (8) Mark-to-market adjustments Other (income) expense, net (75.1) (37.3) 30.0 (9) Tax indemnification Other (income) expense, net — 1.6 3.7 (10) COVID-19 Net sales — — 1.0 Cost of sales — 12.6 42.4 Selling and distribution — — 1.6 General and administrative — — 1.8 Interest income — — (0.7) Income tax benefit — 1.9 (29.8) (11) Impairment Asset impairment — 9.2 — (12) Change in regulatory requirements Cost of sales — (0.1) (0.1) Selling and distribution — — 1.0 General and administrative — — 0.1 (13) Executive management transition General and administrative — — 0.4 (14) Depreciation included as an adjusting item Cost of sales 0.6 — 0.2 (15) Stock-based compensation expense included as an adjusting item Other operating expense, net 6.6 2.5 2.0 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 Consolidated Statements of Cash Flows, we also measure free cash flow from continuing operations (a Non-GAAP measure) which represents net cash provided by operating activities from continuing operations less capital expenditures.
Biggest changeAdjusted diluted EPS reflects adjustments to GAAP earnings (loss) per diluted share to identify items that, in management's judgment, significantly affect the assessment of earnings results between periods. 39 The following table reconciles the Company's net income (loss) from continuing operations as presented in the Consolidated Statements of Operations, the relevant GAAP measure, to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 (unaudited, in millions) Net income (loss) from continuing operations (GAAP) $ 59.0 $ (9.2) $ (68.6) Interest expense 74.8 69.9 72.1 Interest income (40.1) (15.5) (4.7) Income tax expense (benefit) 24.4 10.3 (17.6) Depreciation and amortization 141.9 139.6 143.4 EBITDA from continuing operations (Non-GAAP) 260.0 195.1 124.6 Growth, reinvestment, and restructuring programs, excluding accelerated depreciation (1) 46.1 84.5 83.4 Product recall and related costs (2) 29.2 — — Divestiture, acquisition, integration, and related costs (3) 16.7 13.8 4.0 Mark-to-market adjustments (4) 15.1 (75.1) (37.3) Shareholder activism (5) 0.3 2.7 4.6 Tax indemnification (6) 0.2 — 1.6 Foreign currency (gain) loss on remeasurement of intercompany notes (7) (1.7) 0.8 (0.5) Central services and conveyed employee costs (8) — 65.0 81.6 Loss on extinguishment of debt (9) — 4.5 14.4 Litigation matter (10) — 0.4 — COVID-19, excluding income tax adjustments (11) — — 12.4 Change in regulatory requirements (12) — — (0.1) Adjusted EBITDA from continuing operations (Non-GAAP) $ 365.9 $ 291.7 $ 288.7 % of net sales Net income (loss) from continuing operations margin 1.7 % (0.3) % (2.4) % EBITDA from continuing operations margin 7.6 % 5.9 % 4.4 % Adjusted EBITDA from continuing operations margin 10.7 % 8.8 % 10.3 % (1) 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.
The increase in cash provided in 2022 is primarily due the proceeds received of $537.9 million from the completion of the sale of a significant portion of the Meal Preparation business on October 3, 2022.
The increase in cash provided in 2022 is primarily due the cash proceeds received of $537.9 million from the completion of the sale of a significant portion of the Meal Preparation business on October 3, 2022.
The non-cash unrealized changes in fair value recognized in Other (income) expense, net within the 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 21 to our Consolidated Financial Statements for additional information.
The non-cash unrealized changes in fair value recognized in Other expense (income), net, within the 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 21 to our Consolidated Financial Statements for additional information.
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 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.
Impairment charges are measured by comparing the carrying values of the asset groups to their estimated fair values. The fair value of these assets are based on expected future discounted cash flows using Level 3 inputs. Long-lived assets held for sale are reported at the lower of the carrying amount or fair value less the cost to sell.
Impairment charges are measured by comparing the carrying values of the asset groups to their estimated fair values. The fair value of these assets is based on expected future discounted cash flows using Level 3 inputs. Long-lived assets held for sale are reported at the lower of the carrying amount or fair value less the cost to sell.
Therefore, we believe that only significant changes in the assumptions would result in an impairment of any trademark. Income Taxes — Deferred taxes are recognized for future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse.
Therefore, we believe that only significant changes in the assumptions would result in an impairment of any trademark. 37 Income Taxes — Deferred taxes are recognized for future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse.
Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available. The Company developed our estimates using the best information available at the time. Discount rates selected for each reporting unit approximated the total Company discount rate.
Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available. The Company developed our estimates using the best information available at the time. Discount rates selected for the reporting unit approximated the total Company discount rate.
Future business results may affect deferred tax liabilities or the valuation of deferred tax assets over time. 36 Employee Benefit Plan Costs — We provide a range of benefits to our employees, including pension and postretirement benefits to our eligible employees and retirees.
Future business results may affect deferred tax liabilities or the valuation of deferred tax assets over time. Employee Benefit Plan Costs — We provide a range of benefits to our employees, including pension and postretirement benefits to our eligible employees and retirees.
See Note 13 to our Consolidated Financial Statements for information on our debt obligations. 32 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.
See Note 13 to our Consolidated Financial Statements for information on our debt obligations. 33 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.
The increase in cash used is primarily due the prepayment of 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 increase in cash used is primarily due to the prepayment of debt of $500.0 million, which consisted of $174.8 million on Term Loan A and $325.2 million on Term Loan A-1.
We reviewed our indefinite lived intangible assets, which consist of trademarks totaling $6.0 million as of December 31, 2022, using the relief from royalty method. Significant assumptions include the royalty rates, growth, margins, and discount rates. Our assumptions were based on historical performance and management estimates of future performance, as well as available data on licenses of similar products.
We reviewed our indefinite lived intangible assets, which consist of trademarks totaling $6.0 million as of December 31, 2023, using the relief from royalty method. Significant assumptions include the royalty rates, growth, margins, and discount rates. Our assumptions were based on historical performance and management estimates of future performance, as well as available data on licenses of similar products.
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. We are in compliance with all applicable debt covenants as of December 31, 2022.
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. We are in compliance with all applicable debt covenants as of December 31, 2023.
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.
EBITDA from continuing operations, and adjusted EBITDA 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview 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 years ended December 31, 2022, 2021, and 2020.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview 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 years ended December 31, 2023, 2022, and 2021.
This was partially offset by non-recurring proceeds received of $88.0 million from the completion of the sale of the RTE Cereal business on June 1, 2021. Additionally, the increase was partially offset by lower cash earnings from the Meal Preparation business, which reflects the impact of commodity and freight cost inflation.
This was partially offset by non-recurring proceeds received of $88.0 million from the completion of the sale of the RTE Cereal business on June 1, 2021. Additionally, the increase was partially offset by lower cash earnings from the Meal Preparation and Snack Bars businesses, which reflects the impact of commodity and freight cost inflation.
Income Taxes — Income taxes were recognized at an effective rate of (106.4)% in 2022 compared to 20.8% in 2021. 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 and a change in the tax deductible stock-based compensation.
Income Taxes — Income taxes were recognized at an effective rate of 936.4% in 2022 compared to 20.4% in 2021. 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 and a change in the tax deductible stock-based compensation.
Refer to Note 7 of our Consolidated Financial Statements for additional details. 28 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.
Refer to Note 7 of our Consolidated Financial Statements for additional details. 30 Liquidity and Capital Resources Management assesses the Company's liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities.
Gross Profit — Gross profit as a percentage of net sales was 14.9% for the year ended December 31, 2022 compared to 15.8% for the year ended December 31, 2021, a decrease of 0.9 percentage points. The decrease is primarily due to incremental costs related to labor and supply chain disruption as a result of the macro environment.
Gross Profit — Gross profit as a percentage of net sales was 15.8% for the year ended December 31, 2022 compared to 16.8% for the year ended December 31, 2021, a decrease of 1.0 percentage points. The decrease is primarily due to incremental costs related to labor and supply chain disruption as a result of the macro environment.
The Company completed its annual goodwill and intangible asset impairment analysis as of December 31, 2022. Our assessment did not result in an impairment. Our analysis employed the use of an income approach, corroborated by the market approach. The Company believes the income approach is the most reliable indicator of the fair value of the reporting unit.
The Company completed its annual goodwill and indefinite lived intangible asset impairment analysis as of December 31, 2023. Our assessment did not result in an impairment. Our analysis employed the use of an income approach, corroborated by the market approach. The Company believes the income approach is the most reliable indicator of the fair value of the reporting unit.
Changes in our estimates or any of our other assumptions used in our analysis could result in a different conclusion. Our testing of our trademarks indicated that the implied fair value was significantly in excess of the carrying values. The fair values of our trademarks exceed book value by a minimum of 116% as of December 31, 2022.
Changes in our estimates or any of our other assumptions used in our analysis could result in a different conclusion. Our testing of our trademarks indicated that the implied fair value was significantly in excess of the carrying values. The fair values of our trademarks exceed book value by a minimum of 84% as of December 31, 2023.
(2) 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.
(8) As a result of the sale of a significant portion of the Meal Preparation business during the fourth quarter of 2022, 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.
See Note 20 to our Consolidated Financial Statements for more information about the Company’s commitments and contingent obligations. 34 Capital Expenditures We continue to make investments in property, plant, and equipment and software for our business offices, manufacturing, and distribution facilities. Our preliminary estimate of capital expenditures for 2023 is approximately $130 million.
See Note 20 to our Consolidated Financial Statements for more information about the Company’s commitments and contingent obligations. Capital Expenditures We continue to make investments in property, plant, and equipment and software for our business offices, manufacturing, and distribution facilities. Our preliminary estimate of capital expenditures for 2024 is approximately $145 million.
These estimates are made using various techniques including historical data on performance of similar promotional programs. Differences between estimated expense and actual redemptions are immaterial and recognized as a change in management estimate in a subsequent period. This allowance was $19.5 million and $21.8 million at December 31, 2022 and 2021, respectively.
These estimates are made using various techniques including historical data on performance of similar promotional programs. Differences between estimated expense and actual redemptions are immaterial and recognized as a change in management estimate in a subsequent period. This allowance was $20.2 million and $19.5 million at December 31, 2023 and 2022, respectively.
The increase in cash used was primarily attributable to increased investment in inventories in connection with actions taken to improve service levels as well as commodity and freight cost inflation, which have increased receivables and inventories due to pricing actions and higher input costs. Additionally, separation costs in connection with divestiture activities contributed to cash used.
The increase in cash used was primarily attributable to increased investment in inventories in connection with actions taken to improve service levels as well as commodity and freight cost inflation, which have increased receivables and inventories due to pricing actions and higher input costs.
The projected benefit obligation was $17.8 million and $23.3 million at December 31, 2022 and 2021, respectively, for our postretirement benefit plans. See Note 18 to our Consolidated Financial Statements for more information regarding our employee pension and retirement benefit plans. Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements.
The projected benefit obligation was $15.1 million and $17.8 million at December 31, 2023 and 2022, respectively, for our postretirement benefit plans. See Note 18 to our Consolidated Financial Statements for more information regarding our employee pension and retirement benefit plans. Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements.
For the years ended December 31, 2022, 2021, and 2020, central service costs were approximately $40.2 million, $53.7 million, and $53.6 million, 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 in the fourth quarter of 2022.
For the years ended December 31, 2022 and 2021, central service costs were approximately $40.2 million and $53.7 million, 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.
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 $152.9 million was available under the Receivables Sales Program limit as of December 31, 2022.
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 $156.2 million was available under the Receivables Sales Program limit as of December 31, 2023.
The decrease is primarily due to an expected loss on disposal of $128.5 million as a result of the completion of the sale of a significant portion of the Meal Preparation business on October 3, 2022, a decrease in gross margin of $81.0 million, and the completion of the sale of the Ready-to-eat Cereal business on June 1, 2021, which resulted in a non-recurring pre-tax gain of $18.4 million.
The decrease is primarily due to an expected loss on disposal of $128.5 million as a result of the completion of the sale of the Meal Preparation Business on October 3, 2022, a decrease in gross margin of $83.6 million, and the completion of the sale of the RTE Cereal business on June 1, 2021, which resulted in a non-recurring pre-tax gain of $18.4 million.
Prior to the sale of the RTE Cereal business on June 1, 2021, there were expected disposal loss adjustments of $0.3 million and $51.2 million recognized as asset impairment charges during the years ended December 31, 2021 and 2020, respectively, within Net (loss) income from discontinued operations as the business was held for sale.
The fair value was determined based on the consideration transferred less costs to sell. 36 Prior to the sale of the RTE Cereal business on June 1, 2021, there were expected disposal loss adjustments of $0.3 million and $51.2 million recognized as asset impairment charges during the years ended December 31, 2021 and 2020, respectively, within Net (loss) income from discontinued operations as the RTE Cereal business was held for sale.
The Company recognized deferred income of $9.0 million related to the TSA Credit taken to cover the initial TSA set-up, which included IT migration costs, during the year ended December 31, 2022. Refer to Note 7 to our Consolidated Financial Statements for additional information.
The Company recognized deferred income of $9.0 million related to the TSA Credit taken to cover the initial TSA set-up, which included IT migration costs, during the year ended December 31, 2022. Refer to Note 7 to our Consolidated Financial Statements for additional information. (4) The Company's derivative contracts are marked-to-market each period.
If the discount rate of each plan were one percent lower, the pension plan liability would have been approximately 10.0%, or $25.2 million, higher as of December 31, 2022. The projected benefit obligation was $254.8 million and $330.9 million at December 31, 2022 and 2021, respectively, for our pension benefit plans.
If the discount rate of each plan were one percent lower, the pension plan liability would have been approximately 10.8%, or $21.7 million, higher as of December 31, 2023. The projected benefit obligation was $216.9 million and $254.8 million at December 31, 2023 and 2022, respectively, for our pension benefit plans.
Expected Loss on Disposal of a Business — On August 10, 2022, the Company announced that it had entered into a Stock Purchase Agreement with two entities affiliated with Investindustrial.
On August 10, 2022, the Company announced that it had entered into a Stock Purchase Agreement with two entities affiliated with Investindustrial.
(2) Includes an amount due from Non-Guarantor Subsidiaries of $13.2 million as of December 31, 2022. 33 Cash Requirements Our cash requirements within the next twelve months include working capital requirements, interest payments, and capital expenditures.
(2) Includes an amount due from Non-Guarantor Subsidiaries of $42.3 million as of December 31, 2023. 34 Cash Requirements Our cash requirements within the next twelve months include working capital requirements, interest payments, and capital expenditures.
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.
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.
Estimated future deferred compensation payments as of December 31, 2022 were $6.3 million (with $1.1 million due in 2023). • Unrecognized tax benefits – See Note 12 to our Consolidated Financial Statements for information on our unrecognized tax benefits and the amount and timing of future payments. • Other liabilities – Other liabilities include obligations associated with certain employee benefit programs, employee health care, workers' compensation claims, other casualty losses, in addition to contingent liabilities related to the ordinary course of litigation and investigation, and various other long-term liabilities, all of which have some inherent uncertainty as to the amount and timing of payments and were reflected on our Consolidated Balance Sheet as of December 31, 2022.
Our exit or disposal cost obligations primarily consist of severance and retention obligations. • Unrecognized tax benefits – See Note 12 to our Consolidated Financial Statements for information on our unrecognized tax benefits and the amount and timing of future payments. • Other liabilities – Other liabilities include obligations associated with certain employee benefit programs, employee health care, workers' compensation claims, other casualty losses, in addition to contingent liabilities related to the ordinary course of litigation and investigation, and various other long-term liabilities, all of which have some inherent uncertainty as to the amount and timing of payments and were reflected on our Consolidated Balance Sheet as of December 31, 2023.
The increase is primarily attributable to higher freight costs of $18.7 million due to freight cost inflation and lower utilization of full truck load shipments due to supply chain disruption. Additionally, higher employee compensation costs to address retention and labor shortages contributed to the increase.
The increase is primarily attributable to higher freight costs of $18.5 million due to freight cost inflation and lower utilization of full truck load shipments due to supply chain disruption. Additionally, higher employee compensation costs to address retention and labor shortages contributed to the increase, which was partially offset by TSA income.
Additionally, offsetting the increase in cash used was a non-recurring of a cash outflow of $25.0 million common stock repurchases during 2021. Cash Flows From Discontinued Operations Net cash provided by discontinued operations was $432.6 million in 2022 compared to cash provided by discontinued operations of $235.7 million in 2021, an increase in cash provided of $196.9 million.
Additionally, offsetting the increase in cash used was a non-recurring cash outflow of $25.0 million common stock repurchases during 2021. Cash Flows From Discontinued Operations Net cash provided by discontinued operations was $417.4 million in 2022 compared to $232.7 million in 2021, an increase in cash provided of $184.7 million.
We used a discount rate for each plan to determine our estimated future benefit obligations, and our weighted average discount rate was 5.16% at December 31, 2022. If the discount rate of each plan were one percent higher, the pension plan liability would have been approximately 8.5%, or $21.4 million, lower as of December 31, 2022.
We used a discount rate for each plan to determine our estimated future benefit obligations, and our weighted average discount rate was 4.96% at December 31, 2023. If the discount rate of each plan were one percent higher, the pension plan liability would have been approximately 9.1%, or $18.3 million, lower as of December 31, 2023.
Goodwill and Indefinite Lived Intangible Assets — Goodwill and indefinite lived intangible assets totaled $1,823.6 million and $1,827.9 million as of December 31, 2022 and 2021, respectively, resulting primarily from acquisitions.
Goodwill and Indefinite Lived Intangible Assets — Goodwill and indefinite lived intangible assets totaled $1,830.7 million and $1,823.6 million as of December 31, 2023 and 2022, respectively, resulting primarily from acquisitions.
Minimum amounts committed to as of December 31, 2022 were $609.6 million (with $576.5 million due in 2023). • Pension and other postretirement benefit obligations – Future payments related to pension and postretirement benefits are estimated by an actuarial valuation.
Minimum amounts committed to as of December 31, 2023 were $349.1 million (with $349.0 million due in 2024). • Pension and other postretirement benefit obligations – Future payments related to pension and postretirement benefits are estimated by an actuarial valuation.
During 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 2024 Notes Redemption and Credit Agreement refinancing.
During 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 2024 Notes Redemption and Credit Agreement refinancing. Refer to Note 13 to our Consolidated Financial Statements for additional information.
The change in net sales from 2021 to 2022 was due to the following: Dollars Percent (In millions) 2021 Net sales $ 2,945.9 Pricing 533.3 18.1 % Volume/mix (19.5) (0.7) Foreign currency (5.7) (0.2) 2022 Net sales $ 3,454.0 17.2 % Foreign currency 0.2 Percent change in organic net sales (1) 17.4 % (1) Organic net sales is a Non-GAAP financial measure.
The change in net sales from 2021 to 2022 was due to the following: Dollars Percent (In millions) 2021 Net Sales $ 2,814.3 Pricing 517.6 18.4 % Volume/mix (29.2) (1.0) Foreign currency (5.6) (0.2) 2022 Net Sales $ 3,297.1 17.2 % Foreign currency 0.2 Percent change in organic net sales (1) 17.4 % (1) Organic net sales is a Non-GAAP financial measure.
Estimated future interest payments on the Company’s debt are expected to be $337.3 million (with $76.3 million expected in 2023) based on the interest rates at December 31, 2022. Additionally, the Company has entered into interest rate swap agreements to lock into a fixed LIBOR interest rate base.
Estimated future interest payments on the Company’s debt are expected to be $272.2 million (with $82.7 million expected in 2024) based on the interest rates at December 31, 2023. Additionally, the Company has entered into interest rate swap agreements to lock into a fixed Term SOFR interest rate base.
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.
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. Refer to Note 7 to our Consolidated Financial Statements for additional information.
Under the CARES Act, we deferred the payment of $21.7 million in payroll taxes in 2020, with $12.3 million paid in 2021 and 2022, and the remaining $9.4 million to be paid in the first quarter of 2023.
We are in compliance with the terms of the Revolving Credit Facility and expect to meet foreseeable financial requirements. CARES Act Under the CARES Act, we deferred the payment of $21.7 million in payroll taxes in 2020, with $12.3 million paid in 2021 and 2022, and the remaining $9.4 million paid in the first quarter of 2023.
This should be read in conjunction with the Consolidated Financial Statements and the Notes to those 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.
This should be read in conjunction with the Consolidated Financial Statements and the Notes to those 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 Information for a discussion of the uncertainties, risks, and assumptions associated with these statements.
The expected loss on disposal was calculated as the difference between the fair value of the disposal group and the carrying value of the associated assets, including the related goodwill. The fair value was determined based on the consideration transferred less costs to sell.
The loss on disposal was calculated as the difference between the fair value of the disposal group and the carrying value of the associated assets, including the related goodwill.
Discontinued Operations Discontinued Operations — Net (loss) income from discontinued operations was $68.4 million of income for the year ended December 31, 2021 compared to $68.6 million of income for the year ended December 31, 2020, a decrease of $0.2 million.
Discontinued Operations Discontinued Operations — Net (loss) income from discontinued operations was $137.1 million loss for the year ended December 31, 2022 compared to $56.1 million of income for the year ended December 31, 2021, a decrease of $193.2 million.
(4) During 2022, the Company incurred a loss on extinguishment of debt totaling $4.5 million representing the write-off of deferred financing costs in connection with the debt prepayment and revolving credit commitment reduction in October 2022.
For the years ended December 31, 2022 and 2021, conveyed employee costs were approximately $24.8 million and $27.9 million, respectively. (9) During 2022, the Company incurred a loss on extinguishment of debt totaling $4.5 million representing the write-off of deferred financing costs in connection with the debt prepayment and revolving credit commitment reduction in October 2022.
These costs were historically incurred by TreeHouse prior to the completion of the sale in the fourth quarter of 2022 and include employee and non-employee expenses to support the services.
These costs were historically incurred by TreeHouse and include employee and non-employee expenses to support the services.
Partially offsetting the decrease in income was lower operating expenses due to the fact that 2022 was not a full year of these costs. Refer to Note 7 of our Consolidated Financial Statements for additional details.
Partially offsetting the decrease in income was lower operating expenses due to the fact that 2022 did not incur a full year of these costs.
Refer to Note 3 of the Consolidated Financial Statements for additional information.
Refer to Note 7 to our Consolidated Financial Statements for additional information.
TreeHouse Foods, Inc. and Guarantor Subsidiaries Summarized Statement of Operations Year Ended December 31, 2022 (In millions) Net sales $ 3,398.8 Gross profit (1) 492.8 Net income from continuing operations 40.4 Net loss from discontinued operations (136.3) Net loss (95.9) TreeHouse Foods, Inc. and Guarantor Subsidiaries Summarized Balance Sheet December 31, 2022 (In millions) Current assets $ 725.0 Noncurrent assets 3,215.3 Current liabilities 742.3 Noncurrent liabilities (2) 1,665.2 (1) During the year ended December 31, 2022, TreeHouse Foods, Inc. and Guarantor Subsidiaries recorded $82.3 million of net sales to the Non-Guarantor Subsidiaries and $271.8 million of purchases from the Non-Guarantor Subsidiaries.
TreeHouse Foods, Inc. and Guarantor Subsidiaries Summarized Statement of Operations Year Ended December 31, 2023 (In millions) Net sales $ 3,324.5 Gross profit (1) 542.4 Net income from continuing operations 57.8 Net loss from discontinued operations (5.9) Net income 51.9 TreeHouse Foods, Inc. and Guarantor Subsidiaries Summarized Balance Sheet December 31, 2023 (In millions) Current assets $ 946.3 Noncurrent assets 2,829.5 Current liabilities 627.2 Noncurrent liabilities (2) 1,642.1 (1) During the year ended December 31, 2023, TreeHouse Foods, Inc. and Guarantor Subsidiaries recorded $32.9 million of net sales to the Non-Guarantor Subsidiaries and $281.5 million of purchases from the Non-Guarantor Subsidiaries.
Refer to Note 7 to our Consolidated Financial Statements for additional information. 31 Debt Obligations As of December 31, 2022, $482.3 million of the aggregate commitment of $500.0 million of the Revolving Credit Facility was available. Under the Second Amended and Restated Credit Agreement (the "Credit Agreement"), the Revolving Credit Facility matures on March 26, 2026.
Debt Obligations As of December 31, 2023, $471.0 million of the aggregate commitment of $500.0 million of the Revolving Credit Facility was available. Under the Second Amended and Restated Credit Agreement (the "Credit Agreement"), the Revolving Credit Facility matures on March 26, 2026.
In certain circumstances, however, the preparation of the Consolidated Financial Statements in conformity with GAAP requires us to use our judgment to make certain estimates and assumptions.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for the application of our judgment. In certain circumstances, however, the preparation of the Consolidated Financial Statements in conformity with GAAP requires us to use our judgment to make certain estimates and assumptions.
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. 26 Discontinued Operations Discontinued Operations — Net (loss) income from discontinued operations was a $130.2 million loss for the year ended December 31, 2022 compared to $68.4 million of income for the year ended December 31, 2021, a decrease of $198.6 million.
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.
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.
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. 38 Net Income (Loss) from Continuing Operations Margin, EBITDA from Continuing Operations, EBITDA from Continuing Operations Margin, Adjusted EBITDA from Continuing Operations, and Adjusted EBITDA from Continuing Operations Margin, Adjusting for Certain Items Affecting Comparability Net income (loss) from continuing operations margin, EBITDA from continuing operations margin, and adjusted EBITDA from continuing operations margin are defined as net income (loss) from continuing operations, EBITDA from continuing operations, and adjusted EBITDA from continuing operations as a percentage of net sales.
The change in net sales from 2020 to 2021 was due to the following: Dollars Percent (In millions) 2020 Net Sales $ 2,994.3 Volume/mix excluding divestitures (94.9) (3.2) % Pricing 59.9 2.0 Volume/mix related to divestitures (21.4) (0.7) Foreign currency 8.0 0.3 2021 Net Sales $ 2,945.9 (1.6) % Volume/mix related to divestitures 0.7 Foreign currency (0.3) Percent change in organic net sales (1) (1.2) % (1) Organic net sales is a Non-GAAP financial measure.
The change in net sales from 2022 to 2023 was due to the following: Dollars Percent (In millions) 2022 Net sales $ 3,297.1 Pricing 241.2 7.3 % Volume/mix (111.5) (3.4) Volume/mix related to acquisitions 69.1 2.1 Volume/mix impacted by supply chain disruption (59.1) (1.7) Foreign currency (5.2) (0.2) 2023 Net sales $ 3,431.6 4.1 % Volume/mix related to acquisitions (2.1) Foreign currency 0.2 Percent change in organic net sales (1) 2.2 % (1) Organic net sales is a Non-GAAP financial measure.
At December 31, 2022, we had $316.4 million outstanding under Term Loan A, $588.6 million outstanding under Term Loan A-1, $500.0 million of the 2028 Notes outstanding, and $1.2 million of finance lease obligations.
At December 31, 2023, we had $316.4 million outstanding under Term Loan A, $588.6 million outstanding under Term Loan A-1, $500.0 million of the 2028 Notes outstanding, and $0.6 million of finance lease obligations. The Company has long-term interest rate swap agreements to fix the interest rate base in order to mitigate the Company's exposure to interest rate risk.
In addition, as of December 31, 2022, there were $17.7 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. The Company’s average interest rate on debt outstanding under its Credit Agreement for the year ended December 31, 2022 was 5.53%.
In addition, as of December 31, 2023, there were $29.0 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.
On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business (the "Business") for a closing purchase price of $963.8 million, subject to customary purchase price post-closing adjustments.
On October 3, 2022, the Company completed the sale of a significant portion of the Company’s Meal Preparation business for a closing purchase price of $963.8 million, and during the second quarter of 2023, a $20.3 million adjustment to the purchase price was finalized, resulting in a final purchase price of $943.5 million.
This decrease was primarily due prepayment of 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 debt was from the cash proceeds of the sale of a significant portion of the Meal Preparation business.
The decrease in cash used is primarily due to the prepayment of debt of $500.0 million which consisted of $174.8 million on Term Loan A and $325.2 million on Term Loan A-1 in 2022. This is partially offset by the $100.0 million of share repurchases in 2023.
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 in prior periods, favorable category mix, and lower costs for purchases of personal protective equipment for employees and additional sanitation measures.
This was partially offset by the Company's pricing actions to recover commodity and freight inflation in prior periods, favorable category mix, and lower costs for purchases of personal protective equipment for employees and additional sanitation measures. 29 Total Operating Expenses — Total operating expenses were $535.0 million for the year ended December 31, 2022 compared to $515.8 million for the year ended December 31, 2021, an increase of $19.2 million.
Critical Accounting Estimates Critical accounting estimates are defined as those most important to the portrayal of a company’s financial condition and results, and require the most difficult, subjective, or complex judgments. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for the application of our judgment.
Our investments are expected to be approximately $18 million in 2024. 35 Critical Accounting Estimates Critical accounting estimates are defined as those most important to the portrayal of a company’s financial condition and results, and require the most difficult, subjective, or complex judgments.
Adjusted Earnings Per Diluted Share From Continuing Operations, Adjusting for Certain Items Affecting Comparability Adjusted earnings per diluted share from continuing operations ("adjusted diluted EPS") reflects adjustments to GAAP loss per diluted share from continuing operations to identify items that, in management’s judgment, significantly affect the assessment of earnings results between periods.
EBITDA from continuing operations represents net income (loss) from continuing operations before interest expense, interest income, income tax expense, and depreciation and amortization expense. Adjusted EBITDA from continuing operations reflects adjustments to EBITDA from continuing operations to identify items that, in management’s judgment, significantly affect the assessment of earnings results between periods.
Refer to Note 7 to our Consolidated Financial Statements for additional information. 30 Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Operating Activities From Continuing Operations Net cash provided by operating activities from continuing operations was $140.5 million in 2021 compared to $212.3 million in 2020, a decrease in cash provided of $71.8 million.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Operating Activities From Continuing Operations Net cash used by operating activities from continuing operations was $67.7 million in 2022 compared to net cash provided by operating activities from continuing operations of $141.6 million in 2021, a decrease in cash provided of $209.3 million.
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. 42 The following table reconciles cash flow (used in) provided by operating activities from continuing operations (a GAAP measure) to our free cash flow from continuing operations (a Non-GAAP measure): Year Ended December 31, 2022 2021 2020 (In millions) Cash flow (used in) provided by operating activities from continuing operations $ (81.6) $ 140.5 $ 212.3 Less: Capital expenditures (94.8) (86.1) (84.2) Free cash flow from continuing operations $ (176.4) $ 54.4 $ 128.1 43
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.
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. 29 The following table is derived from our Consolidated Statement of Cash Flows: Year Ended December 31, 2022 2021 2020 (In millions) Net Cash Flows Provided By (Used In): Operating activities of continuing operations $ (81.6) $ 140.5 $ 212.3 Investing activities of continuing operations (90.0) (68.5) (69.7) Financing activities of continuing operations (522.4) (361.9) 74.3 Cash flows from discontinued operations 432.6 235.7 (58.6) Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Operating Activities From Continuing Operations Net cash used in operating activities from continuing operations was $81.6 million in 2022 compared to net cash provided by operating activities from continuing operations of $140.5 million in 2021, a decrease of $222.1 million.
Cash Flow The following table is derived from our Consolidated Statements of Cash Flows: Year Ended December 31, 2023 2022 2021 (In millions) Net Cash Flows Provided By (Used In): Operating activities of continuing operations $ 157.3 $ (67.7) $ 141.6 Investing activities of continuing operations (241.4) (88.7) (66.6) Financing activities of continuing operations (107.5) (522.4) (361.9) Cash flows from discontinued operations 468.1 417.4 232.7 31 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Operating Activities From Continuing Operations Net cash provided by operating activities from continuing operations was $157.3 million in 2023 compared to net cash used in operating activities from continuing operations of $67.7 million in 2022, an increase of $225.0 million in cash provided.
This was partially offset by TSA income and a non-recurring non-cash impairment charge of $9.2 million related to the Bars asset group in 2021. Total Other (Income) Expense — Total other expense of $42.0 million in 2021 decreased by $55.7 million to be total other income of $13.7 million in 2022.
Total Other (Income) Expense — Total other expense of $42.0 million in 2021 decreased by $55.7 million to be total other income of $13.7 million in 2022.
Investing Activities From Continuing Operations Net cash used in investing activities from continuing operations was $90.0 million in 2022 compared to $68.5 million in 2021, an increase in cash used of $21.5 million.
Additionally, separation costs in connection with divestiture activities contributed to cash used. 32 Investing Activities From Continuing Operations Net cash used in investing activities from continuing operations was $88.7 million in 2022 compared to $66.6 million in 2021, an increase in cash used of $22.1 million.
(7) During 2020, the Company recognized a $9.0 million accrual related to a litigation matter challenging wage and hour practices at three former manufacturing facilities in California, and during 2022, the Company recognized $0.4 million incremental expense for the settlement payment of the $9.0 million accrual. (8) The Company's derivative contracts are marked-to-market each period.
(10) During the year ended December 31, 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. 41 (11) 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 climate-related projects are for investments in energy and water efficiency as well as waste reduction initiatives. Our investments, which have not historically been material, are expected to be approximately $10 million in 2023.
Our capital plan includes investment in climate-related projects in order to achieve our broader environmental goals. These climate-related projects are for investments in energy and water efficiency as well as waste reduction initiatives.
Total Operating Expenses — Total operating expenses were $536.4 million for the year ended December 31, 2022 compared to $526.9 million for the year ended December 31, 2021, an increase of $9.5 million.
Total Operating Expenses — Total operating expenses were $429.2 million for the year ended December 31, 2023 compared to $535.0 million for the year ended December 31, 2022, a decrease of $105.8 million.
Our planned increase in capital spending over the prior year is in accordance with our growth strategy as we reinvest in our business. Additionally, subsequent to December 31, 2022, the Company exercised a purchase option on the lease of its Cambridge, Maryland facility for $8.1 million.
Our planned increase in capital spending over the prior year is in accordance with our growth strategy as we reinvest in our business. Our capital expenditures were $140.8 million, $93.5 million, and $84.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The maturity dates for Term Loan A and Term Loan A-1 are March 26, 2028 and March 26, 2026, respectively. The remainder of the decrease in our debt was due to quarterly principal payments. Finance lease obligations decreased by $1.0 million during the year ended December 31, 2022.
Our long-term debt outstanding, including the current portion, was $1,405.6 million at December 31, 2023 and $1,406.2 million at December 31, 2022, a decrease of $0.6 million. This decrease was primarily due to a decrease of finance lease obligations by $0.6 million during the year ended December 31, 2023.
(9) 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.
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. (7) 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.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Continuing Operations Net Sales — Consolidated net sales decreased 1.6% to $2,945.9 million for the year ended December 31, 2021, compared to $2,994.3 million for the year ended December 31, 2020.
Continuing Operations Net Sales — Net sales for the year ended December 31, 2023 totaled $3,431.6 million compared to $3,297.1 million for the year ended December 31, 2022, an increase of $134.5 million, or 4.1%.
We will continue to monitor the impact of foreign currency to the Company's results of operations. 24 Results of Operations The following table presents certain information concerning our financial results, including information presented as a percentage of consolidated net sales: Year Ended December 31, 2022 2021 2020 Dollars Percent Dollars Percent Dollars Percent (Dollars in millions) Net sales $ 3,454.0 100.0 % $ 2,945.9 100.0 % $ 2,994.3 100.0 % Cost of sales 2,939.1 85.1 2,479.2 84.2 2,449.6 81.8 Gross profit 514.9 14.9 466.7 15.8 544.7 18.2 Operating expenses: Selling and distribution 219.0 6.3 200.4 6.8 196.6 6.6 General and administrative 206.6 6.0 185.3 6.3 225.9 7.5 Amortization expense 47.9 1.4 47.3 1.6 50.4 1.7 Asset impairment — — 9.2 0.3 — — Other operating expense, net 62.9 1.8 84.7 2.9 69.1 2.3 Total operating expenses 536.4 15.5 526.9 17.9 542.0 18.1 Operating (loss) income (21.5) (0.6) (60.2) (2.1) 2.7 0.1 Other (income) expense: Interest expense 69.9 2.0 72.1 2.4 92.6 3.1 Interest income (15.5) (0.4) (4.7) (0.2) (4.8) (0.2) Loss on extinguishment of debt 4.5 0.1 14.4 0.5 1.2 — Loss (gain) on foreign currency exchange 1.7 — (0.4) — (0.6) — Other (income) expense, net (74.3) (2.2) (39.4) (1.3) 30.2 1.0 Total other (income) expense (13.7) (0.5) 42.0 1.4 118.6 3.9 Loss before income taxes (7.8) (0.1) (102.2) (3.5) (115.9) (3.8) Income tax expense (benefit) 8.3 0.2 (21.3) (0.7) (61.1) (2.0) Net loss from continuing operations (16.1) (0.3) (80.9) (2.8) (54.8) (1.8) Net (loss) income from discontinued operations (130.2) (3.8) 68.4 2.3 68.6 2.3 Net (loss) income $ (146.3) (4.1) % $ (12.5) (0.5) % $ 13.8 0.5 % 25 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Continuing Operations Net Sales — Net sales for the year ended December 31, 2022 totaled $3,454.0 million compared to $2,945.9 million for the year ended December 31, 2021, an increase of $508.1 million, or 17.2%.
Refer to Note 7 of our Consolidated Financial Statements for additional details. 27 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table presents certain information concerning our financial results, including information presented as a percentage of consolidated net sales: Year Ended December 31, 2022 2021 Increase / (Decrease) (Dollars in millions, except per share amounts) Dollars Percent Dollars Percent $ Change % Change Net sales $ 3,297.1 100.0 % $ 2,814.3 100.0 % $ 482.8 17.2 % Cost of sales 2,774.7 84.2 2,342.7 83.2 432.0 18.4 Gross profit 522.4 15.8 471.6 16.8 50.8 10.8 Operating expenses: Selling and distribution 217.8 6.6 199.4 7.1 18.4 9.2 General and administrative 206.5 6.3 185.2 6.6 21.3 11.5 Amortization expense 47.9 1.5 47.3 1.7 0.6 1.3 Other operating expense, net 62.8 1.9 83.9 3.0 (21.1) (25.1) Total operating expenses 535.0 16.3 515.8 18.4 19.2 3.7 Operating loss (12.6) (0.5) (44.2) (1.6) 31.6 71.5 Other (income) expense: Interest expense 69.9 2.1 72.1 2.6 (2.2) (3.1) Interest income (15.5) (0.5) (4.7) (0.2) (10.8) (229.8) Loss on extinguishment of debt 4.5 0.1 14.4 0.5 (9.9) (68.8) Loss (gain) on foreign currency exchange 1.7 0.1 (0.4) — 2.1 525.0 Other income, net (74.3) (2.3) (39.4) (1.4) (34.9) (88.6) Total other (income) expense (13.7) (0.5) 42.0 1.5 (55.7) (132.6) Income (loss) before income taxes 1.1 — (86.2) (3.1) 87.3 101.3 Income tax expense (benefit) 10.3 0.3 (17.6) (0.6) 27.9 158.5 Net loss from continuing operations (9.2) (0.3) (68.6) (2.5) 59.4 86.6 Net (loss) income from discontinued operations (137.1) (4.2) 56.1 2.0 (193.2) (344.4) Net loss $ (146.3) (4.5) % $ (12.5) (0.5) % $ (133.8) (1,070.4) % Earnings (loss) per common share - diluted: Continuing operations $ (0.16) $ (1.23) $ 1.06 86.6 % Discontinued operations (2.45) 1.00 (3.45) (343.8) Net earnings (loss) per share diluted (1) $ (2.61) $ (0.22) $ (2.39) (1,068.8) % (1) The sum of the individual per share amounts may not add due to rounding. 28 Year Ended December 31, 2022 2021 Increase / (Decrease) (Dollars in millions, except per share amounts) Dollars Dollars $ Change % Change Other financial data: (1) EBITDA from continuing operations (Non-GAAP) $ 195.1 $ 124.6 $ 70.5 56.6 % Adjusted EBITDA from continuing operations (Non-GAAP) 291.7 288.7 3.0 1.0 Adjusted gross profit 539.4 502.5 36.9 7.3 Adjusted total operating expenses 385.0 360.8 24.2 6.7 Adjusted operating income 154.4 141.7 12.7 9.0 Adjusted total other expense (income) 56.1 63.8 (7.7) (12.1) Adjusted income tax expense 25.7 20.2 5.5 27.2 Adjusted net income from continuing operations 72.6 57.7 14.9 25.8 Adjusted diluted earnings per share from continuing operations $ 1.28 $ 1.03 $ 0.26 25.2 % (1) Other financial data included Non-GAAP financial metrics.
In October 2022, the Company reduced the revolving credit commitment from $750.0 million to an aggregate amount of $500.0 million. See Note 13 to our 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.
Revolving Credit Facility If additional borrowings are needed, approximately $471.0 million of the aggregate commitment of $500.0 million was available under the Revolving Credit Facility as of December 31, 2023. See Note 13 to our Consolidated Financial Statements for additional information regarding our Revolving Credit Facility.
Our fair value assessment indicated that the carrying value was in excess of the fair value, and an impairment of $9.2 million of property, plant, and equipment was recognized in our Bars asset group. The impairment charge is included in Asset impairment in the Consolidated Statements of Operations.
Our fair value assessment indicated that the carrying value was in excess of the fair value, and an impairment of $4.7 million within Property, plant, and equipment, net was recognized. Gain or Loss on Disposal of a Business — On September 29, 2023, the Company completed the sale of its Snack Bars business to John B.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+3 added−1 removed5 unchanged
Biggest changeThe Company has entered into $875.0 million of long-term interest rate swap agreements to lock into a fixed LIBOR interest rate base. Under the terms of the agreements, the weighted average fixed interest rate base is approximately 2.91%. The interest rate swaps mature on February 28, 2025.
Biggest changeUnder the terms of the agreements, the weighted average fixed interest rate base for the $875.0 million of interest rate swaps maturing on February 28, 2025 is approximately 2.91%, and for the $300.0 million of interest rate swaps effective February 28, 2025 through February 29, 2028, is approximately 3.99%.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to the amount of interest expense we expect to pay with respect to our Credit Agreement, which is tied to variable market rates including LIBOR and prime interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to the amount of interest expense we expect to pay with respect to our Credit Agreement, which is tied to variable market rates including SOFR and prime interest rates.
Based on our outstanding variable-rate debt balance of $905.0 million under the Credit Agreement at December 31, 2022, and by including the impact of the $875.0 million in interest rate swap agreements, each 1% rise in interest rates would increase our annual interest expense by approximately $0.3 million ($9.1 million excluding the $875.0 million in interest rate swap agreements).
Based on our outstanding variable-rate debt balance of $905.0 million under the Credit Agreement at December 31, 2023, and by including the impact of $875.0 million in effective interest rate swap agreements, each 1% rise in interest rates would increase our annual interest expense by approximately $0.3 million ($9.1 million excluding the $875.0 million in interest rate swap agreements).
Based on the weighted average rates, when using the one month LIBOR rate as of December 31, 2022 and potential changes to credit spreads due to changes in our covenant leverage ratio, the borrowing cost on the principal and revolver with the interest rate swaps would range from 4.32% to 4.82% during the life of the swap agreements.
Based on the weighted average rates, when using the one month SOFR rate as of December 31, 2023 and potential changes to credit spreads due to changes in our covenant leverage ratio, the borrowing cost on the principal and revolver with the interest rate swaps would range from 4.35% to 4.85% during the life of the swap agreements.
We believe these ingredients and packaging materials are generally available from a number of suppliers, although supply chain disruption in 2021 and 2022 has challenged and delayed timing of availability from our suppliers.
We believe these ingredients and packaging materials are generally available from a number of suppliers, although supply chain disruption in 2021 and 2022 challenged and delayed timing of availability from our suppliers. However, in 2023, our service has improved in part as a result of supply chains stabilizing.
Volatility in the cost of our raw materials and packaging supplies can adversely affect our performance, as price changes often lag behind changes in costs, and we are not always able to adjust our pricing to reflect changes in raw material and supply costs.
Volatility in the cost of our raw materials and packaging supplies can adversely affect our performance, as price changes often lag behind changes in costs, and we are not always able to adjust our pricing to reflect changes in raw material and supply costs. 45 Competitive pressures also may limit our ability to quickly raise prices in response to increased raw materials, packaging, fuel, and energy costs.
The Company periodically enters into foreign currency contracts to manage the risk associated with foreign currency cash flows. This includes, but is not limited to, using foreign currency contracts to establish a fixed foreign currency exchange rate for the net cash flow requirements for purchases of inventory, sales of finished goods, and future settlement of foreign-denominated assets and liabilities.
This includes, but is not limited to, using foreign currency contracts to establish a fixed foreign currency exchange rate for the net cash flow requirements for purchases of inventory, sales of finished goods, and future settlement of foreign-denominated assets and liabilities. As of December 31, 2023, the Company had no foreign currency contracts outstanding.
As of December 31, 2022, the Company had no foreign currency contracts outstanding. At December 31, 2022, the impact of a 10% movement in foreign exchange rates would not have a material impact on the Company's consolidated results of operations. 45
At December 31, 2023, the impact of a 10% movement in foreign exchange rates would not have a material impact on the Company's consolidated results of operations. 46
Additionally, all other input costs had price increases when comparing 2022 to 2021, primarily including, but not limited to, diesel, resin, linerboard, and natural gas. We expect the volatile nature of these costs to continue. Our raw materials consist of ingredients and packaging materials.
Additionally, other input costs had price increases when comparing 2023 to 2022, primarily including, but not limited to, diesel, natural gas, and coated recycled board. However, the costs of resin and linerboard both decreased during 2023. Our raw materials consist of ingredients and packaging materials.
Based on our analysis, a 10% change in commodity prices would impact the fair value of the portfolio by $37.2 million. We do not utilize financial instruments for trading purposes.
Based on our analysis, a 10% change in commodity prices would impact the fair value of the portfolio by $28.0 million. We do not utilize financial instruments for trading purposes. During 2021 and 2022, the overall global economy experienced inflation in the costs of raw materials, packaging materials, fuel, and energy.
When comparing fiscal year 2022 to 2021, nearly all raw material input costs had price increases, primarily including, but not limited to, edible oils (soybean, coconut, and palm), wheat, coffee, corn, casein, oats, cucumbers, eggs, and peanut butter.
When comparing fiscal year 2023 to 2022, some raw material input costs had price increases, primarily including, but not limited to, sugar, cucumbers, cocoa, and peanut butter; however, most of our raw material input costs decreased during 2023.
Our variable-rate debt is nearly fully hedged by our fixed rate interest rate swaps as of December 31, 2022.
Under the terms of the agreements entered in January 2024, the weighted average fixed interest rate base for the $300.0 million of interest rate swaps is approximately 3.38%. Our variable-rate debt is nearly fully hedged by our fixed rate interest rate swaps as of December 31, 2023.
In addition, in instances of declining input costs, customers may seek price reductions in situations where we are locked into pricing at higher costs. 44 Foreign Currency Exchange Rate Risk The Company is exposed to foreign currency exchange rate risk as a result of our Canadian subsidiaries, where the functional currency is the Canadian dollar.
Foreign Currency Exchange Rate Risk The Company is exposed to foreign currency exchange rate risk as a result of our Canadian subsidiaries, where the functional currency is the Canadian dollar. The Company periodically enters into foreign currency contracts to manage the risk associated with foreign currency cash flows.
Competitive pressures also may limit our ability to quickly raise prices in response to increased raw materials, packaging, fuel, and energy costs. Accordingly, if we are unable to increase our prices to offset increasing costs, our operating profits and margins could be materially affected.
Accordingly, if we are unable to increase our prices to offset increasing costs, our operating profits and margins could be materially affected. In addition, in instances of declining input costs, customers may seek price reductions in situations where we are locked into pricing at higher costs.
Removed
During 2022 and 2021, the overall global economy has experienced significant inflation in the costs of raw materials, packaging materials, fuel, and energy, and future changes in such costs may cause our results of operations and our operating margins to fluctuate significantly.
Added
The Company has entered into long-term interest rate swap agreements to mitigate its variable rate debt exposures that have a notional amount of $1,175.0 million as of December 31, 2023 and $875.0 million as of December 31, 2022.
Added
In January 2024, the Company entered into additional interest rate swap agreements to lock into a fixed interest rate base. The agreements have a notional value of $300.0 million, effective February 28, 2025 through February 29, 2028.
Added
While the Company continued to experience inflationary costs throughout 2023, the Company saw a general decline in the costs of some of our key commodities, including oats, wheat, coconut oil, and green coffee.

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