UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


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


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

~~Delaware~~		~~20-2311383~~

Delaware	20-2311383
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

2021 Spring Road, Suite 600
Oak Brook, IL	60523
(Address of principal executive offices)	(Zip Code)



Large accelerated filer	☒ x	Accelerated filer	☐ o

Non-accelerated filer	☐ o	Smaller reporting Company	☐ o
(Do not check if a smaller reporting company)

Emerging growth company	☐ o

Number of shares of Common Stock, $0.01 par value, outstanding as of October ~~31, 2017: 57,215,184~~

26, 2018: 55,997,265.

Item 1. Financial Statements

TREEHOUSE FOODS, INC.

(In millions, except per share data)

September 30,

December 31,

2017

2016

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$
131.9

$
62.1

Investments

13.2

10.4

Receivables, net

432.1

429.0

Inventories

1,137.5

978.0

Assets held for sale

—

3.6

Prepaid expenses and other current assets

110.4

77.6

Total current assets

1,825.1

1,560.7

Property, plant, and equipment, net

1,289.8

1,359.3

Goodwill

2,459.2

2,447.2

Intangible assets, net

1,068.3

1,137.6

Other assets, net

43.2

41.0

Total assets

$
6,685.6

$
6,545.8

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

$
773.8

$
626.8

Current portion of long-term debt

72.1

66.4

Total current liabilities

845.9

693.2

Long-term debt

2,620.4

2,724.8

Deferred income taxes

421.4

422.2

Other long-term liabilities

200.6

202.3

Total liabilities

4,088.3

4,042.5

Commitments and contingencies (Note 15)

Stockholders’ equity:

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

—

—

Common stock, par value $0.01 per share, 90.0 shares authorized, 57.2 and 56.8
shares issued and outstanding, respectively

0.6

0.6

Additional paid-in capital

2,101.4

2,071.9

Retained earnings

554.9

532.1

Accumulated other comprehensive loss

(59.6
)

(101.3
)
Total stockholders’ equity

2,597.3

2,503.3

Total liabilities and stockholders’ equity

$
6,685.6

$
6,545.8



	September 30, 2018			December 31, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	52.8		$	132.8
Investments	15.4			14.1
Receivables, net	285.6			329.8
Inventories	999.3			918.3
Prepaid expenses and other current assets	92.5			89.7
Total current assets	1,445.6			1,484.7
Property, plant and equipment, net	1,272.1			1,294.4
Goodwill	2,168.0			2,182.0
Intangible assets, net	722.3			773.0
Other assets, net	36.2			45.2
Total assets	$	5,644.2		$	5,779.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	562.6		$	451.3
Accrued expenses	188.3			138.4
Current portion of long-term debt	10.4			10.1
Total current liabilities	761.3			599.8
Long-term debt	2,333.1			2,535.7
Deferred income taxes	173.3			178.4
Other long-term liabilities	186.8			202.1
Total liabilities	3,454.5			3,516.0
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued	—			—
Common stock, par value $0.01 per share, 90.0 shares authorized, 56.1 and 56.6 shares issued and outstanding, respectively	0.6			0.6
Treasury stock	(70.9		)	(28.7		)
Additional paid-in capital	2,136.7			2,107.0
Retained earnings	198.5			245.9
Accumulated other comprehensive loss	(75.2		)	(61.5		)
Total stockholders’ equity	2,189.7			2,263.3
Total liabilities and stockholders’ equity	$	5,644.2		$	5,779.3

See Notes to Condensed Consolidated Financial Statements.

(In millions, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Net sales

$
1,548.8

$
1,586.9

$
4,607.2

$
4,398.5

Cost of sales

1,288.7

1,301.3

3,783.8

3,622.5

Gross profit

260.1

285.6

823.4

776.0

Operating expenses:

Selling and distribution

95.6

102.2

295.0

292.0

General and administrative

67.1

71.9

229.3

244.6

Amortization expense

28.5

28.6

85.8

80.9

Other operating expense, net

11.1

5.3

111.9

10.3

Total operating expenses

202.3

208.0

722.0

627.8

Operating income

57.8

77.6

101.4

148.2

Other expense:

Interest expense

31.4

30.8

92.9

88.0

Interest income

(0.4
)

(0.1
)

(3.5
)

(3.5
)
Gain on foreign currency exchange

(2.5
)

(1.1
)

(2.8
)

(6.0
)
Other (income) expense, net

(0.8
)

(4.6
)

1.0

(0.3
)
Total other expense

27.7

25.0

87.6

78.2

Income before income taxes

30.1

52.6

13.8

70.0

Income taxes

1.3

15.2

(9.0
)

16.8

Net income

$
28.8

$
37.4

$
22.8

$
53.2

Net earnings per common share:

Basic

$
0.50

$
0.66

$
0.40

$
0.96

Diluted

$
0.50

$
0.65

$
0.40

$
0.95

Weighted average common shares:

Basic

57.3

56.8

57.1

55.4

Diluted

57.7

57.6

57.7

56.2



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Unaudited)						(Unaudited)
Net sales	$	1,394.0		$	1,548.8		$	4,331.0		$	4,607.2
Cost of sales	1,166.5			1,289.1			3,635.8			3,784.5
Gross profit	227.5			259.7			695.2			822.7
Operating expenses:
Selling and distribution	85.4			95.6			285.5			295.0
General and administrative	66.5			66.9			220.5			228.9
Amortization expense	21.4			28.5			64.9			85.8
Other operating expense, net	23.3			11.1			98.9			111.9
Total operating expenses	196.6			202.1			669.8			721.6
Operating income	30.9			57.6			25.4			101.1
Other expense:
Interest expense	27.8			31.4			87.6			92.9
Interest income	(1.3		)	(0.4		)	(3.8		)	(3.5		)
Loss (income) on foreign currency exchange	0.6			(2.5		)	5.0			(2.8		)
Other expense (income), net	3.6			(1.0		)	6.5			0.7
Total other expense	30.7			27.5			95.3			87.3
Income (loss) before income taxes	0.2			30.1			(69.9		)	13.8
Income tax (benefit) expense	(5.2		)	1.3			(21.1		)	(9.0		)
Net income (loss)	$	5.4		$	28.8		$	(48.8	)	$	22.8

Net earnings (loss) per common share:
Basic	$	0.10		$	0.50		$	(0.87	)	$	0.40
Diluted	$	0.10		$	0.50		$	(0.87	)	$	0.40
Weighted average common shares:
Basic	56.3			57.3			56.4			57.1
Diluted	56.7			57.7			56.4			57.7

See Notes to Condensed Consolidated Financial Statements.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Net income

$
28.8

$
37.4

$
22.8

$
53.2

Other comprehensive income:

Foreign currency translation adjustments

18.0

(7.3
)

34.5

21.6

Pension and postretirement reclassification adjustment (1)

0.1

0.3

7.2

0.8

Other comprehensive income (loss)

18.1

(7.0
)

41.7

22.4

Comprehensive income

$
46.9

$
30.4

$
64.5

$
75.6



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017
	(Unaudited)				(Unaudited)
Net income (loss)	$	5.4	$	28.8	$	(48.8	)	$	22.8

Other comprehensive income (loss):
Foreign currency translation adjustments (1)	6.5		18.0		(13.0		)	34.5
Pension and postretirement reclassification adjustment (2)	0.1		0.1		0.4			7.2
Adoption of ASU 2018-02 reclassification to retained earnings	—		—		(1.1		)	—
Other comprehensive income (loss)	6.6		18.1		(13.7		)	41.7

Comprehensive income (loss)	$	12.0	$	46.9	$	(62.5	)	$	64.5

See Notes to Condensed Consolidated Financial Statements.

(In millions)

Nine Months Ended

September 30,

2017

2016

(Unaudited)

Cash flows from operating activities:

Net income

$
22.8

$
53.2

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

Depreciation and amortization

213.2

208.1

Stock-based compensation

25.2

22.8

Loss on divestiture

85.6

—

Other

0.7

(10.8
)
Changes in operating assets and liabilities, net of effect of acquisitions:

Receivables

0.2

(16.8
)
Inventories

(205.0
)

(8.1
)
Prepaid expenses and other assets

(39.2
)

(32.2
)
Accounts payable, accrued expenses, and other liabilities

159.9

82.2

Net cash provided by operating activities

263.4

298.4

Cash flows from investing activities:

Additions to property, plant, and equipment

(102.5
)

(131.9
)
Additions to intangible assets

(18.6
)

(10.9
)
Acquisitions, less cash acquired

—

(2,644.4
)
Proceeds from sale of fixed assets

7.2

1.5

Proceeds from divestiture

19.3

—

Other

(1.0
)

(1.4
)
Net cash used in investing activities

(95.6
)

(2,787.1
)
Cash flows from financing activities:

Borrowings under Revolving Credit Facility

584.5

239.3

Payments under Revolving Credit Facility

(634.5
)

(313.3
)
Proceeds from issuance of Term Loan A-2

—

1,025.0

Proceeds from issuance of 2024 Notes

—

775.0

Payments on capitalized lease obligations and other debt

(2.3
)

(2.6
)
Payment of deferred financing costs

—

(34.3
)
Payments on Term Loans

(50.8
)

(25.9
)
Net proceeds from issuance of common stock

—

835.1

Receipts related to stock-based award activities

11.1

7.6

Payments related to stock-based award activities

(6.7
)

(8.7
)
Net cash (used in) provided by financing activities

(98.7
)

2,497.2

Effect of exchange rate changes on cash and cash equivalents

0.7

3.8

Net increase in cash and cash equivalents

69.8

12.3

Cash and cash equivalents, beginning of period

62.1

34.9

Cash and cash equivalents, end of period

$
131.9

$
47.2

Supplemental cash flow disclosures

Interest paid

$
102.8

$
80.8

Income taxes paid

25.8

49.5

Non-cash investing activities:

Accrued purchase of property and equipment

$
20.9

$
15.5

Accrued other intangible assets

3.8

4.4



	Nine Months Ended September 30,
	2018			2017
	(Unaudited)
Cash flows from operating activities:
Net (loss) income	$	(48.8	)	$	22.8
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	193.7			213.2
Stock-based compensation	28.2			25.2
(Gain) loss on divestitures	(14.3		)	85.6
Other	5.2			0.7
Changes in operating assets and liabilities, net of effect of divestitures and acquisitions:
Receivables	40.1			0.2
Inventories	(85.2		)	(205.0		)
Prepaid expenses and other assets	13.5			(39.2		)
Accounts payable, accrued expenses, and other liabilities	138.1			159.9
Net cash provided by operating activities	270.5			263.4
Cash flows from investing activities:
Additions to property, plant, and equipment	(116.7		)	(102.5		)
Additions to intangible assets	(16.4		)	(18.6		)
Proceeds from sale of fixed assets	4.7			7.2
Proceeds from divestitures	30.8			19.3
Other	(1.1		)	(1.0		)
Net cash used in investing activities	(98.7		)	(95.6		)
Cash flows from financing activities:
Borrowings under Revolving Credit Facility	80.4			584.5
Payments under Revolving Credit Facility	(80.4		)	(634.5		)
Payments on capitalized lease obligations and other debt	(0.9		)	(2.3		)
Payment of deferred financing costs	(2.4		)	—
Payments on Term Loans	(10.5		)	(50.8		)
Repurchases of 2022 Notes	(24.1		)	—
Repurchases of 2024 Notes	(172.1		)	—
Repurchases of common stock	(42.2		)	—
Receipts related to stock-based award activities	4.7			11.1
Payments related to stock-based award activities	(3.3		)	(6.7		)
Net cash used in financing activities	(250.8		)	(98.7		)
Effect of exchange rate changes on cash and cash equivalents	(1.0		)	0.7
Net (decrease) increase in cash and cash equivalents	(80.0		)	69.8
Cash and cash equivalents, beginning of period	132.8			62.1
Cash and cash equivalents, end of period	$	52.8		$	131.9



	Nine Months Ended September 30,
	2018			2017
	(Unaudited)
Supplemental cash flow disclosures
Interest paid	$	102.7		$	102.8
Net income taxes (refunded) paid	(4.3		)	25.8

Non-cash investing activities:
Accrued purchase of property and equipment	$	22.8		$	20.9
Accrued other intangible assets	8.0			3.8

See Notes to Condensed Consolidated Financial Statements.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the nine months ended September 30, ~~2017~~

2018

(Unaudited)

1. BASIS OF PRESENTATION

The unaudited Condensed Consolidated Financial Statements included herein have been prepared by TreeHouse Foods, Inc. and its consolidated subsidiaries (the “Company,” “TreeHouse,” “we,” “us,” or “our”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to quarterly reporting on Form 10-Q. In our opinion, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by such rules and regulations. ~~Certain prior year amounts in the Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.~~ The Condensed Consolidated Financial Statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017. Results of operations for interim periods are not necessarily indicative of annual results.

In the first quarter of 2017, the Company completed changes in its organizational structure that resulted in a change in how the Company manages its business and allocates resources. As a result, the Company revised its reportable segments to reflect how management currently reviews financial information and makes operating decisions. See Note 18 for additional details. All prior period amounts have been recast to reflect the change in reportable segments.

On February 1, 2016, the Company acquired all of the outstanding common stock of Ralcorp Holdings, Inc., the Missouri corporation through which the private brands business (“Private Brands Business”) of ConAgra Foods, Inc. was operated. Ralcorp Holdings, Inc. was renamed TreeHouse Private Brands, Inc. during the first quarter of 2016. The results of operations of the Private Brands Business are included in our financial statements from the date of acquisition and are included in the Baked Goods, Condiments, Meals, and Snacks segments, as applicable.

The Private Brands Business was on a 4-4-5 fiscal calendar during the third quarter of 2016, and September 25, 2016 was the fiscal period end closest to the Company’s fiscal quarter end. This difference did not have a significant impact on the results of operations of the Private Brands Business. In the fourth quarter of 2016, the Company changed the fiscal year end of the Private Brands Business to December 31. The Company did not retrospectively apply the effects of this change to the three and nine month periods ended September 30, 2016 due to impracticability, and believes the effects would be immaterial.

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

A detailed description of the Company’s significant accounting policies can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~

2017.

2. RESTRUCTURING ~~AND MARGIN IMPROVEMENT ACTIVITIES~~

PROGRAMS

The Company’s restructuring and margin improvement activities are part of an enterprise-wide transformation to improve long-term profitability of the Company. ~~Upon completion of our multi-year multi-phase programs, the projects~~These activities are ~~expected to deliver higher margin sales~~aggregated into three categories: (1) TreeHouse 2020 – a long-term growth and ~~reduced~~margin improvement strategy; (2) Structure to Win – an operating expenses ~~resulting in margin expansion.~~

improvement program; and (3) other restructuring and plant closing costs (collectively the “Restructuring Programs”).

The costs by activity for the Restructuring Programs are outlined below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)
TreeHouse 2020	$	39.2	$	14.7	$	99.0	$	14.7
Structure to Win	5.3		—		31.5		—
Other restructuring and plant closing costs	1.0		6.0		4.2		24.8
Total Restructuring Programs	$	45.5	$	20.7	$	134.7	$	39.5

Expenses associated with these programs are ~~primarily aggregated~~recorded in ~~the~~Cost of sales, General and administrative, and Other operating expense, net ~~line of~~in the Condensed Consolidated Statements of Operations, with the exception of asset-related costs, which are recorded in Cost of sales. During the three months ended September 30, 2017, the Company recorded total charges $20.7 million across all restructuring programs and margin improvement activities. The charges included $10.2 million recorded in Cost of sales and $10.5 million recorded in Other operating expenses, net. During the three months ended September 30, 2016, the Company recorded total charges of $5.9 million across all restructuring programs and margin improvement activities. The charges included $1.0 million recorded in Cost of sales and $4.9 million recorded in Other operating expenses, net. During the nine months ended September 30, 2017, the Company recorded charges of $39.5 million across all restructuring programs and margin improvement activities. These charges included $13.5 million recorded in Cost of sales and $26.0 million recorded in Other operating expenses, net. During the nine months ended September 30, 2016, the Company recorded charges of $12.9 million across all restructuring programs and margin improvement activities. These charges included $3.9 million recorded in Cost of sales and $9.0 million recorded in Other operating expenses, net.Operations. The Company does not allocate ~~restructuring and margin improvement activities~~ costs associated with Restructuring Programs to reportable segments when evaluating the performance of its

segments. As a result, costs associated with Restructuring Programs are not presented by reportable segment. See Note 18 for more information.

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)
Cost of sales	$	7.2	$	10.2	$	18.8	$	13.5
General and administrative	1.0		—		3.3		—
Other operating expense, net	37.3		10.5		112.6		26.0
Total	$	45.5	$	20.7	$	134.7	$	39.5

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~segments. As~~

The table below presents the activity of the liabilities associated with the Restructuring Programs as of September 30, 2018:



	Severance			Multiemployer Pension Plan Withdrawal			Other Costs			Total Liabilities
	(In millions)
Balance as of December 31, 2017	$	6.1		$	0.8		$	2.7		$	9.6
Expenses recognized	17.8			—			2.4			20.2
Cash payments	(11.2		)	(0.6		)	(2.7		)	(14.5		)
Adjustments	—			—			(0.8		)	(0.8		)
Balance as of September 30, 2018	$	12.7		$	0.2		$	1.6		$	14.5

Liabilities recorded as of September 30, 2018 associated with total exit cost reserves relate to severance, the partial withdrawal from a ~~result, restructuring~~multiemployer pension plan, and ~~margin improvement activities costs by reportable segment has not been presented. See Note 18 for more information.~~

lease termination costs. The severance and lease termination liabilities were included in Accrued expenses in the Condensed Consolidated Balance Sheets, while the multiemployer pension plan withdrawal liability was included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

In the third quarter of 2017, the Company announced TreeHouse 2020, a program intended to accelerate long-term growth through optimization of our manufacturing network, transformation of our mixing centers and warehouse footprint, and leveraging of systems and processes to drive performance. ~~TreeHouse 2020 is expected~~The Company’s workstreams related to ~~produce significant savings~~these activities and selling, general, and administrative cost reductions will increase our capacity utilization, expand operating margins, and streamline our plant structure to ~~achieve~~optimize our ~~operating margin expansion targets creating reinvestment opportunities to drive future growth.~~

supply chain.

This program began in 2017 and will be executed ~~in multiple phases over~~through 2020. In 2017, the ~~next several years.~~ ~~The key elements of Phase 1 include~~Company announced the closure of the ~~Company’s~~ Brooklyn Park, Minnesota and Plymouth, Indiana facilities, as well as the downsizing of the Dothan, Alabama facility. ~~Production at~~In the ~~Brooklyn Park, Minnesota~~first quarter of 2018, the Company announced the closure of the Company’s Visalia, California and ~~Plymouth, Indiana~~Battle Creek, Michigan facilities. All facilities ~~is expected to cease~~have either closed or are successfully tracking toward their closure dates noted in the ~~fourth~~table below. The table below shows key information regarding the Company's announced plant closures, a component of the broader TreeHouse 2020 program:

Facility Location

Date of Closure

Announcement

Full Facility

Closure

Primary Products

Produced

Primary Segment(s)

Affected

Total

Costs to

Total Cash

Costs to

Dothan, Alabama

August 3, 2017

Partial closure completed in Q3 2018

Trail mix and snack nuts

Snacks

11.2

5.2

Brooklyn Park, Minnesota

August 3, 2017

��

Completed in Q4 2017

Dry dinners

Meals

19.5

12.2

Plymouth, Indiana

August 3, 2017

Completed in Q4 2017

Pickles

Condiments

13.3

8.5

Battle Creek, Michigan

January 31, 2018

Mid-2019

Ready-to-eat cereal

Meals

18.2

11.8

Visalia, California

February 15, 2018

Q1 2019

Pretzels

Baked Goods

23.6

11.0

85.8

48.7

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the third quarter of ~~2017. The facility downsizing at Dothan, Alabama~~2018, the Company announced the closure of its Omaha, Nebraska office by January 31, 2019. Estimated costs to close are approximately $5.8 million, of which $4.3 million is expected to be ~~complete~~ in ~~the third quarter of 2018.In addition, we have taken steps toward increasing our capacity utilization, operational margin expansion, and streamlining our plant structure to optimize our supply chain.~~

cash.

Below is a summary of the overall TreeHouse 2020 program costs by ~~type associated with TreeHouse 2020:~~

type:

Three Months Ended

Nine Months Ended

Cumulative Costs

Total Expected

September 30, 2017

September 30, 2017

To Date

Costs

(In millions)

Asset-related

$
8.0

$
8.0

$
8.0

$
14.8

Employee-related

4.3

4.3

4.3

7.0

Other costs

2.4

2.4

2.4

22.7

Total

$
14.7

$
14.7

$
14.7

$
44.5



	Three Months Ended September 30,				Nine Months Ended September 30,				Cumulative Costs		Total Expected
	2018		2017		2018		2017		To Date		Costs
	(In millions)
Asset-related	$	5.5	$	8.0	$	11.4	$	8.0	$	49.7	$	80.0
Employee-related	10.4		4.3		27.5		4.3		36.6		75.0
Other costs	23.3		2.4		60.1		2.4		70.3		210.0
Total	$	39.2	$	14.7	$	99.0	$	14.7	$	156.6	$	365.0

For the three and nine months ended September 30, 2018, asset-related costs primarily consisted of accelerated depreciation; employee-related costs primarily consisted of dedicated project employee cost and severance; and other costs primarily consisted of consulting costs. For the three and nine months ended September 30, 2017, asset-related costs primarily consisted of accelerated depreciation; employee-related costs primarily consisted of severance; and other costs primarily consisted of ~~third-party~~consulting costs.

~~TREEHOUSE FOODS, INC.~~

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

Asset-related costs are included in Cost of sales while employee-related and other costs are primarily included in Other operating expense, net of the Condensed Consolidated Statements of Operations.

(2) Structure to Win

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

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



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018		Cumulative Costs To Date		Total Full Year 2018 Expected Costs
	(In millions)
Asset-related	$	—	$	2.2	$	2.2	$	2.2
Employee-related	3.4		13.0		13.0		14.0
Other costs	1.9		16.3		16.3		20.8
Total	$	5.3	$	31.5	$	31.5	$	37.0

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

(3) Other Restructuring and Plant Closing Costs

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

Facility Location

Date of Closure
Announcement

End of
Production

Full Facility
Closure

Primary Products
Produced

Primary Segment(s)
Affected

Total
Costs to
Close

Total
Cash
Costs to
Close

(In millions)

City of Industry, California

November 18, 2015

First quarter of 2016

Third quarter of 2016

Liquid non-dairy creamer and refrigerated salad dressings

Beverages, Condiments

$
6.9

$
3.8

Ayer, Massachusetts

April 5, 2016

First quarter of 2017

Third quarter of 2017

Spoonable dressings

Condiments

5.9

4.1

Azusa, California

May 24, 2016

First quarter of 2017

Third quarter of 2017

Bars and snack products

Snacks

19.5

16.1

Ripon, Wisconsin

May 24, 2016

Fourth quarter of 2016

Fourth quarter of 2016

Sugar wafer cookies

Baked Goods

0.9

1.2

Delta, British Columbia

November 3, 2016

Fourth quarter of 2017

First quarter of 2018

Frozen griddle products

Baked Goods

3.7

2.7

Battle Creek, Michigan

November 3, 2016

(1)

(1)

Ready-to-eat cereal

Meals

10.4

2.8

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Facility Location

Date of Closure

Announcement

Full Facility

Closure

Primary Products

Produced

Primary Segment(s)

Affected

Total

Costs to

Total

Cash

Costs to

(In millions)

City of Industry, California

November 18, 2015

Completed in Q3 2016

Liquid non-dairy creamer and refrigerated salad dressings

Beverages, Condiments

6.8

3.7

Ayer, Massachusetts

April 5, 2016

Completed in Q3 2017

Mayonnaise

Condiments

5.6

4.0

Azusa, California

May 24, 2016

Completed in Q3 2017

Bars and fruit snacks

Snacks

21.8

17.1

Ripon, Wisconsin

May 24, 2016

Completed in Q4 2016

Sugar wafer cookies

Baked Goods

0.8

1.0

Delta, British Columbia

November 3, 2016

Completed in Q1 2018

Frozen griddle products

Baked Goods

3.7

2.7

Battle Creek, Michigan

November 3, 2016

(1)

Ready-to-eat cereal

Meals

10.4

2.2

49.1

30.7

Below is a summary of ~~the plant closing~~ costs by type ~~of cost:~~

associated with the other restructuring and plant closing costs:

Three Months Ended September 30,

Nine Months Ended September 30,

Cumulative Costs

Total Expected

2017

2016

2017

2016

To Date

Costs

(In millions)

Asset-related

$
0.8

$
1.0

$
4.3

$
2.5

$
14.5

$
16.6

Employee-related

0.2

2.2

2.9

4.1

10.2

11.9

Other closure costs

1.9

2.7

12.2

3.8

16.7

18.8

Total

$
2.9

$
5.9

$
19.4

$
10.4

$
41.4

$
47.3



	Three Months Ended September 30,				Nine Months Ended September 30,				Cumulative Costs		Total Expected
	2018		2017		2018		2017		To Date		Costs
	(In millions)
Asset-related	$	0.1	$	0.8	$	1.4	$	4.3	$	18.4	$	18.5
Employee-related	—		0.2		—		2.9		10.5		11.3
Other costs	0.3		1.9		0.3		12.2		18.9		19.3
Total	$	0.4	$	2.9	$	1.7	$	19.4	$	47.8	$	49.1

For the three and nine months ended September 30, 2018, asset-related costs primarily consisted of inventory dispositions. For the three and nine months ended September 30, 2017, asset-related costs ~~primarily~~ consisted of accelerated depreciation; employee-related costs primarily consisted of severance; and other costs primarily consisted of third-party costs.

Asset-related costs are included in Cost of sales and employee-related and other closure costs are recorded in Other ~~individually insignificant~~operating expense, net in the Condensed Consolidated Statements of Operations.

Other cost reduction activities not related to our plant closings above totaled ~~$3.1~~$0.6 million and $2.5 million, respectively, for the three ~~months ended September 30, 2017~~ and ~~$5.4 million for the~~ nine months ended September 30, ~~2017~~2018 and were primarily the result of a Private Brands plant closure initiated prior to TreeHouse’s ~~acquisition.~~acquisition and severance-related costs. Other cost reduction activities were ~~insignificant~~$3.1 million and $5.4 million for the three ~~months ended September 30, 2016~~ and ~~$2.5 million for the~~ nine months ended September 30, ~~2016.~~ 2017, respectively.

3. REVENUE RECOGNITION

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective method. See Note 19 for additional information. As a result of the adoption of Topic 606, we have updated our accounting policy for revenue recognition as follows:

We manufacture and sell the following:

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Liabilities recorded~~

Disaggregation of ~~September 30, 2017 associated with total exit cost reserves relate~~Revenue

Segment revenue disaggregated by product category groups are as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)				(In millions)
Retail bakery	$	161.6	$	169.4	$	488.5	$	514.0
Baked products	171.2		181.8		509.4		502.6
Total Baked Goods	332.8		351.2		997.9		1,016.6
Beverages	166.8		168.1		503.5		518.9
Beverage enhancers	69.5		76.8		218.3		240.2
Total Beverages	236.3		244.9		721.8		759.1
Dressings and sauces	240.0		250.4		735.0		738.6
Pickles	77.1		83.4		233.4		250.2
Total Condiments	317.1		333.8		968.4		988.8
Pasta and dry dinners	129.6		147.8		400.6		420.6
Cereals and other meals (1)	124.1		136.8		376.6		476.4
Total Meals	253.7		284.6		777.2		897.0
Snack nuts	171.0		224.9		568.2		608.1
Trail mix and bars	83.1		107.7		297.5		332.1
Total Snacks	254.1		332.6		865.7		940.2
Unallocated net sales (2)	—		1.7		—		5.5
Total net sales	$	1,394.0	$	1,548.8	$	4,331.0	$	4,607.2

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to ~~severance,~~transfer a distinct good or service to the ~~partial withdrawal from~~customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are food and beverage products.

Revenue recognition is completed on a ~~multiemployer pension plan,~~point in time basis when product control is transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and ~~lease termination costs. The severance and lease termination liabilities were included in the Accounts payable and accrued expenses line~~obtain substantially all of the Condensed Consolidated Balance Sheets, while the multiemployer pension plan withdrawal liability was included in the Other long-term liabilities line of the Condensed Consolidated Balance Sheets. The table below presents a reconciliation of the liabilities as of September 30, 2017:

Severance

Multiemployer Pension
Plan Withdrawal

Other Costs

Total Liabilities

(In millions)

Balance as of December 31, 2016

$
3.5

$
0.8

$
-

$
4.3

Expense

6.6

—

2.4

9.0

Payments

(4.2
)

—

(0.5
)

(4.7
)
Adjustments

(0.3
)

—

—

(0.3
)
Balance as of September 30, 2017

$
5.6

$
0.8

$
1.9

$
8.3

3~~. ACQUISITIONS~~

~~Private Brands Business~~

On February 1, 2016, the Company acquired the Private Brands Business, which is primarily engaged in manufacturing, distributing, and marketing private label products to retail grocery, food away from home, and industrial and export customers. The business’s primary product categories include snacks, retail bakery, pasta, cereal, bars, and condiments. The purchase price, after considering working capital adjustments, was $2,644.4 million, net of acquired cash.

~~The Private Brands Business acquisition was accounted for under the acquisition method of accounting and the results of operations were included in our Condensed Consolidated Financial Statements~~remaining benefits from the ~~date of acquisition~~asset at this point in time.

Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the Baked Goods, Condiments, Meals, and Snacks segments. Included in the Company’s Condensed Consolidated Statements of Operations are the Private Brands Business’s net sales of approximately $2,074.6 million and income before income taxes of $55.6 million from the date of acquisition through September 30, 2016. Integration costs of $7.5 million, which were included in the Cost of sales and General and administrative expense lines of the Condensed Consolidated Statements of Operations, were included in determining income before income taxes.

~~We have completed the purchase~~contract’s transaction price ~~allocation~~ to ~~net tangible and intangible assets acquired and liabilities assumed as follows:~~

(In millions)

Cash
$
43.3

Receivables

162.7

Inventory

443.7

Property, plant, and equipment

809.6

Customer relationships

510.9

Trade names

33.0

Software

19.6

Formulas

23.2

Other assets

50.2

Goodwill

1,141.2

Assets acquired

3,237.4

Deferred taxes

(152.8
)
Assumed current liabilities

(246.6
)
Assumed long-term liabilities

(150.3
)
Total purchase price
$
2,687.7

each performance obligation based on its relative standalone selling price. The Company allocated $496.1 million to customer relationships with retail grocery customers, which have an estimated life of 13 years, and $14.8 million to customer relationships with food away from home customers, which have an estimated life of 10 years. The Company allocated $33.0 million to trade names, which have an estimated life of 10 years. The Company allocated $23.2 million to formulas, which have an estimated life of 5 years. The Company allocated $19.6 million to capitalized software with estimated lives

standalone selling price for each distinct good is generally determined by directly observable data.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of 1September 30, 2018.

Significant Payment Terms

Our customer contracts identify the product, quantity, price, payment, and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to ~~5 years, depending on expected use. The aforementioned intangibles~~a customer and the customer’s payment for that good or service will be ~~amortized~~one year or less.

Shipping and handling costs associated with outbound freight are included within Selling and distribution expenses and are accounted for as a fulfillment cost as incurred, including shipping and handling costs after control over ~~their~~a product has transferred to a customer.

Variable Consideration

In addition to fixed contract consideration, most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected ~~useful lives. Indemnification assets~~value or most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related ~~to taxes of approximately $13.8 million were also recorded.~~uncertainties are resolved with our customers. The Company ~~increased~~reviews and updates its estimates and related accruals of variable consideration each period based on the ~~cost~~terms of ~~acquired inventories by approximately $8.4 million~~the agreements, historical experience, and ~~expensed~~any recent changes in the ~~amount~~market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration.

Warranties & Returns

TreeHouse provides all customers with a standard or assurance type warranty. Either stated or implied, the Company provides assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to customers.

The Company does not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a ~~component~~reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience.

Contract asset and liability balances as of ~~Cost of sales.~~September 30, 2018 are immaterial. The Company ~~has allocated $555.0 million, $73.3 million, $413.8 million, and $97.9 million~~does not have significant deferred revenue or unbilled receivable balances arising from transactions with customers.

We have identified certain incremental costs to obtain a contract, primarily sales commissions, requiring capitalization under Topic 606. The Company continues to expense these costs as incurred because the amortization period for the costs would be one year or less. The Company does not incur significant fulfillment costs requiring capitalization.

Impact of ~~goodwill to the Baked Goods, Condiments, Meals, and Snacks segments, respectively. Goodwill arises principally as~~Adoption

The Company adopted Topic 606 on a modified retrospective basis on January 1, 2018. As a result of ~~expansion opportunities~~adoption, the Company reclassified $51.0 million of certain customer liabilities related to customer trade promotional activity from Receivables, net to

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accrued expenses during the first quarter of 2018. There were no material impacts to the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statements of Cash Flows upon adoption.

4. RECEIVABLES SALES AGREEMENT

In December 2017, the Company entered into an agreement (the “Receivables Sales Agreement”), to sell, on a revolving basis, certain trade accounts receivable balances to an unrelated third-party financial institution. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the Condensed Consolidated Balance Sheet. The Receivables Sales Agreement provides for the sale of certain receivables on a revolving basis until terminated by either party. On September 28, 2018, the Company entered into an Amendment to the Receivables Sales Agreement, increasing the maximum receivables that may be sold at any time from $200.0 million to $300.0 million.

The outstanding amount of accounts receivable sold under the Receivables Sales Agreement were $200.0 million and ~~synergies across both new~~$74.6 million as of September 30, 2018 and ~~legacy product categories. None~~December 31, 2017, respectively. The proceeds from these sales of ~~the goodwill resulting from this acquisition is tax deductible. The Company incurred approximately $35.2 million in acquisition costs in 2016 and none in 2017. These costs~~receivables are included within the change in receivables in the ~~General and administrative expense line~~operating activities section of the Condensed Consolidated Statements of ~~Operations.~~

Cash Flows. The ~~fair values~~recorded loss on sale of receivables is $1.0 million and $2.3 million for ~~customer relationships at~~ the acquisition date were determined using the excess earnings method under the income approach. Trade name fair values were determined using the relief from royalty method, while the fair value of formulas was determined using the cost approach. Real property fair values were determined using the costthree and market approaches, while the fair value of personal property was determined using the indirect cost approach. The fair value measurements of intangible assets are based on significant unobservable inputs,nine months ended September 30, 2018, respectively, and ~~thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates, and royalty rates.~~

~~Since the preliminary purchase price allocation~~is included in ~~the Company’s Annual Report for the fiscal year ended December 31, 2016, the Company recorded purchase price adjustments related to taxes, resulting~~Other expense (income), net in ~~an increase to goodwill of approximately $3.0 million in the first quarter of 2017. These adjustments did not impact~~ the Condensed Consolidated Statements of Operations.

The ~~following unaudited pro forma information shows~~Company has no retained interest in the ~~results of operations~~receivables sold under the program above; however, the Company does have collection and administrative responsibilities for the sold receivables. The Company has not recorded any servicing assets or liabilities as ~~if its acquisition~~of September 30, 2018, as the fair value of the ~~Private Brands Business had been completed~~servicing arrangement as ~~of January 1, 2016. Adjustments have been made for~~well as the ~~pro forma effects of depreciation and amortization of tangible and intangible assets recognized as part of the business combination, the issuance of common stock, interest expense related~~fees earned were not material to the financing of the business combination, and related income taxes. Excluded from the 2016 pro forma results were $35.2 million of costs incurred by the Company in connection with the acquisition. The pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

financial statements.

Nine Months Ended
September 30, 2016

(In millions, except
per share data)

Pro forma net sales

$
4,722.4

Pro forma net income

$
74.9

Pro forma basic earnings per common share

$
1.32

Pro forma diluted earnings per common share

$
1.30

September 30,

December 31,

2017

2016

(In millions)

Raw materials and supplies

$
544.2

$
429.4

Finished goods

618.5

571.9

LIFO reserve

(25.2
)

(23.3
)
Total inventories

$
1,137.5

$
978.0



	September 30, 2018			December 31, 2017
	(In millions)
Raw materials and supplies	$	495.3		$	416.5
Finished goods	529.9			530.0
LIFO reserve	(25.9		)	(28.2		)
Total inventories	$	999.3		$	918.3

Inventory ~~was~~is generally accounted for under the ~~FIFO~~first-in, first-out (“FIFO”) method and a portion was accounted for under the last-in, first-out (“LIFO”) ~~method and the weighted average costing approach.~~method. Approximately ~~$95.1~~$75.1 million and ~~$105.9~~$92.9 million of our inventory was accounted for under the LIFO method of accounting at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. ~~Approximately $197.8 million and $116.2 million~~In the first quarter of ~~our~~2018, the Company changed the inventory ~~was accounted~~costing methodology for ~~using~~a portion of the Snacks segment from weighted average cost to FIFO. The FIFO costing ~~approach~~method was preferable to the prior method used as it aligns all of the Snacks inventory costing with the majority of the Company, allows for more accurate matching of revenues and expenses, and is a more common industry practice. The change in costing methodology was not material to the presented periods. As such, prior period information was not retrospectively revised, and the impact of the change was recorded in the period ended March 31, 2018.

Due in part to the closure of the Plymouth, Indiana pickle facility and lower overall inventory levels, the Company has reduced the quantity of LIFO inventory on hand during 2018, resulting in a liquidation of inventory carried at lower costs from prior years. The LIFO liquidation resulted in a reduction to Cost of sales of $4.2 million during the third quarter of 2018. There were no LIFO liquidations during the three or nine months ended September 30, ~~2017 and December 31, 2016, respectively.~~

2017.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~5. PROPERTY, PLANT, AND EQUIPMENT~~

September 30,

December 31,

2017

2016

(In millions)

Land

$
70.3

$
71.2

Buildings and improvements

454.3

465.3

Machinery and equipment

1,278.4

1,324.5

Construction in progress

74.0

85.0

Total

1,877.0

1,946.0

Less accumulated depreciation

(587.2
)

(586.7
)
Property, plant, and equipment, net

$
1,289.8

$
1,359.3

Depreciation expense was $45.7 million and $46.7 million for the three months ended September 30, 2017 and 2016, respectively, and $127.4 million and $127.2 million for the nine months ended September 30, 2017 and 2016, respectively.

6. GOODWILL AND INTANGIBLE ASSETS

As a result of the changes in organizational structure completed in the first quarter of 2017, the Company has the following five operating segments, which are also its reporting units: Baked Goods, Beverages, Condiments, Meals, and Snacks. See Note 18 for more information.

The Company allocated the goodwill balance as of January 1, 2017 between the new reporting units using a relative fair value allocation approach. The change was considered a triggering event indicating a test for goodwill impairment was required as of January 1, 2017. The Company performed the first step of the impairment test, which did not result in the identification of any impairment losses. Changes in the carrying amount of goodwill for the nine months ended September 30, 2017 are as follows:

Baked

Goods

Beverages

Condiments

Meals

Snacks

Total

(In millions)

Balance at January 1, 2017

$
554.2

$
713.2

$
433.1

$
470.6

$
276.1

$
2,447.2

Purchase price adjustments

1.4

—

0.2

1.1

0.3

3.0

Foreign currency exchange adjustments

—

3.8

5.2

—

—

9.0

Balance at September 30, 2017

$
555.6

$
717.0

$
438.5

$
471.7

$
276.4

$
2,459.2



	Baked Goods		Beverages			Condiments			Meals			Snacks			Total
	(In millions)
Goodwill	$	555.6	$	716.7		$	449.5		$	471.7		$	609.8		$	2,803.3
Accumulated impairment losses	—		—			(11.5		)	—			(609.8		)	(621.3		)
Balance at January 1, 2018	555.6		716.7			438.0			471.7			—			2,182.0
Foreign currency exchange adjustments	—		(1.4		)	(2.0		)	—			—			(3.4		)
Divestiture	—		—			—			(10.6		)	—			(10.6		)
Balance at September 30, 2018	$	555.6	$	715.3		$	436.0		$	461.1		$	—		$	2,168.0

Indefinite Lived Intangible Assets

The carrying amounts of our intangible assets with indefinite lives, other than goodwill, as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:

September 30,
2017

December 31,
2016

(In millions)

Trademarks

$
22.8

$
21.6

Total indefinite lived intangibles

$
22.8

$
21.6



	September 30, 2018		December 31, 2017
	(In millions)
Trademarks	$	22.2	$	22.8
Total indefinite lived intangibles	$	22.2	$	22.8

The ~~increase~~decrease in the indefinite lived intangibles balance is due to foreign currency translation.

~~TREEHOUSE FOODS, INC.~~

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

Finite Lived Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets with finite lives as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:

September 30, 2017

December 31, 2016

Gross

Net

Gross

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

(In millions)

(In millions)

Intangible assets with finite lives:

Customer-related

$
1,266.6

$
(341.2
)

$
925.4

$
1,284.3

$
(293.3
)

$
991.0

Contractual agreements

2.8

(2.8
)

—

3.0

(2.9
)

0.1

Trademarks

69.6

(27.4
)

42.2

69.6

(23.6
)

46.0

Formulas/recipes

33.8

(16.9
)

16.9

33.7

(12.8
)

20.9

Computer software

130.8

(69.8
)

61.0

115.7

(57.7
)

58.0

Total finite lived intangibles

$
1,503.6

$
(458.1
)

$
1,045.5

$
1,506.3

$
(390.3
)

$
1,116.0



	September 30, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Impairment Losses			Net Carrying Amount
	(In millions)
Intangible assets with finite lives:
Customer-related	$	961.7	$	(376.9	)	$	584.8	$	1,265.4	$	(361.4	)	$	(273.3	)	$	630.7
Contractual agreements	3.0		(3.0		)	—		3.0		(3.0		)	—			—
Trademarks	59.4		(26.8		)	32.6		69.6		(28.7		)	—			40.9
Formulas/recipes	33.8		(22.2		)	11.6		33.8		(18.3		)	—			15.5
Computer software	151.2		(80.1		)	71.1		137.8		(74.7		)	—			63.1
Total finite lived intangibles	$	1,209.1	$	(509.0	)	$	700.1	$	1,509.6	$	(486.1	)	$	(273.3	)	$	750.2

Total intangible assets, excluding goodwill, as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 were ~~$1,068.3~~$722.3 million and ~~$1,137.6~~$773.0 million, respectively. Amortization expense on intangible assets for the three months ended September 30, 2017 and 2016 was $28.5 million and $28.6 million, respectively, and $85.8 million and $80.9 million for the nine months ended September 30, 2017 and 2016, respectively. Estimated amortization expense on intangible assets for 2017 and the next four years is as follows:

(In millions)

2017

$
114.7

2018

108.4

2019

105.9

2020

103.6

2021

94.1

7. ~~ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~

September 30,

December 31,

2017

2016

(In millions)

Accounts payable

$
652.5

$
458.1

Payroll and benefits

58.2

78.5

Interest

7.4

24.1

Taxes

10.8

31.0

Health insurance, workers’ compensation, and other insurance costs

27.4

17.2

Marketing expenses

9.5

12.4

Other accrued liabilities

8.0

5.5

Total

$
773.8

$
626.8

8. INCOME TAXES

Income taxes were recorded at an effective rate of (2,600.0)% and 30.2% for the three and nine months ended September 30, 2018, respectively, compared to 4.3% and (65.2)% for the three and nine months ended September 30, 2017, ~~respectively, compared to 28.9% and 24.0% for the three and nine months ended September 30, 2016,~~ respectively. The ~~changes~~income tax benefit in the third quarter of 2018 was primarily driven by the release of certain tax reserves related to statute expirations of $6.7 million. In tandem with recognizing the $6.7 million tax benefit, during the third quarter of 2018 the Company wrote off $6.7 million of related tax indemnification asset, which was reflected in Other expense (income), net in the

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidated Statements of Operations. The change in the effective tax rates for the three and nine months ended September 30, ~~2017~~2018 compared to ~~September 30, 2016 was~~2017 are primarily a result of the ~~income~~reduction in the U.S. Federal statutory tax ~~benefits related to share-based payments,~~rate, an increase in the amount of income tax benefit from the release of tax reserves, ~~for unrecognized~~a decrease in the tax ~~benefits, and~~deduction related to share–based payments, a reduction in the ~~income tax~~ benefit ~~derived~~ from foreign tax ~~credits.~~ credits on a year–over–year basis, and the overall impact of discrete items on low third quarter income before income taxes. 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.

The Company’s effective tax rate differs from the U.S. federal statutory tax rate primarily due to state tax expense, the ~~benefits associated with the federal domestic production activities deduction,~~impact of stock compensation expense that is not deductible for tax purposes, and an intercompany financing structure entered into in

~~TREEHOUSE FOODS, INC.~~

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

conjunction with the E.D. Smith Foods, Ltd. (“E.D. Smith”) acquisition in 2007. In addition, the Company’s effective tax rate for the nine months ended September 30, ~~2017~~2018 reflects a discrete ~~benefit~~expense with a rate impact of approximately ~~17.7%~~(2.4)% attributable to the vesting and exercise of share-based awards.

The Internal Revenue Service (“IRS”) ~~is currently examining~~completed their examination of the TreeHouse Foods, Inc. & Subsidiaries’ 2015 tax ~~year.~~year, resulting in an insignificant impact to income tax expense during the first quarter of 2018. Our Canadian operations are under exam by the Canadian Revenue Agency (“CRA”) for tax years 2008 through 2015. These examinations are expected to be completed in ~~2017~~the fourth quarter of 2018 or ~~2018.~~2019. The Italian Agency of Revenue (“IAR”) is examining the 2007 through 2009 and 2013 tax years of our Italian operations. The IAR examinations are not expected to be completed prior to 2020 due to a backlog of appeals before the agency. The Company has examinations in process with various state taxing authorities, which are expected to be completed in ~~2017 and~~ 2018.

Management estimates that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by as much as ~~$9.2~~$3.4 million within the next 12 months, primarily as a result of the resolution of audits currently in progress and the lapsing of statutes of limitations. ~~Approximately $1.5~~As much as $0.8 million of the ~~$9.2~~$3.4 million ~~would~~could affect net income when settled.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act made significant changes to the Internal Revenue Code, including, but not limited to, a corporate tax rate decrease from 35% to 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings, the transition of U.S. international taxation from a worldwide tax system to a territorial system, allowing for the full expensing of certain qualified property and a one-time transition tax on the mandatory repatriation of cumulative foreign earnings.

The SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of US GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. To the extent that a company’s accounting for the Tax Act is incomplete but it is able to provide a reasonable estimate, it must record a provisional amount in the financial statements. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740.

For the period ended December 31, 2017, the Company recorded a provisional net tax benefit of $104.2 million primarily consisting of (1) a $108.4 million benefit related to adjustments to our net deferred tax liability and (2) a $9.6 million expense related to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings. During the nine months ended September 30, 2018, the Company recorded a $1.4 million adjustment to its provisional tax benefit consisting of (1) a $1.0 million additional benefit related to adjustments to our net deferred tax liability and (2) a $0.4 million reduction to the expense related to the one-time transition tax.

The Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low Taxed Income or “GILTI”) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s U.S. shareholder. The FASB allows an entity to make an accounting policy election of either (1) treating taxes due of future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or (2) factoring such amounts into the company’s measurement of deferred taxes. We continue to assess the impact of GILTI and have not yet made an accounting policy election.

As the Company has not completed its analysis of the impact of the Tax Act, the net tax benefit of $105.6 million remains provisional and is subject to change due to, among other things, additional analysis, changes in interpretations and assumptions

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Company has made, and additional regulatory guidance that may be issued. We expect to complete our analysis within the one-year measurement period allowed by SAB 118.

September 30,

December 31,

2017

2016

(In millions)

Revolving Credit Facility

$
120.0

$
170.0

Term Loan A

276.7

288.0

Term Loan A-1

172.5

180.0

Term Loan A-2

973.8

1,005.8

2022 Notes

400.0

400.0

2024 Notes

775.0

775.0

Other debt

3.0

5.7

Total outstanding debt

2,721.0

2,824.5

Deferred financing costs

(28.5
)

(33.3
)
Less current portion

(72.1
)

(66.4
)
Total long-term debt

$
2,620.4

$
2,724.8



	September 30, 2018			December 31, 2017
	(In millions)
Term Loan A	$	495.0		$	498.8
Term Loan A-1	891.0			897.8
2022 Notes	375.9			400.0
2024 Notes	602.9			775.0
Other debt	2.6			3.1
Total outstanding debt	2,367.4			2,574.6
Deferred financing costs	(23.9		)	(28.8		)
Less current portion	(10.4		)	(10.1		)
Total long-term debt	$	2,333.1		$	2,535.7

During the ~~closing~~three months ended September 30, 2018, the Company repurchased $2.7 million and $53.3 million of its 2022 Notes and 2024 Notes, respectively. The Company wrote off $0.7 million of debt issuance costs and recorded a loss on debt extinguishment of $1.1 million related to the repurchases, recorded within Interest expense and Other expense (income), net of the ~~acquisition~~Condensed Consolidated Statements of Operations, respectively. During the nine months ended September 30, 2018, the Company repurchased $24.1 million and $172.1 million of its 2022 Notes and 2024 Notes, respectively. The Company wrote off $2.4 million of debt issuance costs and recorded a loss on debt extinguishment of $4.2 million related to the repurchases, recorded within Interest expense and Other expense (income), net of the ~~Private Brands Business,~~Condensed Consolidated Statement of Operations, respectively. There were no amounts repurchased during the three or nine months ended September 30, 2017.

On December 1, 2017, the Company entered into the ~~Amended and Restated Credit Agreement. The~~Second Amended and Restated Credit Agreement (the “Credit Agreement”) which amends, restates, and replaces the Company’s prior credit agreement, dated as of February 1, 2016 (as amended from time to time prior to February 1, 2016, the “Prior Credit Agreement”). As amended, the senior unsecured credit facility includes a revolving credit facility (the “Revolving Credit Facility” or the “Revolver”) and two term loans.The Credit Agreement (1) ~~amended~~extended the maturity dates of the Revolving Credit Facility, Term Loan A, and Term Loan A-1, ~~so that they are conterminous~~(2) resized the Revolver from $900 million to $750 million, (3) consolidated three term loans into two, (4) improved pricing, and ~~mature~~(5) modified the fee structure on ~~February 1, 2021, (2) provided for~~ the ~~issuance of Term Loan A-2, and (3) increased credit spreads. The proceeds from Term Loan A-2 were used~~Revolving Credit Facility to ~~fund a~~now calculate based on the unused portion of the ~~purchase price of~~commitments under the ~~Private Brands Business. After satisfying~~Revolving Credit Facility rather than the total commitments under the Revolving Credit Facility.

On June 11, 2018, the Company entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement. Under the Amendment, among other things, (i) the leverage covenant threshold has increased through fiscal year 2019, (ii) the Company and the other loan parties secured the obligations with liens on substantially all of their personal property, and (iii) such liens will be released upon the ~~required collateral release~~Company’s leverage ratio being less than or equal to 4.00 to 1.00 no earlier than the fiscal quarter ended on December 31, 2019. The material terms and conditions ~~set forth~~under the Credit Agreement are otherwise substantially consistent with those contained in the Credit Agreement prior to the ~~Credit Facility became unsecured~~Amendment. In connection with this Amendment, $0.6 million in ~~August 2017. Amongst other conditions, the Company had to reach a leverage ratio~~lender fees will be amortized ratably through January 31, 2025 and $1.8 million of ~~3.5 as defined in the Credit Agreement and have no other pari-passu secured debt outstanding to become unsecured.~~

~~The Revolving Credit Facility, Term Loan A, Term Loan A-1, and Term Loan A-2 are known collectively as the “Amended and Restated Credit Agreement.”~~ fees will be amortized ratably through February 1, 2023.

The Company’s average interest rate on debt outstanding under its ~~Amended and Restated~~ Credit Agreement for the three months ended September 30, ~~2017~~2018 was ~~3.106%~~3.71%. Including the impact of interest rate swap agreements ~~described below with a weighted average fixed interest rate base~~in effect as of ~~approximately 0.86% on $500 million,~~September 30, 2018, the average rate ~~decreases~~decreased to ~~2.99%~~3.28%.

Revolving Credit Facility — As of September 30, ~~2017, $729.5~~2018, there were $30.4 million in letters of credit that were issued but undrawn, and $719.6 million of available credit under the ~~aggregate commitment of $900~~$750.0 million ~~of the~~ Revolving Credit ~~Facility was available. Under the Amended and Restated Credit Agreement, the~~Facility. The Revolving Credit Facility matures on February 1, 2021. In addition, as of September 30, 2017, there were $50.5 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.2023.

~~10. EARNINGS PER SHARE~~

Basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the reporting period. The weighted average number of common shares used in the diluted earnings per share calculation is determined using the treasury stock method and includes the incremental effect related to the Company’s outstanding stock-based compensation awards.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. STOCKHOLDERS' EQUITY

Share Repurchase Authorization

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. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The size and timing of any repurchases will depend on price, market and business conditions, and other factors. The Company is authorized to enter into an administrative repurchase plan for $50 million of the $400 million in fiscal 2018 and is also authorized to repurchase an additional $100 million per year outside the administrative repurchase plan (total annual cap of $150 million). Any shares repurchased will be held as treasury stock.

For the nine months ended September 30, 2018, the Company repurchased approximately 0.9 million shares of common stock for a total of $42.2 million.

10. EARNINGS PER SHARE

The following table summarizes the effect of the share-based compensation awards on the weighted average number of shares outstanding used in calculating diluted earnings (loss) per share:

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In millions, except per share data)

Net income

$
28.8

$
37.4

$
22.8

$
53.2

Weighted average common shares outstanding

57.3

56.8

57.1

55.4

Assumed exercise/vesting of equity awards (1)

0.4

0.8

0.6

0.8

Weighted average diluted common shares outstanding

57.7

57.6

57.7

56.2

Net earnings per basic share

$
0.50

$
0.66

$
0.40

$
0.96

Net earnings per diluted share

$
0.50

$
0.65

$
0.40

$
0.95



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017
	(In millions, except per share data)
Net income (loss)	$	5.4	$	28.8	$	(48.8	)	$	22.8

Weighted average common shares outstanding	56.3		57.3		56.4			57.1
Assumed exercise/vesting of equity awards (1)	0.4		0.4		—			0.6
Weighted average diluted common shares outstanding	56.7		57.7		56.4			57.7

Net earnings (loss) per basic share	$	0.10	$	0.50	$	(0.87	)	$	0.40
Net earnings (loss) per diluted share	$	0.10	$	0.50	$	(0.87	)	$	0.40

11. STOCK-BASED COMPENSATION

The Board of Directors adopted, and the Company’s stockholders approved, the “TreeHouse Foods, Inc. Equity and Incentive Plan” (the “Plan”). On April 27, 2017, the Plan was amended and restated to increase the number of shares available for issuance under the Plan by 3.8 million shares, effective February 14, 2017. The Plan is administered by our Compensation Committee, which consists entirely of independent directors. The Compensation Committee determines specific awards for our executive officers. For all other employees, if the committee designates, our Chief Executive Officer or such other officers will, from time to time, determine specific persons to whom awards under the Plan will be granted, and the terms and conditions of each award. The Compensation Committee or its designee, pursuant to the terms of the Plan, will also make all other necessary decisions and interpretations under the Plan.

Under the Plan, the Compensation Committee may grant awards of various types of compensation, including stock options, restricted stock, restricted stock units, performance shares, performance units, other types of stock-based awards, and other cash-based compensation. The maximum number of shares available to be awarded under the Plan is approximately 16.1 million, of which approximately ~~4.9~~3.8 million remain available at September 30, ~~2017.~~

2018.

Income (loss) before income taxes for the three and nine ~~month periods~~months ended September 30, ~~2017~~2018 includes stock-based compensation expense of ~~$6.6~~$5.0 million and ~~$25.2~~$28.2 million, respectively. Stock-based compensation expense for the three and nine months ended September 30, ~~2016~~2017 was ~~$8.5~~$6.6 million and ~~$22.8~~$25.2 million, respectively. The tax benefit recognized related to the compensation cost of these share-based awards was approximately $1.3 million and $7.1 million for the three and nine months

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ended September 30, 2018, respectively, and $2.4 million and $9.3 million for the three and nine months ended September 30, 2017, ~~respectively,~~respectively.

In the first quarter of 2018, the Company entered into an amended employment agreement with our former Chief Executive Officer. The amended plan resulted in the modification of his outstanding equity awards by accelerating the vesting dates, changing outstanding performance units to vest at target, and ~~$3.1~~extending the exercisability of options outstanding. Modification of the existing awards resulted in a charge of $10.0 million in the three months ended March 31, 2018. The impact of this modification on expense recognized for stock options, restricted stock units, and performance units was $1.2 million, $3.8 million, and ~~$8.3~~$5.0 million, ~~for the three and nine months ended September 30, 2016,~~ respectively.

~~TREEHOUSE FOODS, INC.~~

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

Stock Options —The following table summarizes stock option activity during the nine months ended September 30, ~~2017.~~2018. Stock options generally vest in approximately three equal installments on each of the first three anniversaries of the grant date and expire ten years from the grant date.

Weighted

Weighted

Average

Average

Remaining

Aggregate

Employee

Director

Exercise

Contractual

Intrinsic

Options

Options

Price

Term (yrs)

Value

(In thousands)

(In millions)

Outstanding, at December 31, 2016

2,069

20

$
64.77

5.8

$
28.9

Granted

481

—

84.16

Forfeited

(87
)

—

87.85

Exercised

(257
)

(16
)

40.83

Expired

(2
)

—

87.83

Outstanding, at September 30, 2017

2,204

4

71.03

6.3

16.3

Vested/expected to vest, at September 30, 2017

2,140

4

70.57

6.2

16.3

Exercisable, at September 30, 2017

1,404

4

61.99

4.7

16.3

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Compensation expense

$
2.3

$
2.0

$
6.8

$
5.5

Intrinsic value of stock options exercised

0.9

0.1

11.0

6.1

Tax benefit recognized from stock option exercises

0.4

0.1

4.2

2.2

~~Compensation~~



	Employee Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (yrs)	Aggregate Intrinsic Value
	(In thousands)					(In millions)
Outstanding, at December 31, 2017	2,099		$	71.46	6.1	$	5.9
Forfeited	(106	)	88.19
Exercised	(196	)	24.06
Expired	(39	)	84.72
Outstanding, at September 30, 2018	1,758		75.43		5.7	0.7
Vested/expected to vest, at September 30, 2018	1,727		75.27		5.6	0.7
Exercisable, at September 30, 2018	1,436		72.77		5.1	0.7



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)				(In millions)
Compensation expense	$	0.8	$	2.3	$	4.9	$	6.8
Intrinsic value of stock options exercised	—		0.9		3.8		11.0
Tax benefit recognized from stock option exercises	0.1		0.4		0.7		4.2

Future compensation costs related to unvested options totaled ~~$16.3~~$3.9 million at September 30, ~~2017~~2018 and will be recognized over the remaining vesting period of the grants, which averages ~~2.1~~1.3 years. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used to calculate the fair value of stock options issued in 2017 include the following: weighted average expected volatility of 26.71%, expected term of six years, weighted average risk free rate of 2.07%, and no dividends. The weighted average grant date fair value of awards granted in 2017 was $24.41.

Restricted Stock Units— Employee restricted stock unit awards generally vest based on the passage of time. These awards generally vest in approximately three equal installments on each of the first three anniversaries of the grant date. Director restricted stock units generally vest on the first anniversary of the grant date. Certain directors have deferred receipt of their awards until either their departure from the Board of Directors or a specified date. As of September 30, ~~2017, 100 thousand~~2018, director restricted stock units that have been earned and ~~deferred.~~deferred totaled 91,400.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the restricted stock unit activity during the nine months ended September 30, ~~2017:~~

2018:

Weighted

Weighted

Employee

Average

Director

Average

Restricted

Grant Date

Restricted

Grant Date

Stock Units

Fair Value

Stock Units

Fair Value

(In thousands)

(In thousands)

Outstanding, at December 31, 2016

516

$
87.03

104

$
57.78

Granted

316

82.60

17

84.66

Vested

(169
)

85.02

(4
)

100.30

Forfeited

(61
)

87.60

—

—

Outstanding, at September 30, 2017

602

85.19

117

60.21

~~TREEHOUSE FOODS, INC.~~

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Compensation expense

$
5.5

$
4.9

$
17.3

$
12.9

Fair value of vested restricted stock units

0.7

2.8

13.7

15.9

Tax benefit recognized from vested restricted stock units

0.3

1.0

5.0

5.7



	Employee Restricted Stock Units		Weighted Average Grant Date Fair Value		Director Restricted Stock Units		Weighted Average Grant Date Fair Value
	(In thousands)				(In thousands)
Outstanding, at December 31, 2017	547		$	85.41	117		$	60.21
Granted	657		38.70		38		39.01
Vested	(209	)	86.68		(25	)	61.20
Forfeited	(139	)	65.92		(1	)	84.66
Outstanding, at September 30, 2018	856		52.39		129		53.75



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)				(In millions)
Compensation expense	$	3.8	$	5.5	$	17.1	$	17.3
Fair value of vested restricted stock units	0.8		0.7		10.7		13.7
Tax benefit recognized from vested restricted stock units	0.2		0.3		2.3		5.0

Future compensation costs related to restricted stock units are approximately ~~$33.9~~$24.7 million as of September 30, ~~2017~~2018 and will be recognized on a weighted average basis over the next 2.0 years. The grant date fair value of the awards is equal to the Company’s closing stock price on the grant date.

Performance Units— Performance unit awards are granted to certain members of management. These awards contain service and performance conditions. For each of the three performance periods, one-third of the units will accrue, multiplied by a predefined percentage between 0% and 200%, depending on the achievement of certain operating performance measures. Additionally, for the cumulative performance period, a number of units will accrue, equal to the number of units granted multiplied by a predefined percentage between 0% and 200%, depending on the achievement of certain operating performance measures, less any units previously accrued. Accrued units will be converted to stock or cash, at the discretion of the Compensation Committee, generally, on the third anniversary of the grant date. The Company intends to settle these awards in stock and has the shares available to do so. On June ~~27, 2017,~~26, 2018, based on anthe achievement of operating performance measures, ~~72,335~~79,910 performance units were converted into ~~81,556~~18,139 shares of common stock, or an average conversion of ~~1.13~~0.23 shares for each performance unit.

The following table summarizes the performance unit activity during the nine months ended September 30, ~~2017:~~

2018:

Weighted

Average

Performance

Grant Date

Units

Fair Value

(In thousands)

Unvested, at December 31, 2016

246

$
85.16

Granted

114

86.66

Vested

(72
)

79.89

Forfeited

(18
)

87.02

Unvested, at September 30, 2017

270

86.23

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Compensation expense

$
(1.2
)

$
1.6

$
1.1

$
4.4

Fair value of vested performance units

—

(1.8
)

6.5

9.6

Tax benefit recognized from performance units vested

—

—

2.5

4.1



	Performance Units		Weighted Average Grant Date Fair Value
	(In thousands)
Unvested, at December 31, 2017	264		$	86.13
Granted	141		38.27
Vested	(18	)	76.30
Forfeited	(74	)	78.89
Unvested, at September 30, 2018	313		66.92

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018		2017
	(In millions)					(In millions)
Compensation expense	$	0.4	$	(1.2	)	$	6.2	$	1.1
Fair value of vested performance units	—		—			1.0		6.5
Tax benefit recognized from performance units vested	—		—			0.1		2.5

Future compensation costs related to the performance units are estimated to be approximately ~~$6.2~~$2.6 million as of September 30, ~~2017,~~2018 and are expected to be recognized over the next 2.2 years. The grant date fair value of the awards is equal to the Company’s closing stock price on the date of grant.

~~TREEHOUSE FOODS, INC.~~

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

12. ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss consists of the following components, all of which are net of ~~tax, except for the foreign currency translation adjustment:~~

tax:

Unrecognized

Accumulated

Foreign

Pension and

Other

Currency

Postretirement

Comprehensive

Translation (1)

Benefits (2)

Loss

(In millions)

Balance at December 31, 2016

$
(89.4
)

$
(11.9
)

$
(101.3
)
Other comprehensive income

34.5

—

34.5

Reclassifications from accumulated other comprehensive loss

—

7.2

7.2

Other comprehensive income

34.5

7.2

41.7

Balance at September 30, 2017

$
(54.9
)

$
(4.7
)

$
(59.6
)

Unrecognized

Accumulated

Foreign

Pension and

Other

Currency

Postretirement

Comprehensive

Translation (1)

Benefits (2)

Loss

(In millions)

Balance at December 31, 2015

$
(100.5
)

$
(13.0
)

$
(113.5
)
Other comprehensive income

21.6

—

21.6

Reclassifications from accumulated other comprehensive loss

—

0.8

0.8

Other comprehensive income

21.6

0.8

22.4

Balance at September 30, 2016

$
(78.9
)

$
(12.2
)

$
(91.1
)



	Foreign Currency Translation (1)			Unrecognized Pension and Postretirement Benefits (2)			Accumulated Other Comprehensive Loss
	(In millions)
Balance at December 31, 2017	$	(57.2	)	$	(4.3	)	$	(61.5	)
Other comprehensive loss	(13.0		)	—			(13.0		)
Reclassifications from accumulated other comprehensive loss	—			0.4			0.4
Reclassifications from accumulated other comprehensive loss - Adoption of ASU 2018-02	—			(1.1		)	(1.1		)
Other comprehensive loss	(13.0		)	(0.7		)	(13.7		)
Balance at September 30, 2018	$	(70.2	)	$	(5.0	)	$	(75.2	)



	Foreign Currency Translation (1)			Unrecognized Pension and Postretirement Benefits (2)			Accumulated Other Comprehensive Loss
	(In millions)
Balance at December 31, 2016	$	(89.4	)	$	(11.9	)	$	(101.3	)
Other comprehensive income	34.5			—			34.5
Reclassifications from accumulated other comprehensive loss	—			7.2			7.2
Other comprehensive income	34.5			7.2			41.7
Balance at September 30, 2017	$	(54.9	)	$	(4.7	)	$	(59.6	)


(2)	The unrecognized pension and postretirement benefits reclassification is presented net of tax of ~~$4.4~~$0.2 million and ~~$0.5~~$4.4 million for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively. Also included is a $1.1 million adjustment related to the adoption of ASU 2018-02 (see Note 19 for more information).

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Condensed Consolidated Statements of Operations lines impacted by reclassifications out of Accumulated other comprehensive loss are outlined below:

Affected line in

Reclassifications from Accumulated

the Condensed Consolidated

Other Comprehensive Loss

Statements of Operations

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Amortization of defined benefit pension and postretirement items:

Prior service costs

$
—

$
—

$
0.1

$
0.2

(a)
Unrecognized net loss

0.1

0.4

0.7

1.1

(a)
Actuarial adjustment

—

—

2.1

—

(b)
Divestiture

—

—

8.7

—

Other operating expense, net
Total before tax

0.1

0.4

11.6

1.3

Income taxes

—

0.1

4.4

0.5

Income taxes
Net of tax

$
0.1

$
0.3

$
7.2

$
0.8



										Affected line in
	Reclassifications from Accumulated Other Comprehensive Loss									the Condensed Consolidated Statements of Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017
	(In millions)				(In millions)
Amortization of defined benefit pension and postretirement items:
Prior service costs	$	0.1	$	—	$	0.2		$	0.1	Other expense (income), net
Unrecognized net loss	0.1		0.1		0.4			0.7		Other expense (income), net
Actuarial adjustment	—		—		—			2.1		(a)
Divestiture	—		—		—			8.7		Other operating expense, net
Total before tax	0.2		0.1		0.6			11.6
Income taxes	0.1		—		0.2			4.4		Income tax (benefit) expense
Adoption of ASU 2018-02	—		—		1.1			—		Income tax (benefit) expense
Net of tax	$	0.1	$	0.1	$	(0.7	)	$	7.2


(a)	These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement cost, and are recorded in the Cost of sales and General and administrative lines of the Condensed Consolidated Statements of Operations.

~~(b)~~

Represents the actuarial adjustment that was recorded in conjunction with the divestiture of a pension plan and a postretirement benefit plan in the second quarter of ~~2017.~~

2017 due to the SIF business divestiture.

~~TREEHOUSE FOODS, INC.~~

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

13. EMPLOYEE RETIREMENT AND POSTRETIREMENT BENEFITS

Pension, Profit Sharing, and Postretirement Benefits— Certain employees and retirees participate in pension and other postretirement benefit plans. Employee benefit plan obligations and expenses included in the Condensed Consolidated Financial Statements are determined based on plan assumptions, employee demographic data, including years of service and compensation, benefits and claims paid, and employer contributions. In connection with the divestiture of the ~~canned soup and infant feeding (“SIF”)~~SIF business in the second quarter of 2017, the Company divested a pension plan and a postretirement benefit plan. The net unfunded liability associated with these plans as of the closing date, which iswas included in ~~the~~ Other operating expense, net ~~line~~ of the Condensed Consolidated Statements of Operations, was $10.5 ~~million.~~million for the nine months ended September 30, 2017.

Components of net periodic pension expense are as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Service cost

$
0.8

$
1.3

$
2.9

$
3.6

Interest cost

3.6

4.1

11.4

11.2

Expected return on plan assets

(4.2
)

(4.5
)

(13.3
)

(12.2
)
Amortization of unrecognized prior service cost

—

—

0.1

0.2

Amortization of unrecognized net loss

0.1

0.4

0.7

1.1

Net periodic pension cost

$
0.3

$
1.3

$
1.8

$
3.9



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In millions)						(In millions)
Service cost	$	0.6		$	0.8		$	1.8		$	2.9
Interest cost	3.0			3.6			8.9			11.4
Expected return on plan assets	(4.1		)	(4.2		)	(12.2		)	(13.3		)
Amortization of unrecognized prior service cost	0.1			—			0.2			0.1
Amortization of unrecognized net loss	0.1			0.1			0.4			0.7
Net periodic pension (benefit) cost	$	(0.3	)	$	0.3		$	(0.9	)	$	1.8

The Company contributed $1.7 million to the pension plans during the first nine months of 2018. The Company does not expect to make ~~any~~additional contributions to the ~~pension~~ plans in ~~2017.~~

2018.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Components of net periodic postretirement expense are as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Interest cost

$
0.3

$
0.3

$
0.9

$
0.9

Net periodic postretirement cost

$
0.3

$
0.3

$
0.9

$
0.9



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)				(In millions)
Interest cost	$	0.3	$	0.3	$	0.9	$	0.9
Net periodic postretirement cost	$	0.3	$	0.3	$	0.9	$	0.9

The Company expects to contribute approximately ~~$1.6~~$1.8 million to the postretirement health plans during ~~2017.~~

~~Net~~2018.

The service cost components of net periodic pension and postretirement costs ~~are~~were recorded in ~~the~~ Cost of sales and ~~General and administrative lines~~the other components were recorded in Other expense (income), net of the Condensed Consolidated Statements of Operations.

14. OTHER OPERATING EXPENSE, NET

The Company incurred other operating expense for the three and nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, which consisted of the following:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Restructuring

$
10.5

$
4.9

$
26.0

$
9.0

Loss on divestiture

0.4

—

85.6

—

Other

0.2

0.4

0.3

1.3

Total other operating expense, net

$
11.1

$
5.3

$
111.9

$
10.3



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017
	(In millions)					(In millions)
Restructuring programs (1)	$	37.3		$	10.5	$	112.6		$	26.0
(Gain) loss on divestitures (2)	(14.3		)	0.4		(14.3		)	85.6
Other	0.3			0.2		0.6			0.3
Total other operating expense, net	$	23.3		$	11.1	$	98.9		$	111.9


(1)	See Note 2 for more information.

(2)

On July 16, 2018, the Company completed the divestiture of its McCann's business. The McCann's business produced steel cut Irish oatmeal and was previously reported within the Meals segment. On May 22, 2017, the Company completed the divestiture of its SIF business. The SIF business produced private label condensed and ready-to-serve soup, baby food, and gravies for the Meals segment. Neither of these divestitures met the criteria to be presented as discontinued operations.

On May 22, 2017, the Company completed the divestiture of its SIF business. The SIF business was based in Pittsburgh, Pennsylvania and produced private label condensed and ready-to-serve soup, baby food, and gravies for the Meals segment. The divestiture of this business did not meet the criteria to be presented as discontinued operations as it did not represent a strategic shift that would have a

~~TREEHOUSE FOODS, INC.~~

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

~~major effect on the Company’s results of operations. The transaction remains subject to working capital adjustments that are expected to be finalized in the fourth quarter of 2017.~~

15. COMMITMENTS AND CONTINGENCIES

Litigation, Investigations, and Audits— On November 16, 2016, a purported TreeHouse shareholder filed a ~~putative~~ class action captionedTarara v. TreeHouse Foods, Inc., et al., Case No. 1:16-cv-10632, in the United States District Court for the Northern District of Illinois against TreeHouse and certain of its officers. The complaint, amended on March 24, 2017, is purportedly brought on behalf of all purchasers of TreeHouse common stock from January 20, 2016 through and including November 2, 2016, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. On December 22, 2016, another purported TreeHouse shareholder filed an action captionedWells v. Reed, et al., Case No. 2016-CH-16359, in the Circuit Court of Cook County, Illinois, against TreeHouse and certain of its officers. This complaint, purportedly brought derivatively on behalf of TreeHouse, asserts state law claims against certain officers for breach of fiduciary duty, unjust enrichment, and corporate waste. On February 7, 2017, another purported TreeHouse shareholder filed an action captionedLavin v. Reed, Case No. 17-cv-01014, in the Northern District of Illinois, against TreeHouse and certain of its officers. This complaint, likeWells, is purportedly brought derivatively on behalf of TreeHouse, and it asserts state law claims against certain officers for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and corporate waste.

All three complaints make substantially similar allegations (though the amended complaint in Tarara now contains additional detail). Essentially, the complaints allege that TreeHouse, under the authority and control of the individual defendants: (i) made certain false and misleading statements regarding the Company’s business, operations, and future prospects; and (ii) failed to disclose that (a) the Company’s private label business was underperforming; (b) the Company’s Flagstone business was

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

underperforming; (c) the Company’s acquisition strategy was underperforming; (d) the Company had overstated its full-year 2016 guidance; and (e) TreeHouse’s statements lacked reasonable basis. The complaints allege that these actions artificially inflated the market price of TreeHouse common stock during the class period, thus purportedly harming investors. We believe that these claims are without merit and intend to defend against them vigorously.

Since its initial docketing, the Tarara matter has been re-captioned as Public Employees’ Retirement Systems of Mississippi v. TreeHouse Foods, Inc., et al., in accordance with the Court’s order appointing Public Employees’ Retirement Systems of Mississippi as the lead plaintiff. ~~The~~ On May 26, 2017, the Public Employees’ defendants ~~have~~ filed a motion to dismiss, which ~~has been fully briefed.~~

the court denied on February 12, 2018. On April 12, 2018, the Public Employees’ defendants filed their answer to the amended complaint. On April 23, 2018, the parties filed a joint status report with the Court, describing the nature of the case and issues involved, as well as setting forth a proposed discovery and briefing schedule for the Court’s consideration. On July 13, 2018, lead plaintiff filed a motion to certify the class, and defendants filed their response in opposition to the motion to certify the class on October 8, 2018. The motion to certify remains pending before the Court. The next status hearing is scheduled for December 20, 2018.

Additionally, due to the similarity of the complaints, the parties in Wells~~and~~ and Lavin have entered stipulations deferring the litigation until the earlier of (i) the court in Public Employees’ entering an order resolving defendants’ anticipated motion to dismiss therein or (ii) plaintiffs’ counsel receiving notification of a settlement of Public Employees’ or until otherwise agreed to by the ~~Parties. The next status date in~~ ~~Wells~~ ~~is April~~parties. On September 27, ~~2018. There is no set status date in~~ ~~Lavin~~ ~~at this time, but~~2018, the parties ~~are directed~~in Wells and Lavin filed joint motions for entry of agreed orders further deferring the matters in light of the Public Employees’ Court’s denial of the motion to ~~file~~dismiss in February 2018. The Wells and Lavin Courts entered the agreed orders further deferring the matters on September 27, 2018 and October 10, 2018, respectively.

In Lavin, the parties filed a joint status report on the progress of the related litigation byon October 26, ~~2017, after which point~~2017. The Lavin parties also filed additional status reports with the Court on March 12, 2018 and June 19, 2018.

There is no set status date in Lavin ~~court could~~ at this time. The next status date in Wells is set ~~a new status date.~~

for January 7, 2019.

In addition, ~~we are~~the Company is party in the ordinary course of business to certain claims, litigation, audits, and investigations. The Company will record an accrual for a ~~variety of legal proceedings arising out~~loss contingency when it is probable that a loss has been incurred and the amount of the ~~conduct~~loss can be reasonably estimated. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable that may be incurred in connection with any such currently pending or threatened matter, none of ~~our business. While~~which are significant. In the ~~results~~Company’s opinion, the settlement of ~~proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will~~any such currently pending or threatened matter is not expected to have a material ~~adverse effect~~impact on ~~our consolidated~~the Company’s financial ~~statements,~~position, results of operations, or cash flows.

16. DERIVATIVE INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by derivative instruments include interest rate risk, foreign currency risk, and commodity price risk. Derivative contracts are entered into for periods consistent with the related underlying exposure and do not constitute positions independent of those exposures. The Company does not enter into derivative instruments for trading or speculative purposes.

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

~~In June 2016,~~conditions.

As of September 30, 2018, the Company had entered into ~~$500 million~~$2.1 billion of long-term interest rate swap agreements to lock into a fixed LIBOR interest rate base. Under the terms of the agreements, ~~$500 million~~$2.1 billion in variable-rate debt was swapped for a weighted average fixed interest rate

~~TREEHOUSE FOODS, INC.~~

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

base of approximately ~~0.86% for a period of 37 months, beginning on January 31, 2017 and ending on~~2.22% through February 28, ~~2020.~~2025. These ~~agreements do~~instruments are not ~~qualify~~accounted for under hedge accounting and the changes in their fair value are recorded in the Condensed Consolidated Statements of ~~Operations, with their fair value recorded on the Condensed Consolidated Balance Sheets.~~

Operations.

Foreign Currency Risk - Due to the Company’s foreign operations, we are exposed to foreign currency risk. The Company enters into foreign currency contracts to manage the risk associated with foreign currency cash flows. The Company’s objective in using foreign currency contracts is to establish a fixed foreign currency exchange rate for the net cash flow requirements for purchases that are denominated in U.S. dollars. These contracts do not qualify for hedge accounting and changes in their fair

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

value are recorded in the Condensed Consolidated Statements of ~~Operations, with their fair value recorded on the Condensed Consolidated Balance Sheets.~~Operations. As of September 30, ~~2017,~~2018, the Company had ~~$46.5~~$24.5 million of U.S. dollar foreign currency contracts outstanding, expiring throughout ~~2018.~~

2018 and 2019.

Commodity Risk - Certain commodities we use in the production and distribution of our products are exposed to market price risk. The Company utilizes derivative contracts to manage this risk. The majority of commodity forward contracts are not derivatives, and those that are generally qualify for the normal purchases and normal sales scope exception under the guidance for derivative instruments and hedging activities and, therefore, are not subject to its provisions. For derivative commodity contracts that do not qualify for the normal purchases and normal sales scope exception, the Company records their fair value on the Condensed Consolidated Balance Sheets, with changes in value being recorded in the Condensed Consolidated Statements of Operations.

The Company’s derivative commodity contracts may include contracts for diesel, oil, plastics, natural gas, electricity, and other commodity contracts that do not meet the requirements for the normal purchases and normal sales scope exception.

Diesel contracts are used to manage the Company’s risk associated with the underlying cost of diesel fuel used to deliver products. Contracts for oil and plastics are used to manage the Company’s risk associated with the underlying commodity cost of a significant component used in packaging materials. Contracts for natural gas and electricity are used to manage the Company’s risk associated with the utility costs of its manufacturing facilities, and commodity contracts ~~that are derivatives that do not meet the normal purchases and normal sales scope exception~~ are used to manage the price risk associated with raw material costs. As of September 30, ~~2017,~~2018, the Company had outstanding contracts for the purchase of ~~66,473~~0.2 million megawatts of electricity, expiring throughout ~~2017~~2018, 2019, and ~~2018; 8.8~~2020; 4.5 million gallons of diesel, expiring throughout ~~2017~~2018; and ~~early 2018; 1.9~~3.9 million dekatherms of natural gas, expiring throughout ~~2017~~2018 and ~~2018; 0.1 million bushels of wheat, expiring throughout 2017 and early 2018; and 0.9 million bushels of corn, expiring throughout 2017 and early 2018.~~

2019.

The following table identifies the derivative, its fair value, and location on the Condensed Consolidated Balance Sheets:

Fair Value

Balance Sheet Location

September 30, 2017

December 31, 2016

(In millions)

Asset Derivatives

Commodity contracts

Prepaid expenses and other current assets

$
2.5

$
1.0

Foreign currency contracts

Prepaid expenses and other current assets

0.6

0.7

Interest rate swap agreements

Prepaid expenses and other current assets

9.6

10.4

$
12.7

$
12.1

Liability Derivatives

Commodity contracts

Accounts payable and accrued expenses

$
0.4

$
0.5

Foreign currency contracts

Accounts payable and accrued expenses

1.2

—

$
1.6

$
0.5



		September 30, 2018		December 31, 2017
Asset Derivatives	Balance Sheet Location	(In millions)
Commodity contracts	Prepaid expenses and other current assets	$	1.3	$	2.7
Foreign currency contracts	Prepaid expenses and other current assets	1.0		0.5
Interest rate swap agreements	Prepaid expenses and other current assets	17.6		11.9
		$	19.9	$	15.1
Liability Derivatives
Commodity contracts	Accrued expenses	$	0.2	$	1.2
		$	0.2	$	1.2

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Three Months Ended

Nine Months Ended

Location of Gain (Loss)

September 30,

September 30,

Recognized in Net Income

2017

2016

2017

2016

(In millions)

(In millions)

Mark-to-market unrealized gain (loss):

Commodity contracts

Other (income) expense, net

$
2.6

$
2.3

$
1.5

$
3.3

Foreign currency contracts

Other (income) expense, net

(0.5
)

2.1

(1.3
)

(0.2
)
Interest rate swap agreements

Other (income) expense, net

(0.3
)

2.4

(0.8
)

0.8

Total unrealized gain (loss)

1.8

6.8

(0.6
)

3.9

Realized gain (loss):

Commodity contracts

Manufacturing related to Cost of sales and transportation related to Selling and distribution

(0.2
)

0.1

(0.4
)

(0.9
)
Foreign currency contracts

Cost of sales

(1.3
)

(1.3
)

(0.1
)

(3.3
)
Interest rate swap agreements

Interest expense

0.5

—

0.6

—

Total realized (loss) gain

(1.0
)

(1.2
)

0.1

(4.2
)
Total gain (loss)

$
0.8

$
5.6

$
(0.5
)

$
(0.3
)



	Location of Gain (Loss)	Three Months Ended September 30,						Nine Months Ended September 30,
	Recognized in Net Income (Loss)	2018			2017			2018			2017
		(In millions)						(In millions)
Mark-to-market unrealized gain (loss)
Commodity contracts	Other expense (income), net	$	(0.5	)	$	2.6		$	(0.3	)	$	1.5
Foreign currency contracts	Other expense (income), net	(1.4		)	(0.5		)	0.5			(1.3		)
Interest rate swap agreements	Other expense (income), net	5.7			(0.3		)	5.6			(0.8		)
Total unrealized gain (loss)		3.8			1.8			5.8			(0.6		)
Realized gain (loss)
Commodity contracts	Manufacturing related to Cost of sales and transportation related to Selling and distribution	1.2			(0.2		)	4.1			(0.4		)
Foreign currency contracts	Cost of sales	0.4			(1.3		)	1.4			(0.1		)
Interest rate swap agreements	Interest expense	1.5			0.5			3.4			0.6
Total realized gain (loss)		3.1			(1.0		)	8.9			0.1
Total gain (loss)		$	6.9		$	0.8		$	14.7		$	(0.5	)

17. FAIR VALUE

The following table presents the carrying value and fair value of our financial instruments as of September 30, ~~2017~~2018 and December 31, ~~2016:~~

2017:

September 30, 2017

December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Level

(In millions)

(In millions)

Not recorded at fair value (liability):

Revolving Credit Facility

$
(120.0
)

$
(118.8
)

$
(170.0
)

$
(167.1
)

2

Term Loan A

(276.7
)

(277.2
)

(288.0
)

(288.1
)

2

Term Loan A-1

(172.5
)

(172.8
)

(180.0
)

(180.3
)

2

Term Loan A-2

(973.8
)

(975.4
)

(1,005.8
)

(1,007.4
)

2

2022 Notes

(400.0
)

(411.0
)

(400.0
)

(410.0
)

2

2024 Notes

(775.0
)

(829.3
)

(775.0
)

(809.9
)

2

Recorded on a recurring basis at fair value
asset (liability):

Commodity contracts

$
2.1

$
2.1

$
0.5

$
0.5

2

Foreign currency contracts

(0.6
)

(0.6
)

0.7

0.7

2

Interest rate swap agreements

9.6

9.6

10.4

10.4

2

Investments

13.2

13.2

10.4

10.4

1



	September 30, 2018						December 31, 2017
	Carrying Value			Fair Value			Carrying Value			Fair Value			Level
	(In millions)						(In millions)
Liabilities not recorded at fair value:
Term Loan A	$	(495.0	)	$	(496.2	)	$	(498.8	)	$	(500.7	)	2
Term Loan A-1	(891.0		)	(892.3		)	(897.8		)	(900.0		)	2
2022 Notes	(375.9		)	(374.9		)	(400.0		)	(405.0		)	2
2024 Notes	(602.9		)	(617.2		)	(775.0		)	(806.0		)	2
Assets recorded on a recurring basis at fair value:
Commodity contracts	$	1.1		$	1.1		$	1.5		$	1.5		2
Foreign currency contracts	1.0			1.0			0.5			0.5			2
Interest rate swap agreements	17.6			17.6			11.9			11.9			2
Investments	15.4			15.4			14.1			14.1			1

Cash and cash equivalents and accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable are financial liabilities with carrying values that approximate fair value.

The fair ~~value~~values of ~~the Revolving Credit Facility,~~ Term Loan A, Term Loan A-1, ~~Term Loan A-2,~~ 2022 Notes, 2024 Notes, commodity contracts, foreign currency contracts, and interest rate swap agreements are determined using Level 2 inputs. Level 2 inputs are inputs other than quoted market prices that are observable for an asset or liability, either directly or indirectly. The fair values of ~~the Revolving Credit Facility,~~ Term Loan A ~~Term Loan A-1,~~ and Term Loan ~~A-2~~A-1 were estimated using present value techniques and

~~TREEHOUSE FOODS, INC.~~

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

~~market based~~ market-based interest rates and credit spreads. The fair values of the Company’s 2022 Notes and 2024 Notes were estimated based on quoted market prices for similar instruments, where the inputs are considered Level 2, due to their infrequent trading volume. The fair values of the commodity contracts, foreign currency

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

contracts, and interest rate swap agreements are based on an analysis comparing the contract rates to the market rates at the balance sheet date. ~~The commodity contracts, foreign currency contracts, and interest rate swap agreements are recorded at fair value on the Condensed Consolidated Balance Sheets.~~

The fair value of the investments was determined using Level 1 inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement dates. ~~The investments are recorded at fair value on the Condensed Consolidated Balance Sheets.~~

18. SEGMENT ~~AND GEOGRAPHIC~~ INFORMATION ~~AND MAJOR CUSTOMERS~~

In the first quarter of 2017, the Company completed changes in its organizational structure that resulted in a change in how the Company manages its business and allocates resources. Our reportable segments are now organized and managed by products: Baked Goods, Beverages, Condiments, Meals, and Snacks. Previously, our reportable segments were organized and managed by customer channels: North American Retail Grocery, Food Away From Home, and Industrial and Export. All prior period information has been recast to reflect this change.

The Company manages operations on a company-wide basis, thereby making determinations as to the allocation of resources in total rather than on a segment-level basis. The Company has designated reportable segments based on how management views its business. The Company does not segregate assets between segments for internal reporting. Therefore, asset-related information has not been presented. The reportable segments, as presented below, are consistent with the manner in which the Company reports its results to the Chief Operating Decision Maker. Our segments are as follows:

Baked Goods– Our Baked Goods segment sells candy; cookies; crackers; in-store bakery products; pita chips; pretzels; refrigerated dough; and retail griddle waffles, pancakes, and French toast.

Beverages– Our Beverages segment sells broths; liquid non-dairy creamer; non-dairy powdered creamers; powdered drinks; single serve hot beverages; specialty teas, and sweeteners.

Condiments– Our Condiments segment sells aseptic cheese and pudding products; jams, preserves, and jellies; mayonnaise; Mexican, barbeque, and other sauces; pickles and related products; refrigerated and shelf stable dressings and sauces; and table and flavored syrups.

Meals– Our Meals segment sells baking and mix powders; powdered soups and gravies; macaroni and cheese; pasta; ready-to-eat and hot cereals; and skillet dinners. Condensed and ready to serve soup and infant feeding products were sold within the Meals segment through the divestiture of the SIF business on May 22, 2017.

Snacks– Our Snacks segment sells bars; dried fruit; snack nuts; trail mixes; and other wholesome snacks.

The Company evaluates the performance of its segments based on net sales dollars and direct operating income. ~~In conjunction with the change in segments, the Company revised its calculation of direct operating income to include direct general and administrative expenses.~~ Direct operating income is ~~now~~ defined as gross profit less freight out, sales commissions, and direct selling, general, and administrative expenses. ~~All prior period information has been recast to reflect this change.~~ The amounts in the following tables are obtained from reports used by senior management and do not include income taxes. Other expenses not allocated include unallocated selling, general, and administrative expenses, unallocated costs of sales, and unallocated corporate expenses (amortization expense and other operating expense). The accounting policies of the Company’s segments are the same as those described in the summary of significant accounting policies set forth in Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2017.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Financial information relating to the Company’s reportable segments is as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Net sales to external customers:

Baked Goods

$
351.2

$
329.4

$
1,016.6

$
871.8

Beverages

244.9

234.9

759.1

672.7

Condiments

333.8

322.9

988.8

959.0

Meals

284.6

347.9

897.0

937.3

Snacks

332.6

351.7

940.2

967.5

Unallocated

1.7

0.1

5.5

(9.8
)
Total

$
1,548.8

$
1,586.9

$
4,607.2

$
4,398.5

Direct operating income:

Baked Goods

$
46.9

$
33.8

$
121.3

$
97.4

Beverages

51.7

63.8

170.7

175.6

Condiments

34.4

38.0

102.2

115.0

Meals

32.1

33.1

99.9

88.9

Snacks

1.8

18.5

24.4

47.3

Total

166.9

187.2

518.5

524.2

Unallocated selling, general, and administrative expenses

(66.0
)

(74.3
)

(228.1
)

(254.2
)
Unallocated cost of sales (1)

(5.2
)

(1.5
)

3.2

(20.8
)
Unallocated corporate expense and other

(37.9
)

(33.8
)

(192.2
)

(101.0
)
Operating income

57.8

77.6

101.4

148.2

Other expense

(27.7
)

(25.0
)

(87.6
)

(78.2
)
Income before income taxes

$
30.1

$
52.6

$
13.8

$
70.0



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In millions)						(In millions)
Net sales to external customers:
Baked Goods	$	332.8		$	351.2		$	997.9		$	1,016.6
Beverages	236.3			244.9			721.8			759.1
Condiments	317.1			333.8			968.4			988.8
Meals	253.7			284.6			777.2			897.0
Snacks	254.1			332.6			865.7			940.2
Unallocated	—			1.7			—			5.5
Total	$	1,394.0		$	1,548.8		$	4,331.0		$	4,607.2
Direct operating income:
Baked Goods	$	35.2		$	46.9		$	94.0		$	121.3
Beverages	44.1			51.7			129.3			170.7
Condiments	49.4			34.4			112.7			102.2
Meals	29.8			32.1			88.1			99.9
Snacks	(3.8		)	1.8			7.2			24.4
Total	154.7			166.9			431.3			518.5
Unallocated selling, general, and administrative expenses	(64.2		)	(66.0		)	(219.4		)	(228.1		)
Unallocated cost of sales (1)	(14.9		)	(5.2		)	(22.7		)	3.2
Unallocated corporate expense and other (1)	(44.7		)	(38.1		)	(163.8		)	(192.5		)
Operating income	$	30.9		$	57.6		$	25.4		$	101.1


(1)	Includes charges related to restructuring ~~and margin improvement activities,~~programs and other costs managed at corporate.

~~Geographic Information~~ — The Company had revenues from customers outside of the United States of approximately 8.7% and 8.9% of total consolidated net sales in the nine months ended September 30, 2017 and 2016, respectively, with 6.9% and 7.1% of total consolidated net sales in Canada, respectively. The Company held 12.2% and 10.8% of its property, plant, and equipment outside of the United States as of September 30, 2017 and 2016, respectively.

~~Major Customers~~ — Walmart Stores, Inc. and affiliates accounted for approximately 21.0% and 18.2% of consolidated net sales in the nine months ended September 30, 2017 and 2016, respectively. Costco accounted for approximately 10.1% of consolidated net sales in the nine months ended September 30, 2017, with less than 10% for the same period in the prior year. No other customer accounted for more than 10% of our consolidated net sales during these periods.

~~TREEHOUSE FOODS, INC.~~

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

~~Product Information~~ — The following table presents the Company’s net sales by major products for the three and nine months ended September 30, 2017 and 2016. In the first quarter of 2017, the Company changed the product categories to align with the changes in organizational structure described above. All prior period information has been recast to reflect this change.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In millions)

(In millions)

Products:

Dressings and sauces

$
250.4

$
241.9

$
738.6

$
711.3

Snack nuts

224.9

207.0

609.1

555.0

Baked products

181.8

162.3

502.6

432.4

Retail bakery

169.4

167.1

514.0

439.4

Beverages

168.1

161.9

518.9

448.0

Pasta and dry dinners

147.8

146.6

420.6

384.0

Cereals and other meals

136.8

201.3

476.4

553.3

Trail mix and bars

109.4

144.8

336.6

402.7

Pickles

83.4

81.0

250.2

247.7

Beverage enhancers

76.8

73.0

240.2

224.7

Total net sales

$
1,548.8

$
1,586.9

$
4,607.2

$
4,398.5

19. RECENT ACCOUNTING PRONOUNCEMENTS

~~Recently~~

Adopted

In May 2014, the ~~fourth quarter of 2016, the Company adopted~~ Financial Accounting Standards Board (“FASB”) issued Topic 606, which introduced a new framework to be used when recognizing revenue to reduce complexity and increase comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. Topic 606 supersedes the revenue recognition requirements under Topic 605 “Revenue Recognition”. On January 1, 2018, we adopted Topic 606 using the modified retrospective method and elected to apply guidance retrospectively to all contracts that were not completed as of January 1, 2018. Under the modified retrospective method, periods beginning January 1, 2018 are presented under Topic 606 while prior periods continue to be presented under Topic 605. We have determined that the cumulative effect on net income and the opening balance sheet caused by adopting Topic 606 effective January 1, 2018 is immaterial. See Note 3 for additional information on revenue recognition.

In November 2016, the FASB issued Accounting Standards Update (“ASU”) ~~No 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~. Under this ASU, excess tax benefits and deficiencies are no longer recognized as additional paid-in capital in the Condensed Consolidated Balance Sheets. The ASU requires recognition of excess tax benefits and deficiencies in the Condensed Consolidated Statements of Operations. As the Company adopted the ASU in the fourth quarter, any related adjustments were required to be reflected as of the beginning of the fiscal year of adoption. The results for the three and nine months periods ended September 30, 2016 have been recast to reflect the adoption of the ASU as of January 1, 2016, resulting in income tax benefits of $0.2 million and $3.8 million, respectively, related to the recognition of excess tax benefits and deficiencies, which are included in the Income taxes line of the Condensed Consolidated Statements of Operations. The effect on basic net earnings per common share was $0.01 for the three months ended September 30, 2016, with no impact on diluted net earnings per common share. The effect on basic and diluted net earnings per common share for the nine months ended September 30, 2016 was $0.07 and $0.06, respectively. Additionally, the ASU requires excess tax benefits to be reported as a component of operating activities in the Condensed Consolidated Statements of Cash Flows. Excess tax benefits of $3.7 million were retrospectively reclassified from financing to operating activities in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016. The effects of the adoption of the other provisions of this ASU were immaterial.

~~In July 2015, the FASB issued ASU~~ No. ~~2015-11,~~ 2016-18, ~~Simplifying the Measurement of Inventory,~~Restricted Cash which requires entities to measure inventory at the lower of cost and net realizable value (“NRV”). This ASU will not apply to inventory valued under the last-in-first-out method. Under current guidance, an entity is required to measure inventory at the lower of cost or market, with market defined as replacement cost, NRV, or NRV less a normal profit margin. The three market measurements added complexity and reduced comparability in the valuation of inventory. FASB issued this ASU as part of its simplification initiative to address these issues. The ASU is effective on a prospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company prospectively adopted the ASU during the first quarter of 2017, the impact of which was not significant.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~, to ~~eliminate~~require that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the second step of the goodwill impairment test. This ASU requires an entity to measure a goodwill impairment loss as the amount by which the carrying value of a reporting unit exceeds its fair value. Additionally, an entity should include the income tax effects from any tax deductible goodwillbeginning-of-period and end-of-period amounts on the ~~carrying value~~statement of ~~the reporting unit when measuring a goodwill impairment loss, if applicable.~~cash flows. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2019. Early adoption~~2017 and is ~~permitted for interim or annual goodwill impairment tests performed on testing dates after~~required to be applied retrospectively. The Company adopted this standard as of January 1, ~~2017.~~2018. The adoption did not result in any changes to the financial statements presented within this Form 10-Q, as the Company ~~early adopted~~does not have any restricted cash balances.

In August 2016, the FASB issued ASU ~~during~~No. 2016-15, Statement of Cash Flows, to provide cash flow statement classification guidance for certain cash receipts and payments including (a) debt prepayment or extinguishment costs; (b) contingent consideration payments made after a business combination; (c) insurance settlement proceeds; (d) distributions from equity method investees; (e) beneficial interests in securitization transactions and (f) application of the ~~third quarter~~predominance principle for cash receipts and payments with aspects of ~~2017,~~more than one class of cash flows. The ASU is effective for fiscal years, and ~~will apply to any goodwill impairment losses prospectively.~~

interim

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

periods within those years, beginning after December 15, 2017. The amendments in this ASU should be applied retrospectively. The Company adopted this ASU on January 1, 2018. The adoption of this ASU did not result in any changes to our financial statements as we were already compliant with the changes.

~~Recently Issued~~

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which revises how employers that sponsor defined benefit pension and other postretirement plans present net periodic benefit cost. The ASU requires an employer to present the service cost component in the same income statement line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The standard requires adoption on a retrospective basis for the presentation of net benefit cost components. The Company ~~is currently assessing the impact that~~adopted this standard ~~will have upon adoption.~~

as of January 1, 2018. Upon adoption, the Company recorded the service cost component of net benefit cost in Cost of sales and the other components of net benefit cost in Other expense (income), net of the Condensed Consolidated Statements of Operations. The Company also reclassified a total of $0.2 million of net benefit from operating income ($0.4 million of income from Cost of sales and $0.2 million of expense from General and administrative expense) to Other expense (income), net of the Condensed Consolidated Statements of Operations for the third quarter ended September 30, 2017.

In ~~November~~October 2016, the FASB issued ASU No. ~~2016-18,~~ 2016-16, ~~Restricted Cash~~Intra-Entity Transfers of Assets Other Than Inventory,, to ~~require that restricted cash~~improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This ASU requires an entity to recognize the consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU was issued as part of a simplification initiative. The ASU is effective on a modified retrospective basis for fiscal years, and ~~restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts on the statement of cash flows.~~interim periods within those years, beginning after September 15, 2017. The Company ~~currently classifies changes~~adopted the ASU on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings during the first quarter of 2018, the impact of which was not significant.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated AOCI, which allows an entity to elect to reclassify the deferred tax effects, including any related valuation allowance, resulting from the application of the Tax Act from AOCI to retained earnings. The amendment in ~~restricted cash as an investing activity~~this ASU essentially eliminates the stranded deferred tax effects in AOCI resulting from the enactment of the Tax Act. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2018-02 should be applied either in the ~~Consolidated Statements~~period of ~~Cash Flows.~~adoption or retrospectively to each period in which the effect of the change in the federal income tax rate in the Tax Act is recognized. The Company adopted this ASU in the first quarter of 2018 and elected to reclassify the deferred tax effects due to the decrease in the U.S. Federal statutory tax rate, primarily associated with its pension and postretirement activity, from AOCI to retained earnings. The impact of adopting this ASU is outlined in Note 12.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2017.~~2019 with early adoption permitted. The ~~standard requires adoption~~Company early adopted the ASU on a ~~retrospective basis. The Company is currently assessing~~prospective basis during the third quarter of 2018 with no impact ~~that this standard will have upon adoption, which is not expected~~ to ~~be significant.~~

the financial statements or related disclosures.

Not yet adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between existing GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under existing GAAP. The ~~ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The~~ standard requires that entities apply the effects of these changes using a modified retrospective approach, which includes a number of optional practical expedients. In July 2018, the FASB issued ASU No. 2018-11, Leases (842), Targeted Improvements, which provides an additional transition election to not restate comparative periods for the effects of applying the new standard. This transition election permits entities to apply ASU No. 2016-02 on the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company expects to elect this transition approach and recognize the cumulative impact of adoption in the opening balance of retained earnings as of January 1, 2019. These ASU's are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of ~~this ASU~~these ASU's will result in a significant increase to the Company’s Balance Sheets for lease

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liabilities and lease assets, and the Company is currently assessing the impact that this standard will have upon ~~adoption.~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~, which introduced a new framework to be used when recognizing revenue in an attempt to reduce complexity and increase comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The standard requires that entities apply the effects of these changes to all prior years presented, upon adoption using either the full retrospective method, which presents the impact of the change separately in each prior year presented, or the modified retrospective method, which includes the cumulative changes to all prior years presented in beginning retained earnings in the year of initial adoption. The Company expects to use the modified retrospective method. The FASB also issued ASU No. 2016-10, ~~Identifying Performance Obligations and Licensing, and ASU No. 2016-12,~~ ~~Narrow-Scope Improvements and Practical Expedients~~, in April 2016 and May 2016, respectively, which amend the guidance in ASU 2014-09 and have the same effective date as the original standard. The Company is currently finalizing the impact that these standards will have on its accounting policies, processes, system requirements, internal controls, and ~~disclosures using internal resources and~~disclosures. The Company does not anticipate that the ~~assistance~~adoption of these ASU’s will have a ~~third-party.~~significant impact on the Company’s Consolidated Statements of Operations or Cash Flows. The Company has ~~established a project plan,~~ completed anthe initial review of its ~~customer~~lease contracts and has selected a lease accounting system. The Company is ~~updating policies~~currently implementing the lease accounting system and ~~procedures. Based upon implementation procedures~~has been collecting the required information from lease contracts for adoption.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which simplifies hedge accounting by better aligning an entity’s financial reporting for hedging relationships with its risk management activities. The ASU also simplifies the application of the hedge accounting guidance. The new guidance is effective on January 1, 2019, with early adoption permitted. For cash flow hedges existing at the adoption date, the standard requires adoption on a modified retrospective basis with a cumulative-effect adjustment to the Consolidated Balance Sheet as of the beginning of the year of adoption. The amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. The Company anticipates adopting this ASU as of the first quarter of 2019 and does not expect ~~significant changes in its revenue recognition policies once~~a material impact upon adoption.

In August 2018, the ~~standard~~FASB issued ASU No. 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. The ASU is ~~adopted.~~

effective for fiscal years ending after December 15, 2021 with early adoption permitted. The Company plans to early adopt during the fourth quarter of 2018 and anticipates minimal disclosure impact upon adoption.

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

20. GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

The ~~Company’s~~ 2022 Notes and 2024 Notes are ~~guaranteed~~ fully and unconditionally, as well as jointly and severally, guaranteed by ~~its~~our directly and indirectly owned domestic subsidiaries, which are collectively known as the “Guarantor Subsidiaries”. Bay Valley Foods, LLC, which is a 100% owned direct subsidiary, maintains 100% direct and indirect ownership of the following Guarantor ~~Subsidiaries.~~ Subsidiaries: Sturm Foods, Inc.; S.T. Specialty Foods, Inc.; Associated Brands, Inc.; Cains Foods, Inc.; Cains Foods L.P.; Cains GP, LLC; Flagstone Foods, Inc., Protenergy Holdings, Inc.; Protenergy Natural Foods, Inc.; TreeHouse Private Brands, Inc. (formerly Ralcorp Holdings, Inc.); American Italian Pasta Company.; Nutcracker Brands, Inc.; Linette Quality Chocolates, Inc.; Ralcorp Frozen Bakery Products, Inc.; Cottage Bakery, Inc.; The Carriage House Companies, Inc. and certain other domestic subsidiaries that may become guarantors in the future.

The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances, only upon the occurrence of certain customary conditions. There are no significant restrictions on the ability of the parent company or any guarantor to obtain funds from its subsidiaries by dividend or loan. The following condensed supplemental consolidating financial information presents the results of operations, financial position, and cash flows of the parent company, its Guarantor Subsidiaries, its non-guarantor subsidiaries, and the eliminations necessary to arrive at the information for the Company on a consolidated basis as of September 30, ~~2017~~2018 and ~~2016,~~December 31, 2017, and for the three and nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. The equity method has been used with respect to investments in subsidiaries. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

Condensed Supplemental Consolidating Balance Sheet

September 30, ~~2017~~

2018

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Assets

Current assets:

Cash and cash equivalents

$
76.7

$
0.2

$
55.0

$
—

$
131.9

Investments

—

—

13.2

—

13.2

Accounts receivable, net

—

377.6

54.5

—

432.1

Inventories, net

—

1,008.3

129.2

—

1,137.5

Prepaid expenses and other current assets

71.7

17.6

21.1

—

110.4

Total current assets

148.4

1,403.7

273.0

—

1,825.1

Property, plant, and equipment, net

27.9

1,104.8

157.1

—

1,289.8

Goodwill

—

2,333.7

125.5

—

2,459.2

Investment in subsidiaries

5,212.5

572.0

—

(5,784.5
)

—

Intercompany accounts (payable) receivable, net

(152.7
)

137.4

15.3

—

—

Deferred income taxes

23.4

—

—

(23.4
)

—

Intangible and other assets, net

59.4

945.3

106.8

—

1,111.5

Total assets

$
5,318.9

$
6,496.9

$
677.7

$
(5,807.9
)

$
6,685.6

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

$
25.3

$
675.3

$
73.2

$
—

$
773.8

Current portion of long-term debt

70.8

1.2

0.1

—

72.1

Total current liabilities

96.1

676.5

73.3

—

845.9

Long-term debt

2,618.7

1.5

0.2

—

2,620.4

Deferred income taxes

—

418.7

26.1

(23.4
)

421.4

Other long-term liabilities

6.8

187.7

6.1

—

200.6

Stockholders’ equity

2,597.3

5,212.5

572.0

(5,784.5
)

2,597.3

Total liabilities and stockholders’ equity

$
5,318.9

$
6,496.9

$
677.7

$
(5,807.9
)

$
6,685.6



	Parent Company		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	0.2	$	—		$	52.6		$	—		$	52.8
Investments	—		—			15.4			—			15.4
Accounts receivable, net	3.4		221.6			60.6			—			285.6
Inventories	—		890.7			108.6			—			999.3
Prepaid expenses and other current assets	25.7		53.0			13.8			—			92.5
Total current assets	29.3		1,165.3			251.0			—			1,445.6
Property, plant, and equipment, net	34.0		1,084.9			153.2			—			1,272.1
Goodwill	—		2,046.7			121.3			—			2,168.0
Investment in subsidiaries	5,112.2		584.7			—			(5,696.9		)	—
Deferred income taxes	12.4		—			—			(12.4		)	—
Intangible and other assets, net	68.5		600.4			89.6			—			758.5
Total assets	$	5,256.4	$	5,482.0		$	615.1		$	(5,709.3	)	$	5,644.2
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	61.8	$	624.6		$	64.5		$	—		$	750.9
Current portion of long-term debt	9.8		0.5			0.1			—			10.4
Total current liabilities	71.6		625.1			64.6			—			761.3
Long-term debt	2,332.1		0.5			0.5			—			2,333.1
Deferred income taxes	—		163.4			22.3			(12.4		)	173.3
Other long-term liabilities	10.8		162.4			13.6			—			186.8
Intercompany accounts receivable (payable), net	652.2		(581.6		)	(70.6		)	—			—
Stockholders’ equity	2,189.7		5,112.2			584.7			(5,696.9		)	2,189.7
Total liabilities and stockholders’ equity	$	5,256.4	$	5,482.0		$	615.1		$	(5,709.3	)	$	5,644.2

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Balance Sheet

December 31, ~~2016~~

2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Assets

Current assets:

Cash and cash equivalents

$
—

$
0.2

$
61.9

$
—

$
62.1

Investments

—

—

10.4

—

10.4

Accounts receivable, net

—

372.9

56.1

—

429.0

Inventories, net

—

869.6

108.4

—

978.0

Assets held for sale

—

3.6

—

—

3.6

Prepaid expenses and other current assets

23.6

36.7

17.3

—

77.6

Total current assets

23.6

1,283.0

254.1

—

1,560.7

Property, plant, and equipment, net

31.3

1,181.0

147.0

—

1,359.3

Goodwill

—

2,330.8

116.4

—

2,447.2

Investment in subsidiaries

5,031.5

519.4

—

(5,550.9
)

—

Intercompany accounts receivable (payable), net

199.6

(196.9
)

(2.7
)

—

—

Deferred income taxes

20.7

—

—

(20.7
)

—

Intangible and other assets, net

53.9

1,018.0

106.7

—

1,178.6

Total assets

$
5,360.6

$
6,135.3

$
621.5

$
(5,571.6
)

$
6,545.8

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

$
61.3

$
493.1

$
72.4

$
—

$
626.8

Current portion of long-term debt

63.1

3.2

0.1

—

66.4

Total current liabilities

124.4

496.3

72.5

—

693.2

Long-term debt

2,722.3

2.2

0.3

—

2,724.8

Deferred income taxes

—

418.3

24.6

(20.7
)

422.2

Other long-term liabilities

10.6

187.0

4.7

—

202.3

Stockholders’ equity

2,503.3

5,031.5

519.4

(5,550.9
)

2,503.3

Total liabilities and stockholders’ equity

$
5,360.6

$
6,135.3

$
621.5

$
(5,571.6
)

$
6,545.8



	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	83.2		$	0.2	$	49.4	$	—		$	132.8
Investments	—			—		14.1		—			14.1
Accounts receivable, net	0.2			297.1		32.5		—			329.8
Inventories	—			803.1		115.2		—			918.3
Prepaid expenses and other current assets	69.8			32.0		20.0		(32.1		)	89.7
Total current assets	153.2			1,132.4		231.2		(32.1		)	1,484.7
Property, plant, and equipment, net	29.3			1,108.7		156.4		—			1,294.4
Goodwill	—			2,057.3		124.7		—			2,182.0
Investment in subsidiaries	4,945.5			582.6		—		(5,528.1		)	—
Intercompany accounts (payable) receivable, net	(328.6		)	274.5		54.1		—			—
Deferred income taxes	15.1			—		—		(15.1		)	—
Intangible and other assets, net	62.5			652.1		103.6		—			818.2
Total assets	$	4,877.0		$	5,807.6	$	670.0	$	(5,575.3	)	$	5,779.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	53.3		$	513.8	$	54.7	$	(32.1	)	$	589.7
Current portion of long-term debt	9.0			1.1		—		—			10.1
Total current liabilities	62.3			514.9		54.7		(32.1		)	599.8
Long-term debt	2,533.8			1.4		0.5		—			2,535.7
Deferred income taxes	—			167.3		26.2		(15.1		)	178.4
Other long-term liabilities	17.6			178.5		6.0		—			202.1
Stockholders’ equity	2,263.3			4,945.5		582.6		(5,528.1		)	2,263.3
Total liabilities and stockholders’ equity	$	4,877.0		$	5,807.6	$	670.0	$	(5,575.3	)	$	5,779.3

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Operations

Three Months Ended September 30, 2018

(In millions)



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	1,400.2		$	170.9		$	(177.1	)	$	1,394.0
Cost of sales	—			1,193.9			149.7			(177.1		)	1,166.5
Gross profit	—			206.3			21.2			—			227.5
Selling, general, and administrative expense	35.3			107.7			8.9			—			151.9
Amortization expense	3.0			16.1			2.3			—			21.4
Other operating expense, net	26.2			(3.4		)	0.5			—			23.3
Operating income (loss)	(64.5		)	85.9			9.5			—			30.9
Interest expense	28.3			—			1.3			(1.8		)	27.8
Interest income	(0.3		)	(1.5		)	(1.3		)	1.8			(1.3		)
Other expense (income), net	(4.2		)	5.7			2.7			—			4.2
Income (loss) before income taxes	(88.3		)	81.7			6.8			—			0.2
Income tax (benefit) expense	(18.0		)	12.3			0.5			—			(5.2		)
Equity in net income (loss) of subsidiaries	75.7			6.3			—			(82.0		)	—
Net income (loss)	$	5.4		$	75.7		$	6.3		$	(82.0	)	$	5.4

Condensed Supplemental Consolidating Statement of Operations

Three Months Ended September 30, 2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net sales

$
—

$
1,458.0

$
175.9

$
(85.1
)

$
1,548.8

Cost of sales

—

1,221.5

152.3

(85.1
)

1,288.7

Gross profit

—

236.5

23.6

—

260.1

Selling, general, and administrative expense

23.9

128.5

10.3

—

162.7

Amortization expense

3.3

22.7

2.5

—

28.5

Other operating expense, net

2.4

8.0

0.7

—

11.1

Operating (loss) income

(29.6
)

77.3

10.1

—

57.8

Interest expense

31.3

0.1

3.8

(3.8
)

31.4

Interest income

—

(3.8
)

(0.4
)

3.8

(0.4
)
Other (income) expense, net

(2.4
)

(1.7
)

0.8

—

(3.3
)
(Loss) income before income taxes

(58.5
)

82.7

5.9

—

30.1

Income taxes

(22.4
)

22.7

1.0

—

1.3

Equity in net income (loss) of subsidiaries

64.9

4.9

—

(69.8
)

—

Net income (loss)

$
28.8

$
64.9

$
4.9

$
(69.8
)

$
28.8

~~Condensed Supplemental Consolidating Statement of Operations~~

~~Three Months Ended September 30, 2016~~

~~(In millions)~~

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net sales

$
—

$
1,501.8

$
167.0

$
(81.9
)

$
1,586.9

Cost of sales

—

1,240.2

143.0

(81.9
)

1,301.3

Gross profit

—

261.6

24.0

—

285.6

Selling, general, and administrative expense

23.5

134.5

16.1

—

174.1

Amortization expense

2.3

23.9

2.4

—

28.6

Other operating expense, net

—

4.7

0.6

—

5.3

Operating (loss) income

(25.8
)

98.5

4.9

—

77.6

Interest expense

31.0

(0.1
)

1.1

(1.2
)

30.8

Interest income

—

(1.0
)

(0.3
)

1.2

(0.1
)
Other (income) expense, net

—

(0.5
)

(5.2
)

—

(5.7
)
(Loss) income before income taxes

(56.8
)

100.1

9.3

—

52.6

Income taxes

(22.1
)

35.4

1.9

—

15.2

Equity in net income (loss) of subsidiaries

72.1

7.4

—

(79.5
)

—

Net income (loss)

$
37.4

$
72.1

$
7.4

$
(79.5
)

$
37.4



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	1,458.0		$	175.9		$	(85.1	)	$	1,548.8
Cost of sales	—			1,221.9			152.3			(85.1		)	1,289.1
Gross profit	—			236.1			23.6			—			259.7
Selling, general, and administrative expense	23.9			128.3			10.3			—			162.5
Amortization expense	3.3			22.7			2.5			—			28.5
Other operating expense, net	2.4			8.0			0.7			—			11.1
Operating income (loss)	(29.6		)	77.1			10.1			—			57.6
Interest expense	31.3			0.1			3.8			(3.8		)	31.4
Interest income	—			(3.8		)	(0.4		)	3.8			(0.4		)
Other expense (income), net	(2.4		)	(1.9		)	0.8			—			(3.5		)
Income (loss) before income taxes	(58.5		)	82.7			5.9			—			30.1
Income tax (benefit) expense	(22.4		)	22.7			1.0			—			1.3
Equity in net income (loss) of subsidiaries	64.9			4.9			—			(69.8		)	—
Net income (loss)	$	28.8		$	64.9		$	4.9		$	(69.8	)	$	28.8

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Operations

Nine Months Ended September 30, 2018

(In millions)



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	4,336.9		$	518.3		$	(524.2	)	$	4,331.0
Cost of sales	—			3,699.5			460.5			(524.2		)	3,635.8
Gross profit	—			637.4			57.8			—			695.2
Selling, general, and administrative expense	114.9			361.7			29.4			—			506.0
Amortization expense	8.7			49.3			6.9			—			64.9
Other operating expense, net	81.6			14.0			3.3			—			98.9
Operating income (loss)	(205.2		)	212.4			18.2			—			25.4
Interest expense	88.9			—			2.7			(4.0		)	87.6
Interest income	(2.6		)	(3.6		)	(1.6		)	4.0			(3.8		)
Other expense (income), net	(1.4		)	12.2			0.7			—			11.5
Income (loss) before income taxes	(290.1		)	203.8			16.4			—			(69.9		)
Income tax (benefit) expense	(61.4		)	39.0			1.3			—			(21.1		)
Equity in net income (loss) of subsidiaries	179.9			15.1			—			(195.0		)	—
Net income (loss)	$	(48.8	)	$	179.9		$	15.1		$	(195.0	)	$	(48.8	)

Condensed Supplemental Consolidating Statement of Operations

Nine Months Ended September 30, 2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net sales

$
—

$
4,353.3

$
498.8

$
(244.9
)

$
4,607.2

Cost of sales

—

3,596.9

431.8

(244.9
)

3,783.8

Gross profit

—

756.4

67.0

—

823.4

Selling, general, and administrative expense

86.0

408.0

30.3

—

524.3

Amortization expense

9.4

69.2

7.2

—

85.8

Other operating expense, net

2.4

107.4

2.1

—

111.9

Operating (loss) income

(97.8
)

171.8

27.4

—

101.4

Interest expense

94.2

0.3

4.8

(6.4
)

92.9

Interest income

(2.2
)

(6.4
)

(1.3
)

6.4

(3.5
)
Other (income) expense, net

(0.8
)

(1.8
)

0.8

—

(1.8
)
(Loss) income before income taxes

(189.0
)

179.7

23.1

—

13.8

Income taxes

(72.6
)

59.2

4.4

—

(9.0
)
Equity in net income (loss) of subsidiaries

139.2

18.7

—

(157.9
)

—

Net income (loss)

$
22.8

$
139.2

$
18.7

$
(157.9
)

$
22.8

~~Condensed Supplemental Consolidating Statement of Operations~~

~~Nine Months Ended September 30, 2016~~

~~(In millions)~~

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net sales

$
—

$
4,161.1

$
459.8

$
(222.4
)

$
4,398.5

Cost of sales

—

3,448.0

396.9

(222.4
)

3,622.5

Gross profit

—

713.1

62.9

—

776.0

Selling, general, and administrative expense

100.1

394.1

42.4

—

536.6

Amortization expense

6.8

67.1

7.0

—

80.9

Other operating expense, net

—

8.8

1.5

—

10.3

Operating (loss) income

(106.9
)

243.1

12.0

—

148.2

Interest expense

87.4

0.2

4.0

(3.6
)

88.0

Interest income

(2.2
)

(3.9
)

(1.0
)

3.6

(3.5
)
Other (income), net

—

(2.5
)

(3.8
)

—

(6.3
)
(Loss) income before income taxes

(192.1
)

249.3

12.8

—

70.0

Income taxes

(73.4
)

90.1

0.1

—

16.8

Equity in net income (loss) of subsidiaries

171.9

12.7

—

(184.6
)

—

Net income (loss)

$
53.2

$
171.9

$
12.7

$
(184.6
)

$
53.2



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	4,353.3		$	498.8		$	(244.9	)	$	4,607.2
Cost of sales	—			3,597.6			431.8			(244.9		)	3,784.5
Gross profit	—			755.7			67.0			—			822.7
Selling, general, and administrative expense	86.0			407.6			30.3			—			523.9
Amortization expense	9.4			69.2			7.2			—			85.8
Other operating expense, net	2.4			107.4			2.1			—			111.9
Operating income (loss)	(97.8		)	171.5			27.4			—			101.1
Interest expense	94.2			0.3			4.8			(6.4		)	92.9
Interest income	(2.2		)	(6.4		)	(1.3		)	6.4			(3.5		)
Other expense (income), net	(0.8		)	(2.1		)	0.8			—			(2.1		)
Income (loss) before income taxes	(189.0		)	179.7			23.1			—			13.8
Income tax (benefit) expense	(72.6		)	59.2			4.4			—			(9.0		)
Equity in net income (loss) of subsidiaries	139.2			18.7			—			(157.9		)	—
Net income (loss)	$	22.8		$	139.2		$	18.7		$	(157.9	)	$	22.8

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended September 30, ~~2017~~

2018

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net income (loss)

$
28.8

$
64.9

$
4.9

$
(69.8
)

$
28.8

Other comprehensive income:

Foreign currency translation adjustments

—

—

18.0

—

18.0

Pension and postretirement reclassification
adjustment, net of tax

—

0.1

—

—

0.1

Other comprehensive income

—

0.1

18.0

—

18.1

Equity in other comprehensive income (loss) of
subsidiaries

18.1

18.0

—

(36.1
)

—

Comprehensive income (loss)

$
46.9

$
83.0

$
22.9

$
(105.9
)

$
46.9



	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	5.4	$	75.7	$	6.3	$	(82.0	)	$	5.4
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		6.5		—			6.5
Pension and postretirement reclassification adjustment, net of tax	—		0.1		—		—			0.1
Other comprehensive income (loss)	—		0.1		6.5		—			6.6
Equity in other comprehensive (loss) income of subsidiaries	6.6		6.5		—		(13.1		)	—
Comprehensive income (loss)	$	12.0	$	82.3	$	12.8	$	(95.1	)	$	12.0

Condensed Supplemental Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended September 30, ~~2016~~

2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net income (loss)

$
37.4

$
72.1

$
7.4

$
(79.5
)

$
37.4

Other comprehensive income:

Foreign currency translation adjustments

—

—

(7.3
)

—

(7.3
)
Pension and postretirement reclassification
adjustment, net of tax

—

0.3

—

—

0.3

Other comprehensive income (loss)

—

0.3

(7.3
)

—

(7.0
)
Equity in other comprehensive (loss) income of
subsidiaries

(7.0
)

(7.3
)

—

14.3

—

Comprehensive income (loss)

$
30.4

$
65.1

$
0.1

$
(65.2
)

$
30.4



	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	28.8	$	64.9	$	4.9	$	(69.8	)	$	28.8
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		18.0		—			18.0
Pension and postretirement reclassification adjustment, net of tax	—		0.1		—		—			0.1
Other comprehensive income (loss)	—		0.1		18.0		—			18.1
Equity in other comprehensive income (loss) of subsidiaries	18.1		18.0		—		(36.1		)	—
Comprehensive income (loss)	$	46.9	$	83.0	$	22.9	$	(105.9	)	$	46.9

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Comprehensive Income (Loss)

Nine Months Ended September 30, ~~2017~~

2018

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net income (loss)

$
22.8

$
139.2

$
18.7

$
(157.9
)

$
22.8

Other comprehensive income:

Foreign currency translation adjustments

—

—

34.5

—

34.5

Pension and postretirement reclassification
adjustment, net of tax

—

7.2

—

—

7.2

Other comprehensive income

—

7.2

34.5

—

41.7

Equity in other comprehensive income (loss) of
subsidiaries

41.7

34.5

—

(76.2
)

—

Comprehensive income (loss)

$
64.5

$
180.9

$
53.2

$
(234.1
)

$
64.5



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(48.8	)	$	179.9		$	15.1		$	(195.0	)	$	(48.8	)
Other comprehensive income (loss):
Foreign currency translation adjustments	—			—			(13.0		)	—			(13.0		)
Pension and postretirement reclassification adjustment, net of tax	—			0.4			—			—			0.4
Adoption of ASU 2018-02 reclassification to retained earnings	—			(1.1		)	—			—			(1.1		)
Other comprehensive income (loss)	—			(0.7		)	(13.0		)	—			(13.7		)
Equity in other comprehensive (loss) income of subsidiaries	(13.7		)	(13.0		)	—			26.7			—
Comprehensive income (loss)	$	(62.5	)	$	166.2		$	2.1		$	(168.3	)	$	(62.5	)

Condensed Supplemental Consolidating Statement of Comprehensive Income (Loss)

Nine Months Ended September 30, ~~2016~~

2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Net income (loss)

$
53.2

$
171.9

$
12.7

$
(184.6
)

$
53.2

Other comprehensive income:

Foreign currency translation adjustments

—

—

21.6

—

21.6

Pension and postretirement reclassification
adjustment, net of tax

—

0.8

—

—

0.8

Other comprehensive income

—

0.8

21.6

—

22.4

Equity in other comprehensive income (loss) of
subsidiaries

22.4

21.6

—

(44.0
)

—

Comprehensive income (loss)

$
75.6

$
194.3

$
34.3

$
(228.6
)

$
75.6



	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	22.8	$	139.2	$	18.7	$	(157.9	)	$	22.8
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		34.5		—			34.5
Pension and postretirement reclassification adjustment, net of tax	—		7.2		—		—			7.2
Other comprehensive income (loss)	—		7.2		34.5		—			41.7
Equity in other comprehensive income (loss) of subsidiaries	41.7		34.5		—		(76.2		)	—
Comprehensive income (loss)	$	64.5	$	180.9	$	53.2	$	(234.1	)	$	64.5

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Cash Flows

Nine Months Ended September 30, ~~2017~~

2018

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash flows from operating activities:

Net cash provided by (used in) operating
   activities

$
13.4

$
406.0

$
1.4

$
(157.4
)

$
263.4

Cash flows from investing activities:

Additions to property, plant, and equipment

(1.6
)

(87.4
)

(13.5
)

—

(102.5
)
Additions to intangible assets

(17.7
)

(0.8
)

(0.1
)

—

(18.6
)
Intercompany transfer

69.8

(128.2
)

—

58.4

—

Proceeds from sale of fixed assets

—

7.2

—

—

7.2

Proceeds from divestiture

—

19.0

0.3

—

19.3

Other

—

—

(1.0
)

—

(1.0
)
Net cash provided by (used in) investing
   activities

50.5

(190.2
)

(14.3
)

58.4

(95.6
)
Cash flows from financing activities:

Net (repayment) borrowing of debt

(100.8
)

(2.2
)

(0.1
)

—

(103.1
)
Intercompany transfer

109.2

(213.6
)

5.4

99.0

—

Receipts related to stock-based award activities

11.1

—

—

—

11.1

Payments related to stock-based award activities

(6.7
)

—

—

—

(6.7
)
Net cash provided by (used in) financing
   activities

12.8

(215.8
)

5.3

99.0

(98.7
)
Effect of exchange rate changes on cash and cash
   equivalents

—

—

0.7

—

0.7

Increase (decrease) in cash and cash equivalents

76.7

—

(6.9
)

—

69.8

Cash and cash equivalents, beginning of period

—

0.2

61.9

—

62.1

Cash and cash equivalents, end of period

$
76.7

$
0.2

$
55.0

$
—

$
131.9



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	89.3		$	323.9		$	51.5		$	(194.2	)	$	270.5
Cash flows from investing activities:
Additions to property, plant, and equipment	(2.2		)	(99.2		)	(15.3		)	—			(116.7		)
Additions to intangible assets	(15.8		)	(0.6		)	—			—			(16.4		)
Intercompany transfer	(25.8		)	(162.2		)	(16.2		)	204.2			—
Other	—			35.5			(1.1		)	—			34.4
Net cash (used in) provided by investing activities	(43.8		)	(226.5		)	(32.6		)	204.2			(98.7		)
Cash flows from financing activities:
Net (repayment) borrowing of debt	(208.5		)	(1.5		)	—			—			(210.0		)
Intercompany transfer	120.8			(95.1		)	(15.7		)	(10.0		)	—
Repurchases of common stock	(42.2		)	—			—			—			(42.2		)
Receipts related to stock-based award activities	4.7			—			—			—			4.7
Payments related to stock-based award activities	(3.3		)	—			—			—			(3.3		)
Net cash (used in) provided by financing activities	(128.5		)	(96.6		)	(15.7		)	(10.0		)	(250.8		)
Effect of exchange rate changes on cash and cash equivalents	—			(1.0		)	—			—			(1.0		)
Decrease (increase) in cash and cash equivalents	(83.0		)	(0.2		)	3.2			—			(80.0		)
Cash and cash equivalents, beginning of period	83.2			0.2			49.4			—			132.8
Cash and cash equivalents, end of period	$	0.2		$	—		$	52.6		$	—		$	52.8

TREEHOUSE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Supplemental Consolidating Statement of Cash Flows

Nine Months Ended September 30, ~~2016~~

2017

(In millions)

Parent

Guarantor

Non-Guarantor

Company

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash flows from operating activities:

Net cash provided by (used in)  operating
   activities

$
94.2

$
398.7

$
(10.7
)

$
(183.8
)

$
298.4

Cash flows from investing activities:

Additions to property, plant, and equipment

(2.8
)

(119.9
)

(9.2
)

—

(131.9
)
Additions to intangible assets

(8.2
)

(2.7
)

—

—

(10.9
)
Intercompany transfer

32.4

(78.4
)

—

46.0

—

Acquisitions, less cash acquired

(2,687.7
)

0.3

43.0

—

(2,644.4
)
Proceeds from sale of fixed assets

—

1.5

—

—

1.5

Other

—

(0.6
)

(0.8
)

—

(1.4
)
Net cash (used in) provided by investing
   activities

(2,666.3
)

(199.8
)

33.0

46.0

(2,787.1
)
Cash flows from financing activities:

Net borrowing (repayment) of debt

1,700.1

(2.6
)

—

—

1,697.5

Payment of deferred financing costs

(34.3
)

—

—

—

(34.3
)
Intercompany transfer

61.9

(196.4
)

(3.3
)

137.8

—

Net proceeds from issuance of common stock

835.1

—

—

—

835.1

Receipts related to stock-based award activities

7.6

—

—

—

7.6

Payments related to stock-based award activities

(8.7
)

—

—

—

(8.7
)
Net cash provided by (used in) financing
   activities

2,561.7

(199.0
)

(3.3
)

137.8

2,497.2

Effect of exchange rate changes on cash and cash
   equivalents

—

—

3.8

—

3.8

(Decrease) increase in cash and cash equivalents

(10.4
)

(0.1
)

22.8

—

12.3

Cash and cash equivalents, beginning of period

10.4

0.1

24.4

—

34.9

Cash and cash equivalents, end of period

$
—

$
—

$
47.2

$
—

$
47.2

~~21. SUBSEQUENT EVENTS~~

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. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The size and timing of any repurchases will depend on price, market and business conditions, and other factors. Provided, however, that the Company is authorized to enter into an administrative repurchase plan for $50 million of the $400 million in the twelve months following November, 6 2017. The Company will repurchase shares opportunistically with a total annual cap of $150 million. Any shares repurchased will be held as treasury stock.

On October 29, 2017 Mr. Robert Aiken resigned as the Company’s President and Chief Operating Officer. The Company is in discussions with Mr. Aiken regarding the satisfaction of his monetary obligations to the Company under his employment agreement.



	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	13.4		$	406.0		$	1.4		$	(157.4	)	$	263.4
Cash flows from investing activities:
Additions to property, plant, and equipment	(1.6		)	(87.4		)	(13.5		)	—			(102.5		)
Additions to intangible assets	(17.7		)	(0.8		)	(0.1		)	—			(18.6		)
Intercompany transfer	69.8			(128.2		)	—			58.4			—
Proceeds from sale of fixed assets	—			7.2			—			—			7.2
Proceeds from divestiture	—			19.0			0.3			—			19.3
Other	—			—			(1.0		)	—			(1.0		)
Net cash (used in) provided by investing activities	50.5			(190.2		)	(14.3		)	58.4			(95.6		)
Cash flows from financing activities:
Net borrowing (repayment) of debt	(100.8		)	(2.2		)	(0.1		)	—			(103.1		)
Intercompany transfer	109.2			(213.6		)	5.4			99.0			—
Receipts related to stock-based award activities	11.1			—			—			—			11.1
Payments related to stock-based award activities	(6.7		)	—			—			—			(6.7		)
Net cash (used in) provided by financing activities	12.8			(215.8		)	5.3			99.0			(98.7		)
Effect of exchange rate changes on cash and cash equivalents	—			—			0.7			—			0.7
Increase (decrease) in cash and cash equivalents	76.7			—			(6.9		)	—			69.8
Cash and cash equivalents, beginning of period	—			0.2			61.9			—			62.1
Cash and cash equivalents, end of period	$	76.7		$	0.2		$	55.0		$	—		$	131.9

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

Business Overview

TreeHouse Foods, Inc. is a manufacturer of packaged foods and beverages with ~~more than 50~~ manufacturing facilities across the United States, Canada, and Italy that focuses primarily on private label products for both retail grocery and food away from home customers. We manufacture shelf stable, refrigerated, frozen, and fresh products within our five segments (Baked ~~goods,~~Goods, Beverages, Condiments, Meals, and Snacks). We have a comprehensive offering of packaging formats and flavor profiles, and we also offer natural, organic, and preservative free ingredients in many categories.

Our reportable segments, and the product categories that make up each segment, are as follows:

Net sales are relatively evenly distributed across segments:

We believe we are the largest manufacturer of private label snack nuts, trail mixes, refrigerated dough, ~~retail griddle items, in-store bakery cookies, pretzels,~~crackers, pickles, salsa, ~~macaroni and cheese dinners,~~ non-dairy powdered creamer, ready-to-eat cereals, bouillon, and dry pasta in the United States, the largest manufacturer of private label pretzels, retail griddle items, powdered drink mixes, retail salad dressings, macaroni and cheese dinners, and instant hot cereals in both the United States and Canada, and the largest manufacturer of private label jams and pasta sauces in Canada, based on volume. We also believe we are one of the largest manufacturers of private label ~~crackers,~~in-store bakery products, cookies, pitas, snack bars, table syrup, flavored syrup, barbeque sauce, preserves, and jellies in the United States, based on volume.

The following discussion and analysis presents the factors that had a material effect on our results of operations for the three and nine month periods ended September 30, ~~2017~~2018 and ~~2016.~~2017. Also discussed is our financial position as of the end of the current period. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes to those Condensed Consolidated Financial Statements included elsewhere in this report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statementson page 5361 for a discussion of the uncertainties, risks, and assumptions associated with these statements.

~~Segments~~

In the first quarter of 2017, the Company completed changes in its organizational structure that resulted in a change in how the Company manages its business and allocates resources. Our reportable segments are now organized and managed by products: Baked Goods, Beverages, Condiments, Meals, and Snacks. Our reportable segments are discussed in greater detail in Note 18 within the Notes to Condensed Consolidated Financial Statements.

Current Market Environment

~~Despite~~

Retail food sales and volumes have been under pressure in recent years. However, trends might be starting to shift as positive sales growth has returned across most measured channels during the ~~overall improvement in~~past year. Based on the ~~U.S. economy, consumer spending continues to remain challenged. Specifically, retail food volumes continue to be weak compared to overall consumer spending. September~~Citi DD’s Nielsen AOC+C Data Analysis – 9/8/18 report, total retail food sales and volumes showed sequential declines month-to-month as consumers executed stock-up trips to stores in advance of early September hurricanes. On a quarterly basis, third quarter total retail food sales across the industry increased ~~sequentially~~0.6% over the second quarter of 2017 with sales up nearly 0.6%. The sequential improvement in sales was mirrored, though to a lesser extent, in the third quarter year-over-year comparison. Total retail food sales across the industry increased 0.3% in the third quarter of 2017 compared to the same period lastpast year as minimal volume ~~declines (-1.8%)~~decreases of 1.0% were more than offset by price increases ~~(+2.1%)~~of 1.6%. Although volume softness continued in the industry, pricing actions have mostly offset this impact. Branded products continue to be the hardest hit as volumes were 2.7% lower in the third quarter of 2017 compared to 2016 with pricing offsetting 2.5% of the decline. Comparatively, privatePrivate label food volumes were down 0.1% for the third quarter year-over-year with a corresponding 2.7% increase in pricing. As such, comparatively stable industry volumes combined with similar pricing actions demonstrates private label products are well positioned against their branded counterparts.

~~While overall~~sales and volume growth continues to outpace branded products as total private label sales in measured channels over the past year increased 3.5% compared to a decrease of 0.1% for branded products. These increases were led by private label pricing and volume increases of 2.2% and 1.3%, respectively, compared to branded pricing increases of 2.1% and volume decreases of 2.2%. As such, on an industry basis, strong private label sales and volumes continue to be ~~a challenge, certain retail~~attractive compared to branded counterparts.

Retail sectors are ~~experiencing~~continuing to experience growth in premium, better for you, natural, and organic foods (collectively referred to as “PBFY”) as consumers ~~continue to snack, with~~shift their consumptions trends towards a focus on ~~“healthy” and “better for you” foods. “Healthy” and “better for you”~~healthier eating with cleaner labels. PBFY foods include items such as fresh or freshly prepared foods, foods with premium ingredients, natural, organic, clean label, or specialty foods, most of which are located in the perimeter of the store. Recent data shows that these product offerings are expected to be the primary growth area for both branded and private label products, and that growth in private label is expected to drive the overall growth in these product categories. These trends are prompting companies, TreeHouse included, to increase or adjust their offerings, while retaining their commitment to provide products at reasonable prices. The margin on these PBFY products tend to be higher and more stable than other labels. In an effort to respond to shifting consumer demand, the Company offers an increasing variety of ~~snacks, natural, and organic products.~~

PBFY products, currently offering PBFY products in 28 of our categories.

Recent Developments

TreeHouse 2020 ~~– Operating Margin Improvement Plan~~

On August 3, 2017, the Company announced the TreeHouse 2020 program, which is a comprehensive strategic blueprint intended to accelerate long-term growth through optimization of our manufacturing network, transformation of our mixing centers and warehouse footprint, and leveraging of systems and processes to drive performance. TreeHouse 2020 is a multi-year plan to fully integrate the business and reduce its cost structure in order to invest in market-differentiated capabilities, including higher growth potential product categories to serve the rapidly evolving needs of customers which are strategically focused and highly committed to their corporate brands. TreeHouse 2020 is expected to produce significant savings to achieve our operating margin expansion targets creating reinvestment opportunities to drive future growth. Specifically, we are targeting to improve our operating margin structure by

approximately 300 basis points by the end of 2020. In the short-term, while we continue to execute on these margin improvement initiatives we might experience modest sales declines due to the rationalization of low margin business.

The TreeHouse 2020 program will be executed ~~in multiple phases over~~through 2020. In 2017, the ~~next several years.~~ ~~The key elements of Phase 1 include~~Company announced the closure of ~~the Company’s~~its Brooklyn Park, Minnesota and Plymouth, Indiana facilities, as well as the downsizing of the Dothan, Alabama facility. Production at the Brooklyn Park, Minnesota and Plymouth, Indiana facilities ~~is expected to cease~~ceased in the fourth quarter of 2017. The partial facility downsizing at Dothan, Alabama ~~is expected to be complete~~was completed in the third quarter of 2018. In addition, we have taken steps toward increasing our capacity utilization, operational margin expansion, and streamlining our plant structure to optimize our supply chain. Plant closings, line shutdowns, warehouse consolidations, and the rollout of a standardized management operating structure continue to track to plan. See Note 2 to our Condensed Consolidated Financial Statements for additional information regarding restructuring ~~and margin improvement activities.~~

~~Recent Developments~~

~~Share Repurchase Authorization~~

programs.

On ~~November 2, 2017,~~January 31, 2018, the Company announced its intention to close its remaining operations in Battle Creek, Michigan. The Company had previously announced its decision to downsize the Battle Creek facility; however, following completion of the first phase of downsizing, it was determined that the ~~Board of Directors adopted a stock repurchase program.~~remaining operations would not be economically viable. Current production at Battle Creek will be moved to other cereal manufacturing facilities. The ~~stock repurchase program authorizes~~costs to close the ~~Company to repurchase up to $400 million~~remainder of the ~~Company’s common stock~~ ~~at any time, or from time to time~~. Any repurchases under the program may be made by means of open market transactions, negotiated block transactions, or otherwise, including pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The size and timing of any repurchases will depend on price, market and business conditions, and other factors. Provided, however, that the Company is authorized to enter into an administrative repurchase plan for $50 million of the $400 million in the twelve months following November, 6 2017. The Company will repurchase shares opportunistically with a total annual cap of $150 million. ~~Any shares repurchased will be held as treasury stock.~~

~~Sale of the Soup and Infant Feeding Business~~

On April 25, 2017, the Company announced that it had entered into a definitive agreement to sell its canned soup and infant feeding (“SIF”) business. The SIF business is based in Pittsburgh, Pennsylvania and produces private label condensed and ready-to-serve soup, baby food, and gravies for the Meals segment. The transaction closed on May 22, 2017 and remains subject to working capital adjustments thatBattle Creek facility are expected to be ~~finalized~~approximately $18.2 million, of which approximately $11.8 million is expected to be in cash. Components of the charges include non-cash asset write-offs of approximately $6.4 million, employee-related costs of approximately $3.2 million, and other closure costs of approximately $8.6 million. Total expected costs to close decreased $11.8 million from the initial announcement through September 30, 2018 due to revised estimates. The full closure of the facility was initially scheduled for the fourth quarter of ~~2017.~~

2018, but this date has been delayed to mid-2019 due to recent customer bid activity.

On February 15, 2018, the Company announced the planned closure of its Visalia, California facility by the end of the first quarter of 2019. The plant primarily produces pretzels and cereal snack mixes for the Baked Goods segment. Current pretzel production will be moved to other TreeHouse manufacturing facilities prior to the plant closure. The costs to close the Visalia facility are expected to be approximately $23.6 million, of which approximately $11.0 million is expected to be in cash. Components of the charges include non-cash accelerated depreciation of approximately $12.6 million, employee-related costs of approximately $3.7 million, and other closure costs of approximately $7.3 million. Total expected costs to close increased $2.6 million since the initial announcement through September 30, 2018 due to revised estimates.

On July 18, 2018, the Company announced the planned closure of an administrative office located in Omaha, Nebraska by January 31, 2019. Costs associated with this office closure are expected to be approximately $5.8 million, of which $4.3 million is expected to be in cash.

Structure to Win

In the first quarter of 2018, the Company announced an operating expenses improvement program designed to align our organization structure with strategic priorities. The program is intended to support operational effectiveness, cost reduction, and position the Company for growth with a focus on a lean customer focused go-to-market team, centralized supply chain, and streamlined back office. In the nine months ended September 30, 2018, we incurred costs of $31.5 million on this program. We expect to spend $37.0 million in 2018 primarily on employee-related costs and consulting services, which is intended to yield $55.0 million in annualized run-rate savings starting in 2019.

Results of Operations

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

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Dollars

Percent

Dollars

Percent

Dollars

Percent

Dollars

Percent

(Dollars in millions)

(Dollars in millions)

Net sales

$
1,548.8

100.0
%

$
1,586.9

100.0
%

$
4,607.2

100.0
%

$
4,398.5

100.0
%
Cost of sales

1,288.7

83.2

1,301.3

82.0

3,783.8

82.1

3,622.5

82.4

Gross profit

260.1

16.8

285.6

18.0

823.4

17.9

776.0

17.6

Operating expenses:

Selling and distribution

95.6

6.2

102.2

6.4

295.0

6.4

292.0

6.6

General and administrative

67.1

4.3

71.9

4.5

229.3

5.0

244.6

5.6

Amortization expense

28.5

1.8

28.6

1.8

85.8

1.9

80.9

1.8

Other operating expense, net

11.1

0.7

5.3

0.3

111.9

2.4

10.3

0.2

Total operating expenses

202.3

13.0

208.0

13.0

722.0

15.7

627.8

14.2

Operating income

57.8

3.8

77.6

5.0

101.4

2.2

148.2

3.4

Other expense:

Interest expense

31.4

2.0

30.8

1.9

92.9

2.0

88.0

2.0

Interest income

(0.4
)

—

(0.1
)

—

(3.5
)

(0.1
)

(3.5
)

(0.1
)
Gain on foreign currency exchange

(2.5
)

(0.2
)

(1.1
)

(0.1
)

(2.8
)

(0.1
)

(6.0
)

(0.1
)
Other (income) expense, net

(0.8
)

—

(4.6
)

(0.2
)

1.0

0.1

(0.3
)

—

Total other expense

27.7

1.8

25.0

1.6

87.6

1.9

78.2

1.8

Income before income taxes

30.1

2.0

52.6

3.4

13.8

0.3

70.0

1.6

Income taxes

1.3

0.1

15.2

1.0

(9.0
)

(0.2
)

16.8

0.4

Net income

$
28.8

1.9
%

$
37.4

2.4
%

$
22.8

0.5
%

$
53.2

1.2
%



	Three Months Ended September 30,										Nine Months Ended September 30,
	2018					2017					2018					2017
	Dollars			Percent		Dollars			Percent		Dollars			Percent		Dollars			Percent
	(Dollars in millions)										(Dollars in millions)
Net sales	$	1,394.0		100.0	%	$	1,548.8		100.0	%	$	4,331.0		100.0	%	$	4,607.2		100.0	%
Cost of sales	1,166.5			83.7		1,289.1			83.2		3,635.8			83.9		3,784.5			82.1
Gross profit	227.5			16.3		259.7			16.8		695.2			16.1		822.7			17.9
Operating expenses:
Selling and distribution	85.4			6.1		95.6			6.2		285.5			6.6		295.0			6.4
General and administrative	66.5			4.8		66.9			4.3		220.5			5.1		228.9			5.0
Amortization expense	21.4			1.5		28.5			1.8		64.9			1.5		85.8			1.9
Other operating expense, net	23.3			1.7		11.1			0.7		98.9			2.3		111.9			2.4
Total operating expenses	196.6			14.1		202.1			13.0		669.8			15.5		721.6			15.7
Operating income	30.9			2.2		57.6			3.8		25.4			0.6		101.1			2.2
Other expense:
Interest expense	27.8			2.0		31.4			2.0		87.6			2.0		92.9			2.0
Interest income	(1.3		)	(0.1	)	(0.4		)	—		(3.8		)	(0.1	)	(3.5		)	(0.1	)
Loss (income) on foreign currency exchange	0.6			—		(2.5		)	(0.2	)	5.0			0.1		(2.8		)	(0.1	)
Other expense (income), net	3.6			0.3		(1.0		)	—		6.5			0.2		0.7			0.1
Total other expense	30.7			2.2		27.5			1.8		95.3			2.2		87.3			1.9
Income (loss) before income taxes	0.2			—		30.1			2.0		(69.9		)	(1.6	)	13.8			0.3
Income tax (benefit) expense	(5.2		)	(0.4	)	1.3			0.1		(21.1		)	(0.5	)	(9.0		)	(0.2	)
Net income (loss)	$	5.4		0.4	%	$	28.8		1.9	%	$	(48.8	)	(1.1	)%	$	22.8		0.5	%

Three Months Ended September 30, ~~2017~~2018 Compared to Three Months Ended September 30, ~~2016~~2017

Net Sales—
Third quarter net sales decreased by ~~$38.1~~$154.8 million, or ~~2.4%~~10.0%, in ~~2017~~2018 compared to ~~2016.~~2017. The change in net sales from the third quarter of ~~2016~~2017 to the third quarter of ~~2017~~2018 was due to the following:

Dollars

Percent

(Dollars in millions)

2016 Net sales

$
1,586.9

Volume/mix

1.4

0.1
%
Pricing

1.5

0.1

Product recalls

1.6

0.1

Acquisition/divestiture

(45.6
)

(2.9
)
Foreign currency

3.0

0.2

2017 Net sales

$
1,548.8

(2.4
)%



	Dollars			Percent
	(Dollars in millions)
2017 Net sales	$	1,548.8
SKU rationalization	(36.7		)	(2.3	)%
Volume/mix excluding SKU rationalization	(137.8		)	(8.9	)
Pricing	26.8			1.7
Product recalls	(1.7		)	(0.1	)
Divestitures	(2.7		)	(0.2	)
Foreign currency	(2.7		)	(0.2	)
2018 Net sales	$	1,394.0		(10.0	)%

The change in net sales was ~~more than explained~~driven by the ongoing efforts to simplify and rationalize low margin SKUs, which contributed 2.3% to the year-over-year decline, and the divestiture of the ~~SIF~~McCann's business in July 2018, which contributed ~~2.9%~~0.2% to the year-over-year decline. ~~Volume/mix, pricing,~~Excluding the impact of the divestiture and ~~foreign exchange were slightly favorable~~SKU rationalization, net sales decreased 7.5% in the third quarter 2018 compared to 2017, driven by the ~~prior year, partially offsetting~~following:

Volume/mix was unfavorable 8.9% year-over-year mostly driven by declines in the ~~decline from~~Snacks and Meals segments.

Foreign currency exchange was unfavorable 0.2% in the ~~divestiture.~~ third quarter of 2018 compared to 2017.

Included in third quarter 2017 net sales was a $1.7 million product recall reimbursement, which did not recur in 2018, contributing a 0.1% decrease to the year-over-year change in net sales.

Pricing was favorable 1.7% in the third quarter of 2018 compared to ~~a $0.1 million impact in 2016, that contributed an increase of 0.1%~~2017 reflecting pricing actions to ~~net sales year-over-year.~~

~~Cost of Sales~~cover commodity, packaging, and freight inflation across most product categories.

Gross Profit — ~~Cost of sales~~Gross profit as a percentage of net sales was ~~83.2%~~16.3% in the third quarter of 2018, compared to 16.8% in the third quarter of 2017, ~~compared~~a decrease of 0.5% . Of this decrease, 0.4 percentage points was related to ~~82.0%~~$4.7 of expenses for plant restoration costs related to a temporary shutdown at our Snacks plant in Robersonville, NC in the third quarter of ~~2016. Included in cost of sales~~2018, and $3.2 million related to product recall reimbursement in the third quarter of 2017 that did not recur in 2018. This was ~~$1.5 million related~~partially offset by a reduction in expenses associated with restructuring programs to ~~product recall reimbursement compared to expense of $0.2~~$7.2 million in the third quarter of ~~2016. Also included in cost of sales was~~2018 compared to $10.2 million ~~of restructuring and other margin improvement activities~~ in the third quarter of 2017 compared to $1.0 million in the prior year. These transactions, coupled with the product recall reimbursement outlined above in net sales, increased cost of sales as a percentage of net sales by 0.5% in the third quarter of 2017 and 0.1% in the third quarter of 2016.2017. The remaining ~~0.8% increase in cost of sales as a~~0.1 percentage ~~of net sales~~point decrease was primarily due to unfavorable volume/mix, higheroperating costs, including unanticipated hurricane expenses, higher ~~commodity~~freight costs, ~~and unfavorable mix, partially offset by a reduction in~~higher variable incentive compensation, and ~~depreciation.~~higher commodity costs, partially offset by pricing actions and lower costs resulting from a LIFO liquidation.

Operating Expenses— Total operating expenses were ~~$202.3~~$196.6 million in the third quarter of ~~2017~~2018 compared to ~~$208.0~~$202.1 million in the third quarter of ~~2016.~~2017. The decrease in ~~2017~~2018 resulted from the following:

Selling and distribution expenses decreased ~~$6.6~~$10.2 million, or ~~6.5%~~10.7%, in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~2017 driven by savings from the Structure to Win initiative and other cost saving measures, lower broker commissions, and lower freight expense due to volume, partially offset by higher freight rates and higher variable incentive compensation. Selling and distribution expenses as a percentage of net sales decreased 0.1 percentage points to 6.1% in the third quarter of 2018, compared to 6.2% in the third quarter of ~~2017, compared to 6.4% in the third quarter of 2016. The~~2017. This decrease was primarily related to ~~lower volumes, a reduction in variable incentive compensation,~~savings from the Structure to Win initiative and other cost ~~savings in 2017, partially offset by unfavorable freight rates.~~

saving measures.

General and administrative expenses decreased ~~$4.8~~$0.4 million, or ~~6.7%~~0.6%, in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~2017. General and administrative expenses as a percentage of net sales ~~decreased slightly~~increased 0.5 percentage points to 4.8% in the third quarter of 2018, compared to 4.3% in the third quarter of ~~2017,~~2017. Of this increase, 0.2 percentage points was related to $5.1 million of costs associated with restructuring programs and acquisition, integration, divestiture and related costs in 2018, compared to ~~4.5%~~$3.4 million associated with acquisition, integration, divestiture and related costs in 2017. The remaining 0.3 percentage point increase year-over-year was mostly due increased variable incentive compensation partially offset by savings from the Structure to Win initiative and other cost saving measures.

Amortization expense decreased $7.1 million in the third quarter of ~~2016 mostly related to lower revenues and a reduction in variable incentive compensation.~~

~~Amortization expense was relatively flat in the third quarter of 2017~~2018 compared to the third quarter of ~~2016.~~

2017 reflecting the impairment of the customer related intangible assets in the Snacks segment in the fourth quarter of 2017.

Other operating expense was $23.3 million in the third quarter of 2018 compared to $11.1 million in the third quarter of 2017, ~~compared to $5.3 million in the third quarter~~an increase of ~~2016.~~$12.2 million. The increase was ~~entirely~~mostly due to $26.8 million of higher costs in 2018 associated with restructuring ~~and other margin improvement activities~~programs that were announced in recent quarters with respect to the TreeHouse 2020 margin improvement plan and the Company’s ~~closure~~plant closures partially offset by a gain on the divestiture of the ~~Brooklyn Park, Minnesota; Plymouth, Indiana; City~~McCann's business of Industry, California; Ayer, Massachusetts; Azusa, California; Delta, British Columbia (frozen griddle); and Ripon, Wisconsin facilities as well as the downsizing of the Dothan, Alabama and Battle Creek, Michigan facilities.$14.3 million. See Note 2 and Note 14 to our Condensed Consolidated Financial Statements for additional information regarding restructuring programs and ~~margin improvement activities.~~

other operating expense, net.

Interest Expense— Interest expense ~~increased~~decreased to ~~$31.4~~$27.8 million in the third quarter of ~~2017,~~2018, compared to ~~$30.8~~$31.4 million in ~~2016,~~2017, primarily due to lower net debt and lower credit facility pricing from the December 1, 2017 credit agreement amendment, partially offset by higher interest rates and the write-off of $0.7 million of deferred debt issuance costs associated with ~~Federal~~the repurchase of the 2022 Notes and 2024 Notes in the third quarter of 2018. The higher interest ~~rate increases partially offset by lower net debt.~~rates reflect the year-over-year increase in LIBOR.

Interest Income– Interest income of ~~$0.4~~$1.3 million primarily relates to cash held by our Canadian subsidiaries and gains on investments. Interest income increased slightly from the third quarter of ~~2016.~~2017.

Foreign Currency— The Company’s foreign currency impact was a ~~$2.5~~$0.6 million ~~gain~~loss for ~~the~~ third quarter of ~~2017,~~2018, compared to ~~a gain~~income of ~~$1.1~~$2.5 million in the third quarter of ~~2016,~~2017, primarily due to fluctuations in currency exchange rates between the U.S. and Canadian dollar during the respective periods.

Other ~~(Income)~~ Expense (Income), net— Other ~~income~~expense was ~~$0.8~~$3.6 million for the third quarter of ~~2017,~~2018, compared to income of ~~$4.6~~$1.0 million in the third quarter of ~~2016.~~2017. The change was primarily due to ~~lower~~expenses associated with tax indemnification and a loss on debt extinguishment related to the repurchase of 2022 Notes and 2024 Notes partially offset by an increase in non-cash mark-to-market gains from hedging activities, ~~primarily foreign currency contracts, commodity contracts, and~~driven by interest rate swaps.

Income Taxes— Income tax (benefit) expense was a benefit of ~~$1.3~~$5.2 million ~~was recorded~~ in the third quarter of ~~2017~~2018 compared to an expense of ~~$15.2~~$1.3 million for the same period of ~~2016.~~2017. The ~~effective rate~~income tax benefit in the third quarter of 2018 was ~~4.3%~~primarily driven by the release of certain tax reserves related to statute expirations of $6.7 million. In tandem with recognizing the $6.7 million tax benefit, during the third quarter of 2018 the Company wrote off $6.7 million of related tax indemnification asset, which was reflected in Other expense (income), net in the Condensed Consolidated Statements of Operations. The remaining fluctuation in the tax provision for the third quarter of ~~2017~~2018 compared to ~~28.9% for~~ the third quarter of ~~2016. The change in the effective tax rate for the three months ended September 30,~~ 2017 ~~as compared to September 30, 2016 is~~was primarily a result of the reduction in the U.S. Federal statutory tax rate, an increase in the amount of income tax benefit from the release of certain tax reserves, ~~for unrecognized tax benefits due to~~a reduction in the ~~lapse of statutes and a~~ benefit from foreign tax credits on a year-over-year ~~basis.~~basis, and the overall impact of discrete items on low third quarter income before taxes. 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.

The Company’s effective tax rate differs from the U.S. federal statutory tax rate primarily due to state tax expense, ~~the benefits associated with the federal domestic production activities deduction, the excess~~executive compensation expense that is not deductible for tax ~~benefits related to share-based payments, the benefit of~~purposes, and an intercompany financing structure entered into in conjunction with the E.D. Smith Foods, Ltd. (“E.D. Smith”) acquisition in ~~2007, and the benefit derived from foreign tax credits.~~

2007.

Three Months Ended September 30, ~~2017~~2018 Compared to Three Months Ended September 30, ~~2016~~2017 — Results by Segment

Three Months Ended September 30,

2017

2016

Dollars

Percent

Dollars

Percent

(Dollars in millions)

Net sales

$
351.2

100.0
%

$
329.4

100.0
%
Cost of sales

275.1

78.3

267.0

81.1

Gross profit

76.1

21.7

62.4

18.9

Freight out and commissions

22.2

6.3

20.8

6.3

Direct selling, general, and administrative

7.0

2.0

7.8

2.3

Direct operating income

$
46.9

13.4
%

$
33.8

10.3
%



	Three Months Ended September 30,
	2018				2017
	Dollars		Percent		Dollars		Percent
	(Dollars in millions)
Net sales	$	332.8	100.0	%	$	351.2	100.0	%
Cost of sales	269.2		80.9		275.1		78.3
Gross profit	63.6		19.1		76.1		21.7
Freight out and commissions	22.5		6.8		22.2		6.3
Direct selling, general, and administrative	5.9		1.7		7.0		2.0
Direct operating income	$	35.2	10.6	%	$	46.9	13.4	%

Net sales in the Baked Goods segment ~~increased $21.8~~decreased $18.4 million, or ~~6.6%~~5.2%, in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~2017. The change in net sales from ~~2016~~2017 to ~~2017~~2018 was due to the following:

Dollars

Percent

(Dollars in millions)

2016 Net sales

$
329.4

Volume/mix

21.7

6.6
%
Pricing

(0.7
)

(0.2
)
Foreign currency

0.8

0.2

2017 Net sales

$
351.2

6.6
%



	Dollars			Percent
	(Dollars in millions)
2017 Net sales	$	351.2
SKU rationalization	(7.6		)	(2.1	)%
Volume/mix excluding SKU rationalization	(18.6		)	(5.3	)
Pricing	8.5			2.4
Foreign currency	(0.7		)	(0.2	)
2018 Net sales	$	332.8		(5.2	)%

Net sales ~~increased~~decreased during the third quarter of ~~2017~~2018 compared to the third quarter of 2016 primarily due to favorable volume/mix from increased distribution predominantly in the cracker and cookie categories, partially offset by unfavorable pricing from competitive pressure.

~~Cost of sales as a percentage of net sales decreased 2.8%, from 81.1% in the third quarter of 2016 to 78.3% in~~ the third quarter of 2017 primarily due to ~~lower~~unfavorable volume/mix due to lost distribution from competitive pressure in the dough, crackers, and cookies categories combined with unfavorable mix, the ongoing efforts to simplify and rationalize low margin SKUs, and unfavorable foreign currency, partially offset by favorable pricing driven by commodity and freight inflation.

Gross profit as a percentage of net sales decreased 2.6 percentage points, from 21.7% in the third quarter of 2017 to 19.1% in the third quarter of 2018, primarily due to higher operating costs, higher commodity costs ~~(flour, sugar,~~(wheat, eggs, and ~~eggs)~~resin), and ~~lower operating costs.~~

unfavorable volume/mix, partially offset by favorable pricing.

Freight out and commissions paid to independent sales brokers was $22.5 million in the third quarter of 2018, compared to $22.2 million in the third quarter of ~~2017, compared to $20.8 million in the third quarter of 2016.~~2017. Freight and commissions as a percentage of net sales ~~was flat year-over-year.~~

increased 0.5 percentage points year-over-year due to freight cost inflation, particularly in the temperature controlled freight market.

Direct selling, general, and administrative expenses were $5.9 million in the third quarter of 2018 compared to $7.0 million in the third quarter of ~~2017 compared to $7.8 million in the third quarter of 2016.~~2017. The decrease in direct selling, general, and administrative expenses as a percentage of net sales was primarily due to Structure to Win savings combined with lower spend due to other cost saving activities.

Three Months Ended September 30,

2017

2016

Dollars

Percent

Dollars

Percent

(Dollars in millions)

Net sales

$
244.9

100.0
%

$
234.9

100.0
%
Cost of sales

178.3

72.8

158.5

67.5

Gross profit

66.6

27.2

76.4

32.5

Freight out and commissions

10.3

4.2

6.9

2.9

Direct selling, general, and administrative

4.6

1.9

5.7

2.4

Direct operating income

$
51.7

21.1
%

$
63.8

27.2
%



	Three Months Ended September 30,
	2018				2017
	Dollars		Percent		Dollars		Percent
	(Dollars in millions)
Net sales	$	236.3	100.0	%	$	244.9	100.0	%
Cost of sales	180.4		76.3		178.3		72.8
Gross profit	55.9		23.7		66.6		27.2
Freight out and commissions	7.9		3.3		10.3		4.2
Direct selling, general, and administrative	3.9		1.7		4.6		1.9
Direct operating income	$	44.1	18.7	%	$	51.7	21.1	%

Net sales in the Beverages segment ~~increased $10.0~~decreased $8.6 million, or ~~4.3%~~3.5%, in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~2017. The change in net sales from ~~2016~~2017 to ~~2017~~2018 was due to the following:

Dollars

Percent

(Dollars in millions)

2016 Net sales

$
234.9

Volume/mix

14.0

6.0
%
Pricing

(4.0
)

(1.7
)
2017 Net sales

$
244.9

4.3
%



	Dollars			Percent
	(Dollars in millions)
2017 Net sales	$	244.9
SKU rationalization	(3.9		)	(1.6	)%
Volume/mix excluding SKU rationalization	(3.5		)	(1.4	)
Pricing	(1.2		)	(0.5	)
2018 Net sales	$	236.3		(3.5	)%

Net sales ~~increased~~decreased during the third quarter of ~~2017~~2018 compared to the third quarter of 2016 primarily due to favorable volume/mix from increased distribution, principally in the single serve beverages, creamer, broth, and liquid beverages categories, partially offset by unfavorable pricing from competitive pressure.

~~Cost of sales as a percentage of net sales increased 5.3%, from 67.5% in the third quarter of 2016 to 72.8% in~~ the third quarter of 2017 primarily due to the ongoing efforts to simplify and rationalize low margin SKUs, unfavorable volume/mix in creamers, partially offset by category gains in broth. Pricing was unfavorable primarily due to competitive pressure in the single serve beverages category, partially offset by favorable pricing driven by commodity inflation.

Gross profit as a percentage of net sales decreased 3.5 percentage points, from 27.2% in the third quarter of 2017 to 23.7% in the third quarter of 2018, primarily due to a labor dispute and ensuing recovery at a creamer plant that has driven unfavorable volume/mix and higher operating ~~costs and unfavorable commodity costs (primarily related to oils).~~

costs.

		~~Page~~

	Page
Part I — Financial Information

Item 1 — Financial Statements (Unaudited)	3

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	35 39

Item 3 — Quantitative and Qualitative Disclosures About Market Risk	53 62

Item 4 — Controls and Procedures	54 62

Report of Independent Registered Public Accounting Firm	55 63

Part II — Other Information

Item 1 — Legal Proceedings	56 64

Item 1A — Risk Factors	56 64

Item 2 — Unregistered Sale of Equity Securities and Use of Proceeds	65

Item 6 — Exhibits	57 66

Signatures	58 67

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	131.9		$	62.1
Investments		13.2			10.4
Receivables, net		432.1			429.0
Inventories		1,137.5			978.0
Assets held for sale		—			3.6
Prepaid expenses and other current assets		110.4			77.6
Total current assets		1,825.1			1,560.7
Property, plant, and equipment, net		1,289.8			1,359.3
Goodwill		2,459.2			2,447.2
Intangible assets, net		1,068.3			1,137.6
Other assets, net		43.2			41.0
Total assets	$	6,685.6		$	6,545.8
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	773.8		$	626.8
Current portion of long-term debt		72.1			66.4
Total current liabilities		845.9			693.2
Long-term debt		2,620.4			2,724.8
Deferred income taxes		421.4			422.2
Other long-term liabilities		200.6			202.3
Total liabilities		4,088.3			4,042.5
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued		—			—
Common stock, par value $0.01 per share, 90.0 shares authorized, 57.2 and 56.8 shares issued and outstanding, respectively		0.6			0.6
Additional paid-in capital		2,101.4			2,071.9
Retained earnings		554.9			532.1
Accumulated other comprehensive loss		(59.6	)		(101.3	)
Total stockholders’ equity		2,597.3			2,503.3
Total liabilities and stockholders’ equity	$	6,685.6		$	6,545.8

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
Net sales	$	1,548.8		$	1,586.9		$	4,607.2		$	4,398.5
Cost of sales		1,288.7			1,301.3			3,783.8			3,622.5
Gross profit		260.1			285.6			823.4			776.0
Operating expenses:
Selling and distribution		95.6			102.2			295.0			292.0
General and administrative		67.1			71.9			229.3			244.6
Amortization expense		28.5			28.6			85.8			80.9
Other operating expense, net		11.1			5.3			111.9			10.3
Total operating expenses		202.3			208.0			722.0			627.8
Operating income		57.8			77.6			101.4			148.2
Other expense:
Interest expense		31.4			30.8			92.9			88.0
Interest income		(0.4	)		(0.1	)		(3.5	)		(3.5	)
Gain on foreign currency exchange		(2.5	)		(1.1	)		(2.8	)		(6.0	)
Other (income) expense, net		(0.8	)		(4.6	)		1.0			(0.3	)
Total other expense		27.7			25.0			87.6			78.2
Income before income taxes		30.1			52.6			13.8			70.0
Income taxes		1.3			15.2			(9.0	)		16.8
Net income	$	28.8		$	37.4		$	22.8		$	53.2

Net earnings per common share:
Basic	$	0.50		$	0.66		$	0.40		$	0.96
Diluted	$	0.50		$	0.65		$	0.40		$	0.95
Weighted average common shares:
Basic		57.3			56.8			57.1			55.4
Diluted		57.7			57.6			57.7			56.2


(1)	Net of tax of $(0.1) million and $0.1 million for the three and nine months ended September 30, 2018, respectively. There was no tax impact for the three or nine months ended September 30, 2017.


(2)	Net of tax of $0.1 million and ~~$0.2~~$0.1 million for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$4.4~~$0.2 million and ~~$0.5~~$4.4 million for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.


(1)	The downsizing of this facility began in January ~~2017 and is expected to last approximately 15 months.~~ 2017. On January 31, 2018, the Company announced the full closure of this facility, with a targeted completion date of mid-2019. The costs associated with the full closure are included in the TreeHouse 2020 section of this footnote.


(1)	On May 22, 2017, the Company sold the soup and infant feeding business (“SIF”). Included within this category was $59.5 million of SIF related sales for the nine months ended September 30, 2017. No amounts were included for the three months ended September 30, 2017.


(2)	Represents product recall reimbursements that were received during the three and nine months ended September 30, 2017.

	Severance			Multiemployer Pension Plan Withdrawal		Other Costs			Total Liabilities
	(In millions)
Balance as of December 31, 2016	$	3.5		$	0.8	$	-		$	4.3
Expense		6.6			—		2.4			9.0
Payments		(4.2	)		—		(0.5	)		(4.7	)
Adjustments		(0.3	)		—		—			(0.3	)
Balance as of September 30, 2017	$	5.6		$	0.8	$	1.9		$	8.3

	(In millions)
Cash	$	43.3
Receivables		162.7
Inventory		443.7
Property, plant, and equipment		809.6
Customer relationships		510.9
Trade names		33.0
Software		19.6
Formulas		23.2
Other assets		50.2
Goodwill		1,141.2
Assets acquired		3,237.4
Deferred taxes		(152.8	)
Assumed current liabilities		(246.6	)
Assumed long-term liabilities		(150.3	)
Total purchase price	$	2,687.7

	Nine Months Ended September 30, 2016
	(In millions, except per share data)
Pro forma net sales	$	4,722.4
Pro forma net income	$	74.9
Pro forma basic earnings per common share	$	1.32
Pro forma diluted earnings per common share	$	1.30

	Baked
	Goods		Beverages		Condiments		Meals		Snacks		Total
	(In millions)
Balance at January 1, 2017	$	554.2	$	713.2	$	433.1	$	470.6	$	276.1	$	2,447.2
Purchase price adjustments		1.4		—		0.2		1.1		0.3		3.0
Foreign currency exchange adjustments		—		3.8		5.2		—		—		9.0
Balance at September 30, 2017	$	555.6	$	717.0	$	438.5	$	471.7	$	276.4	$	2,459.2

	September 30, 2017		December 31, 2016
	(In millions)
Trademarks	$	22.8	$	21.6
Total indefinite lived intangibles	$	22.8	$	21.6

	September 30, 2017							December 31, 2016
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
	(In millions)							(In millions)
Intangible assets with finite lives:
Customer-related	$	1,266.6	$	(341.2	)	$	925.4	$	1,284.3	$	(293.3	)	$	991.0
Contractual agreements		2.8		(2.8	)		—		3.0		(2.9	)		0.1
Trademarks		69.6		(27.4	)		42.2		69.6		(23.6	)		46.0
Formulas/recipes		33.8		(16.9	)		16.9		33.7		(12.8	)		20.9
Computer software		130.8		(69.8	)		61.0		115.7		(57.7	)		58.0
Total finite lived intangibles	$	1,503.6	$	(458.1	)	$	1,045.5	$	1,506.3	$	(390.3	)	$	1,116.0

									Weighted
							Weighted		Average
							Average		Remaining		Aggregate
	Employee			Director			Exercise		Contractual		Intrinsic
	Options			Options			Price		Term (yrs)		Value
	(In thousands)										(In millions)
Outstanding, at December 31, 2016		2,069			20		$	64.77		5.8	$	28.9
Granted		481			—			84.16
Forfeited		(87	)		—			87.85
Exercised		(257	)		(16	)		40.83
Expired		(2	)		—			87.83
Outstanding, at September 30, 2017		2,204			4			71.03		6.3		16.3
Vested/expected to vest, at September 30, 2017		2,140			4			70.57		6.2		16.3
Exercisable, at September 30, 2017		1,404			4			61.99		4.7		16.3

				Weighted
				Average
	Performance			Grant Date
	Units			Fair Value
	(In thousands)
Unvested, at December 31, 2016		246		$	85.16
Granted		114			86.66
Vested		(72	)		79.89
Forfeited		(18	)		87.02
Unvested, at September 30, 2017		270			86.23

				Unrecognized			Accumulated
	Foreign			Pension and			Other
	Currency			Postretirement			Comprehensive
	Translation (1)			Benefits (2)			Loss
	(In millions)
Balance at December 31, 2016	$	(89.4	)	$	(11.9	)	$	(101.3	)
Other comprehensive income		34.5			—			34.5
Reclassifications from accumulated other comprehensive loss		—			7.2			7.2
Other comprehensive income		34.5			7.2			41.7
Balance at September 30, 2017	$	(54.9	)	$	(4.7	)	$	(59.6	)


(1)	The foreign currency translation adjustment is ~~not~~presented net of tax asof $0.1 million for the ~~Company’s investments in its foreign subsidiaries are considered to be permanent.~~ nine months ended September 30, 2018. There was no tax impact for the nine months ended September 30, 2017.

									Affected line in
	Reclassifications from Accumulated								the Condensed Consolidated
	Other Comprehensive Loss								Statements of Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)				(In millions)
Amortization of defined benefit pension and postretirement items:
Prior service costs	$	—	$	—	$	0.1	$	0.2	(a)
Unrecognized net loss		0.1		0.4		0.7		1.1	(a)
Actuarial adjustment		—		—		2.1		—	(b)
Divestiture		—		—		8.7		—	Other operating expense, net
Total before tax		0.1		0.4		11.6		1.3
Income taxes		—		0.1		4.4		0.5	Income taxes
Net of tax	$	0.1	$	0.3	$	7.2	$	0.8

	Parent			Guarantor		Non-Guarantor
	Company			Subsidiaries		Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	76.7		$	0.2	$	55.0	$	—		$	131.9
Investments		—			—		13.2		—			13.2
Accounts receivable, net		—			377.6		54.5		—			432.1
Inventories, net		—			1,008.3		129.2		—			1,137.5
Prepaid expenses and other current assets		71.7			17.6		21.1		—			110.4
Total current assets		148.4			1,403.7		273.0		—			1,825.1
Property, plant, and equipment, net		27.9			1,104.8		157.1		—			1,289.8
Goodwill		—			2,333.7		125.5		—			2,459.2
Investment in subsidiaries		5,212.5			572.0		—		(5,784.5	)		—
Intercompany accounts (payable) receivable, net		(152.7	)		137.4		15.3		—			—
Deferred income taxes		23.4			—		—		(23.4	)		—
Intangible and other assets, net		59.4			945.3		106.8		—			1,111.5
Total assets	$	5,318.9		$	6,496.9	$	677.7	$	(5,807.9	)	$	6,685.6
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	25.3		$	675.3	$	73.2	$	—		$	773.8
Current portion of long-term debt		70.8			1.2		0.1		—			72.1
Total current liabilities		96.1			676.5		73.3		—			845.9
Long-term debt		2,618.7			1.5		0.2		—			2,620.4
Deferred income taxes		—			418.7		26.1		(23.4	)		421.4
Other long-term liabilities		6.8			187.7		6.1		—			200.6
Stockholders’ equity		2,597.3			5,212.5		572.0		(5,784.5	)		2,597.3
Total liabilities and stockholders’ equity	$	5,318.9		$	6,496.9	$	677.7	$	(5,807.9	)	$	6,685.6

	Nine Months Ended September 30,
Free Cash Flow	2017			2016
	(In millions)
Cash flow provided by operating activities	$	263.4		$	298.4
Less: Capital expenditures		(121.1	)		(142.8	)
Free cash flow	$	142.3		$	155.6



¹		As reported results for the nine months ended September 30, 2018 reflect a loss; therefore, all equity awards were considered non-dilutive and excluded from the EPS calculation. Adjusted amounts, however, reflect net income and equity awards are considered dilutive. Accordingly, an adjustment is required to reflect total dilutive shares of 56.8 million compared to basic shares of 56.4 million.



			Location in Condensed	Three Months Ended September 30,						Nine Months Ended September 30,
			Consolidated Statements of Operations	2018			2017			2018			2017
				(unaudited in millions)
(1	)	Restructuring programs	Other operating expense, net	$	37.3		$	10.5		$	112.6		$	26.0
			Cost of sales	7.2			10.2			18.8			13.5
			General and administrative	1.0			—			3.3			—
(2	)	CEO transition costs	General and administrative	—			—			13.0			—
(3	)	Mark-to-market adjustments	Other expense (income), net	(3.8		)	(1.9		)	(5.8		)	0.6
(4	)	Foreign currency (gain) loss on re-measurement of intercompany notes	Loss (income) on foreign currency exchange	(1.4		)	(4.2		)	1.9			(7.6		)
(5	)	Product recall reimbursement	Net sales	—			(1.7		)	—			(5.5		)
			Cost of sales	—			(1.5		)	—			(2.9		)
(6	)	Acquisition, integration, divestiture, and related costs	General and administrative	4.1			3.4			4.8			12.7
			Other operating expense, net	(14.0		)	0.6			(13.7		)	85.8



			Other expense (income), net	—	(0.2	)	—	—
(7	)	Debt amendment and repurchase activity	General and administrative	—	—		0.2	—
			Other expense (income), net	1.1	—		4.2	—
			Interest expense	0.7	—		2.4	—
(8	)	Tax indemnification	Other expense (income), net	6.7	—		7.9	—
(9	)	Plant restoration	Cost of sales	4.7	—		4.7	—
(10	)	Accelerated depreciation	Cost of sales	5.8	9.1		15.9	13.3
			General and administrative	1.0	—		3.3	0.3
(11	)	Stock-based compensation expense included as an adjusting item	General and administrative	0.1	—		10.2	—



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 yet be Purchased under the Program
			(in millions)	(in millions)	(in millions)
July 1 through July 31, 2018	$	52.72	0.1	0.1	$	337.6
August 1 through August 31, 2018	47.68		0.1	0.1	333.4
September 1 through September 30, 2018	52.79		0.1	0.1	329.1
For the Quarter Ended September 30, 2018	$	50.96	0.3	0.3	$	329.1


12.1*

12.1*	Computation of Ratio of Earnings to Fixed Charges.

15.1*	Awareness Letter from Deloitte & Touche LLP regarding unaudited financial information.

31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document.

101.SCH*	XBRL Taxonomy Extension Schema Document.

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.




	TREEHOUSE FOODS, INC.

	/s/ Matthew J. Foulston
	Matthew J. Foulston
	Executive Vice President and Chief Financial Officer