UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
|
þ
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Quarterly Report Pursuant to
Section 13 or 15(d) of the Securities and Exchange Act of
1934
|
For
the Quarterly Period Ended June 30, 2009.
or
|
o
|
Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For
the Transition Period
from to
Commission
File Number 001-32504
TreeHouse
Foods, Inc.
(Exact
name of the registrant as specified in its charter)
Delaware
|
|
20-2311383
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
employer identification no.)
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Two
Westbrook Corporate Center, Suite 1070
|
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Westchester,
IL
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60154
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(
Address of principal
executive offices
)
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(
Zip Code
)
|
(Registrant’s
telephone number, including area code)
(708) 483-1300
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
þ
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
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þ
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Accelerated
filer
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o
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Non-accelerated
filer
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o
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Smaller
reporting Company
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o
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(Do
not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
þ
There
were 31,823,489 shares of Common Stock, par value $0.01 per share, outstanding
as of July 31, 2009.
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Part I
— Financial Information
TREEHOUSE
FOODS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share and per share data)
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June
30,
|
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December
31,
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2009
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2008
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(Unaudited)
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Assets
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|
|
|
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Current
assets:
|
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|
|
|
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|
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Cash
and cash equivalents
|
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$
|
2,097
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|
|
$
|
2,687
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Receivables,
net
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84,009
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86,837
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Inventories,
net
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275,803
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|
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245,790
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|
Deferred
income taxes
|
|
|
6,809
|
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|
6,769
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|
Prepaid
expenses and other current assets
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7,130
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|
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|
10,315
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Assets
held for sale
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4,081
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|
4,081
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|
Total
current assets
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|
379,929
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|
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356,479
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Property,
plant and equipment, net
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278,081
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|
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270,664
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Goodwill
|
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567,862
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|
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560,874
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Identifiable
intangible and other assets, net
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165,147
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|
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167,665
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Total
assets
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|
$
|
1,391,019
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$
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1,355,682
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Liabilities
and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable and accrued expenses
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$
|
163,801
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$
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187,795
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Current
portion of long-term debt
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627
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|
475
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Total
current liabilities
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164,428
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188,270
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Long-term
debt
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482,837
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475,233
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Deferred
income taxes
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36,367
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27,485
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Other
long-term liabilities
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37,441
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|
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44,563
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Commitments
and contingencies (Note 16)
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Stockholders’
equity:
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Preferred
stock, par value $0.01 per share, 10,000,000 shares authorized, none
issued
|
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—
|
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—
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Common
stock, par value $0.01 per share, 90,000,000 and 40,000,000 shares
authorized, respectively, and 31,815,612 and 31,544,515 shares issued and
outstanding, respectively
|
|
|
318
|
|
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|
315
|
|
Additional
paid-in capital
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575,443
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|
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569,262
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|
Retained
earnings
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145,109
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|
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113,948
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Accumulated
other comprehensive loss
|
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(50,924
|
)
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(63,394
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)
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Total
stockholders’ equity
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669,946
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620,131
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Total
liabilities and stockholders’ equity
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$
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1,391,019
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$
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1,355,682
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|
See Notes
to Condensed Consolidated Financial Statements.
TREEHOUSE
FOODS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except per share data)
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Three
Months Ended
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Six
Months Ended
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June
30,
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June
30,
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|
2009
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|
2008
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2009
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2008
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(Unaudited)
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(Unaudited)
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Net
sales
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$
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372,605
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$
|
367,369
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$
|
728,001
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$
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727,992
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Cost
of sales
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292,761
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298,740
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576,446
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588,974
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Gross
profit
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79,844
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68,629
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151,555
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139,018
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Operating
expenses:
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Selling
and distribution
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28,517
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28,948
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54,298
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57,612
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General
and administrative
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19,863
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15,760
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35,636
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31,002
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Other
operating expense, net
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183
|
|
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|
928
|
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|
425
|
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|
11,850
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Amortization
expense
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3,321
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3,528
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6,579
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7,015
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|
Total
operating expenses
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51,884
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49,164
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96,938
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107,479
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Operating
income
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27,960
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19,465
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54,617
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31,539
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Other
(income) expense:
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Interest
expense
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4,839
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|
7,561
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9,337
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15,292
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Interest
income
|
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|
(18
|
)
|
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|
(87
|
)
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|
(18
|
)
|
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|
(107
|
)
|
Loss
(gain) on foreign currency exchange
|
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|
(3,864
|
)
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|
(5
|
)
|
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|
(1,804
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)
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1,855
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Other
(income) expense, net
|
|
|
(1,153
|
)
|
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|
113
|
|
|
|
(1,265
|
)
|
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|
(181
|
)
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Total
other (income) expense
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|
(196
|
)
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7,582
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6,250
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16,859
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Income
before income taxes
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28,156
|
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11,883
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48,367
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14,680
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Income
taxes
|
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9,731
|
|
|
|
3,591
|
|
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17,210
|
|
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4,327
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|
Net
income
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$
|
18,425
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$
|
8,292
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$
|
31,157
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$
|
10,353
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Weighted
average common shares:
|
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|
|
|
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Basic
|
|
|
31,616
|
|
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|
31,209
|
|
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31,586
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31,207
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Diluted
|
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31,752
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31,341
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32,052
|
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31,325
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Net
earnings per common share:
|
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Basic
|
|
$
|
.58
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|
$
|
.27
|
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|
$
|
.99
|
|
|
$
|
.33
|
|
Diluted
|
|
$
|
.58
|
|
|
$
|
.26
|
|
|
$
|
.97
|
|
|
$
|
.33
|
|
See Notes
to Condensed Consolidated Financial Statements.
TREEHOUSE
FOODS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
|
|
|
|
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|
|
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Six
Months Ended
|
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
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Net
income
|
|
$
|
31,157
|
|
|
$
|
10,353
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
16,398
|
|
|
|
16,917
|
|
Amortization
|
|
|
6,579
|
|
|
|
7,015
|
|
Loss
(gain) on foreign currency exchange, intercompany note
|
|
|
(2,146
|
)
|
|
|
1,855
|
|
Loss
(gain) on foreign currency contracts
|
|
|
222
|
|
|
|
(519
|
)
|
Mark
to market adjustment on interest rate swap
|
|
|
(1,206
|
)
|
|
|
—
|
|
Excess
tax benefits from stock-based payment arrangements
|
|
|
(100
|
)
|
|
|
—
|
|
Stock-based
compensation
|
|
|
6,059
|
|
|
|
5,381
|
|
Write
down of impaired assets
|
|
|
—
|
|
|
|
5,197
|
|
Loss
(gain) on disposition of assets
|
|
|
380
|
|
|
|
(387
|
)
|
Deferred
income taxes
|
|
|
7,293
|
|
|
|
3,964
|
|
Other
|
|
|
80
|
|
|
|
213
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
4,086
|
|
|
|
(11,290
|
)
|
Inventories
|
|
|
(27,880
|
)
|
|
|
20,176
|
|
Prepaid
expenses and other current assets
|
|
|
3,224
|
|
|
|
(4,699
|
)
|
Accounts
payable, accrued expenses and other liabilities
|
|
|
(29,117
|
)
|
|
|
1,739
|
|
Net
cash provided by operating activities
|
|
|
15,029
|
|
|
|
55,915
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(22,553
|
)
|
|
|
(29,683
|
)
|
Insurance
proceeds
|
|
|
—
|
|
|
|
598
|
|
Acquisitions
of businesses
|
|
|
—
|
|
|
|
(402
|
)
|
Proceeds
from sale of fixed assets
|
|
|
24
|
|
|
|
743
|
|
Net
cash used in investing activities
|
|
|
(22,529
|
)
|
|
|
(28,744
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
borrowings (repayment) of debt
|
|
|
6,479
|
|
|
|
(32,884
|
)
|
Proceeds
from stock option exercises
|
|
|
137
|
|
|
|
187
|
|
Excess
tax benefits from stock-based payment arrangements
|
|
|
100
|
|
|
|
100
|
|
Cash
used to net share settle equity awards
|
|
|
(279
|
)
|
|
|
—
|
|
Net
cash provided by (used in) financing activities
|
|
|
6,437
|
|
|
|
(32,597
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
473
|
|
|
|
(141
|
)
|
Net
decrease in cash and cash equivalents
|
|
|
(590
|
)
|
|
|
(5,567
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
2,687
|
|
|
|
9,230
|
|
Cash
and cash equivalents, end of period
|
|
$
|
2,097
|
|
|
$
|
3,663
|
|
See Notes
to Condensed Consolidated Financial Statements.
TREEHOUSE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As
of and for the six months ended June 30, 2009
(Unaudited)
1.
Basis of Presentation
The
Condensed Consolidated Financial Statements included herein have been prepared
by TreeHouse Foods, Inc. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission 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 generally accepted
accounting principles have been condensed or omitted as permitted by such rules
and regulations. The Condensed Consolidated Financial Statements and
related notes should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2008. Results of
operations for interim periods are not necessarily indicative of annual
results.
The
preparation of our Condensed Consolidated Financial Statements in conformity
with accounting principles generally accepted in the United States of America
(“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.
The
Company evaluated subsequent events through the time of filing this Quarterly
Report on Form 10-Q on August 7, 2009. We are not aware of any
significant events that occurred subsequent to the balance sheet date but prior
to the filing of this report that would have a material impact on our Condensed
Consolidated Financial Statements.
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, 2008.
Unless
otherwise indicated, references in this report to “we,” “us,” “our,” or the
“Company” refer to TreeHouse Foods, Inc. and subsidiaries, taken as a
whole.
2.
Recent Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) 157,
Fair Value Measurement
(Section 820-10 of the
Codification), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value
measurements. The provisions of SFAS 157 are effective for fiscal
years beginning after November 15, 2007. In February 2008, the FASB
issued FASB Staff Position (“FSP”) FAS 157-2 (Section 820-10-65-1 of the
Codification), which delayed the effective date of Statement 157 for all
nonrecurring fair value measurements of nonfinancial assets and nonfinancial
liabilities until fiscal years beginning after November 15, 2008. The
adoption of the provisions of SFAS 157 and FSP FAS 157-2 did not significantly
impact our financial statements.
In
December 2007, the FASB issued SFAS 141(R),
Business Combinations,
a
replacement of SFAS 141,
Business Combinations
(Section 805-10 of the Codification). The provisions of SFAS
141(R) establish principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest acquired and the goodwill
acquired. SFAS 141(R) also establishes disclosure requirements that
will enable users to evaluate the nature and financial effects of the business
combination, and applies to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008, and may not be early adopted. The Company
will apply SFAS 141(R) for acquisitions after the effective date.
In
December 2007, FASB issued SFAS 160,
Non-controlling Interests in
Consolidated Financial Statements – an Amendment of ARB 51
(Sections
810-10-45-15 through 17 of the Codification). The provisions of SFAS
160 outline the accounting and reporting for ownership interests in a subsidiary
held by parties other than the parent. SFAS 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. SFAS 160 is to be applied prospectively as
of the beginning of the fiscal year in which it is initially adopted, except for
the presentation and disclosure requirements, which are to be applied
retrospectively for all periods presented. Adoption of SFAS 160 did
not have an impact on our financial statements.
In March
2008, FASB issued SFAS 161,
Disclosures about Derivative
Instruments and Hedging Activities
(Section 235-10-599(n) of the
Codification),
which requires
increased qualitative, and credit-risk disclosures. This Statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Further, entities are encouraged,
but not required to provide comparative disclosures for earlier
periods. We adopted SFAS 161 beginning January 1, 2009 and have
provided the required disclosures beginning with our first quarterly report on
Form 10-Q in 2009.
Emerging
Issues Task Force (“EITF”) 08-6,
Equity Method Investment Accounting
Considerations
(Section 323-10 of the Codification),
was issued in November
2008 and is effective for transactions occurring in fiscal years beginning on or
after December 15, 2008. This EITF was issued to provide guidance on
how to apply Accounting Principles Board Opinion 18 (Section 323-10 of the
Codification) as a result of the issuance and adoption of SFAS 141(R) and SFAS
160. EITF 08-6 resulted in four consensuses: (1) the initial carrying
amount of an equity method investment should be determined by applying the cost
accumulation model in appendix D of SFAS 141(R), (2) when reviewing for
impairment, Opinion 18 should be used, (3) share issuances by the investee
should be accounting for as if the equity method investor sold a proportionate
share of its investment, and (4) when the investment is no longer accounted for
under Opinion 18 and is instead within the scope of cost method accounting or
SFAS 115 (Section 320-10 of the Codification), the investor should prospectively
apply the provisions of Opinion 18 or SFAS 115 and use the current carrying
amount of the investment as its initial cost. The adoption of EITF
08-6 did not have a significant impact on our financial statements.
On
December 30, 2008, the FASB issued FASB Staff Position (“FSP”) 132R-1,
Employers Disclosures about
Postretirement Benefit Plan Assets
(Section 715-20-50-1 of the
Codification). This FSP is effective for fiscal years ending after
December 15, 2009. This FSP does not change current accounting
methods, but requires disclosure about investment policies and strategies, the
fair value of each major category of plan assets, the methods and inputs used to
develop fair value measurements of plan assets, and concentrations of credit
risk. As this FSP only pertains to disclosures, the Company does not
expect its impact upon adoption to be significant.
In April
2009, the FASB issued FSP SFAS No. 107-1,
Interim Disclosures about Fair Value
of Financial Instruments,
(Section 825-10-50-30 of the Codification)
which amends SFAS No. 107,
Disclosures about Fair Value of
Financial Instruments,
and APB Opinion No. 28,
Interim Financial Reporting
(Section 270-10 of the Codification). FSP SFAS No. 107-1 requires
disclosures about fair value of financial instruments in financial statements
for interim reporting periods and in annual financial statements of
publicly-traded companies. This FSP also requires entities to
disclose the method(s) and significant assumptions used to estimate the fair
value of financial instruments in financial statements on an interim and annual
basis and to highlight any changes from prior periods. The effective
date for this FSP is interim and annual periods ending after June 15,
2009. We have complied with the disclosure provisions of this
FSP.
In May
2009, the FASB issued SFAS 165,
Subsequent Events
(Section 855-10 of the
Codification), which establishes general standards of accounting for, and
requires disclosure of, events that occur after the balance sheet date but
before financial statements are issued or are available to be
issued. SFAS 165 is effective for fiscal years and interim periods
ended after June 15, 2009. We adopted the provisions of SFAS 165 for
the quarter ended June 30, 2009. The adoption of these provisions did
not have a material effect on our consolidated financial
statements.
In June
2009, the FASB issued SFAS 168,
The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(Section 105-10 of the Codification). SFAS 168 establishes the FASB
Accounting Standards Codification (the “Codification”) as the single source of
authoritative, nongovernmental U.S. GAAP. The Codification is
effective for financial statements for interim or annual reporting periods
ending after September 15, 2009. We will begin to use the new
guidelines and numbering system prescribed by the Codification when referring to
GAAP in the third quarter of fiscal 2009. As the Codification was not
intended to change or alter existing GAAP, it will not have any impact on our
consolidated financial statements.
3.
Income Taxes
Income
tax expense was recorded at an effective rate of 34.6% and 35.6% for the three
and six months ended June 30, 2009, respectively, compared to 30.2% and 29.5%
for the three and six months ended June 30, 2008, respectively. The
Company’s effective tax rate is favorably impacted by an intercompany financing
structure entered into in conjunction with the E.D. Smith, Canadian
acquisition. For the six months ended June 30, 2009 and 2008, the
Company recognized a tax benefit of approximately $2.3 million and $2.8
million, respectively, related to this item. As consolidated earnings
for the three and six months ended June 30, 2009 were significantly higher than
consolidated earnings for the three and six months ended June 30, 2008, this tax
benefit was proportionally much smaller, therefore, increasing the net effective
tax rate in the three and six months ended June 30, 2009 compared to
2008.
As of
June 30, 2009, the Company does not believe that the gross recorded unrecognized
tax benefits will materially change within the next 12 months.
The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, Canada and various state jurisdictions. The Internal
Revenue Service (“IRS”) began an examination of the Company’s 2007 federal
income tax return in the second quarter of 2009. The IRS has
previously examined tax returns filed for years through 2006. The
Company has various state tax examinations in process, which are expected to be
completed in due course. The outcome of the IRS examination and the
various state tax examinations are unknown at this time.
E.D.
Smith and its affiliates are subject to Canadian, U.S. and state tax
examinations from 2005 forward. The IRS has completed an examination
of E.D. Smith’s U.S. affiliates tax return for 2005 during the period ended
March 31, 2009. An insignificant tax adjustment was paid to settle
the examination.
4.
Other Operating Expense
The
Company incurred Other operating expense of $0.2 million and $0.4 million for
the three and six months ended June 30, 2009, respectively, and $0.9 million and
$11.9 million for the three and six months ended June 30, 2008,
respectively. For the six months ended June 30, 2009, expenses
consisted of $0.6 million relating to executory costs at our
closed Portland, Oregon pickle plant offset by $0.2 million in rental
income. For the six months ended June 30, 2008, expenses consisted of
$11.4 million relating to the closing of our Portland, Oregon pickle plant
and $0.5 million relating to a fire at our non-dairy powdered creamer facility
located in New Hampton, Iowa.
5.
Facility Closings
On
February 13, 2008, the Company announced plans to close its pickle plant in
Portland, Oregon. The Portland plant was the Company’s highest cost
and least utilized pickle facility. Operations in the plant ceased
during the second quarter of 2008. Costs associated with the plant
closure are estimated to be approximately $13.9 million, of which $8.6 million
is expected to be in cash, net of estimated proceeds from the sale of
assets. The Company has incurred $13.5 million in Portland closure
costs since 2008. There are no accrued expenses related to this
closure as of June 30, 2009, and insignificant accrued expenses as of December
31, 2008. In connection with the Portland closure, the Company has
$4.1 million of assets held for sale, which are primarily land and
buildings.
On
November 3, 2008, the Company announced plans to close its salad dressings
manufacturing plant in Cambridge, Ontario. Manufacturing operations
in Cambridge ceased at the end of June 2009. Production is being
transitioned to the Company’s other manufacturing facilities in Canada and the
United States. The change will result in the Company’s production
capabilities being more aligned with the needs of our customers. The
majority of the closure costs were included as costs of the acquisition of E.D.
Smith and are not expected to significantly impact earnings. Total
costs are expected to be approximately $1.9 million. As of June 30,
2009, the Company had remaining accruals of approximately $1.3 million for
the closure, the components of which include $0.8 million for severance and $0.5
million for closing and other costs. The Company expects payments to
be completed by the end of 2009, with all payments expected to be funded with
cash from operations. Severance payments during the six months ended
June 30, 2009 were approximately $0.5 million.
6.
Insurance Claim – New Hampton
In
February 2008, the Company’s non-dairy powdered creamer plant in New Hampton,
Iowa was damaged by a fire, which left the facility unusable. The
Company has repaired the facility and it became operational in the first quarter
of 2009. We filed a claim with our insurance provider and have
received approximately $37.5 million in reimbursements for property damage and
incremental expenses incurred to service our customers throughout this
period. We expect to incur a total of approximately $49.0 million in
claims, most of which has been incurred as of June 30, 2009, all of which are
expected to be reimbursed by our insurance provider, less a $0.5 million
deductible. As of June 30, 2009, the Company has a liability of
approximately $4.9 million primarily related to reimbursements in excess of
the net book value related to the fixed assets destroyed in the
fire. This liability is expected to be resolved during 2009 upon
finalization of the claim, with any remaining amounts, plus any additional
reimbursements to be received from our insurance provider, recorded as a
gain. An additional component of our claim is for lost income, the
impact of which will not be recorded until the claim is finalized and cash is
received.
7.
Inventories
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Finished
goods
|
|
$
|
206,923
|
|
|
$
|
181,311
|
|
Raw
materials and supplies
|
|
|
88,870
|
|
|
|
82,869
|
|
LIFO
reserve
|
|
|
(19,990
|
)
|
|
|
(18,390
|
)
|
Total
|
|
$
|
275,803
|
|
|
$
|
245,790
|
|
Approximately
$67.7 million and $83.0 million of our inventory was accounted for under the
LIFO method of accounting at June 30, 2009 and December 31, 2008,
respectively.
8.
Intangible Assets
Changes
in the carrying amount of goodwill for the six months ended June 30, 2009 are as
follows:
|
North
American
|
|
Food
Away
|
|
Industrial
|
|
|
|
|
Retail
Grocery
|
|
From
Home
|
|
and
Export
|
|
Total
|
|
|
|
(In
thousands)
|
|
Balance
at December 31, 2008
|
$
|
343,651
|
|
$
|
83,641
|
|
$
|
133,582
|
|
$
|
560,874
|
|
Currency
exchange adjustment
|
|
6,315
|
|
|
673
|
|
|
—
|
|
|
6,988
|
|
Balance
at June 30, 2009
|
$
|
349,966
|
|
$
|
84,314
|
|
$
|
133,582
|
|
$
|
567,862
|
|
The gross
carrying amount and accumulated amortization of our intangible assets other than
goodwill as of June 30, 2009 and December 31, 2008 are as follows:
|
|
June
30, 2009
|
|
|
December
31, 2008
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In
thousands)
|
|
Intangible
assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
29,083
|
|
|
$
|
—
|
|
|
$
|
29,083
|
|
|
$
|
27,824
|
|
|
$
|
—
|
|
|
$
|
27,824
|
|
Intangible
assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related
|
|
|
141,127
|
|
|
|
(29,054
|
)
|
|
|
112,073
|
|
|
|
137,693
|
|
|
|
(23,430
|
)
|
|
|
114,263
|
|
Non-compete
agreement
|
|
|
2,620
|
|
|
|
(1,792
|
)
|
|
|
828
|
|
|
|
2,620
|
|
|
|
(1,422
|
)
|
|
|
1,198
|
|
Trademarks
|
|
|
17,610
|
|
|
|
(1,849
|
)
|
|
|
15,761
|
|
|
|
17,610
|
|
|
|
(1,385
|
)
|
|
|
16,225
|
|
Formulas/recipes
|
|
|
1,645
|
|
|
|
(551
|
)
|
|
|
1,094
|
|
|
|
1,583
|
|
|
|
(378
|
)
|
|
|
1,205
|
|
Total
|
|
$
|
192,085
|
|
|
$
|
(33,246
|
)
|
|
$
|
158,839
|
|
|
$
|
187,330
|
|
|
$
|
(26,615
|
)
|
|
$
|
160,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
expense on intangible assets for the three months ended June 30, 2009 and 2008
was $3.3 million and $3.5 million, respectively and $6.6 million and $7.0
million for the six months ended June 30, 2009 and 2008,
respectively. Estimated aggregate intangible asset amortization
expense for the next five years is as follows:
|
(In
thousands)
|
2010
|
$12,857
|
2011
|
$10,965
|
2012
|
$10,664
|
2013
|
$10,422
|
2014
|
$10,402
|
9.
Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Revolving
credit facility
|
|
$
|
378,900
|
|
|
$
|
372,000
|
|
Senior
notes
|
|
|
100,000
|
|
|
|
100,000
|
|
Tax
increment financing and other
|
|
|
4,564
|
|
|
|
3,708
|
|
|
|
|
483,464
|
|
|
|
475,708
|
|
Less
current portion
|
|
|
(627
|
)
|
|
|
(475
|
)
|
Total
Long-Term Debt
|
|
$
|
482,837
|
|
|
$
|
475,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility
—
The Company maintains an unsecured revolving credit agreement with an aggregate
commitment of $600 million, of which $212.5 million was available as of June 30,
2009, that expires August 31, 2011. In addition, as of June 30, 2009,
there were $8.6 million in letters of credit under the revolver that were issued
but undrawn. The credit facility contains various financial and other
restrictive covenants and requires that we maintain certain financial ratios,
including a leverage and interest coverage ratio. We are in
compliance with all applicable covenants as of June 30, 2009. We
believe that, given our cash flow from operating activities and our available
credit capacity, we can comply with the current terms of the credit facility and
meet foreseeable financial requirements. Our average interest rate on
debt outstanding under our Credit Agreement at June 30, 2009 was
1.0%.
Senior Notes
— The Company
also maintains a private placement of $100 million in aggregate principal of
6.03% senior notes due September 30, 2013, pursuant to a Note Purchase Agreement
among the Company and a group of purchasers. The Note Purchase
Agreement contains covenants that will limit the ability of the Company and its
subsidiaries to, among other things, merge with other entities, change the
nature of the business, create liens, incur additional indebtedness or sell
assets. The Note Purchase Agreement also requires the Company to
maintain certain financial ratios. We are in compliance with the
applicable covenants as of June 30, 2009.
Swap Agreements
— During
2008, the Company entered into a $200 million long term interest rate swap
agreement with an effective date of November 19, 2008 to lock into a fixed LIBOR
interest base rate. Under the terms of agreement, $200 million in
floating rate debt was swapped for a fixed 2.9% interest base rate for a period
of 24 months, amortizing to $50 million for an additional nine months at the
same 2.9% interest rate. Under the terms of the Company’s revolving
credit agreement and in conjunction with our credit spread, this will result in
an all-in borrowing cost on the swapped principal being no more than 3.8% during
the life of the swap agreement. The Company did not apply hedge
accounting to this swap.
In July
2006, the Company entered into a forward interest rate swap transaction for a
notional amount of $100 million as a hedge of the forecasted private placement
of $100 million senior notes. The interest rate swap transaction was
terminated on August 31, 2006, which resulted in a pre-tax loss of $1.8
million. The unamortized loss is reflected, net of tax, in
Accumulated other comprehensive loss in our Condensed Consolidated Balance
Sheets. The total loss will be reclassified ratably to our Condensed
Consolidated Statements of Income as an increase to Interest expense over the
term of the senior notes, providing an effective interest rate of 6.29% over the
term of our senior notes. In the six months ended June 30, 2009, $0.1
million of the loss was taken into interest expense. We anticipate
that $0.3 million of the loss will be reclassified to interest expense in
2009.
Tax Increment Financing
—As
part of the acquisition of the soup and infant feeding business in 2006, the
Company assumed the payments related to redevelopment bonds pursuant to a Tax
Increment Financing Plan. The Company has agreed to make certain
payments with respect to the principal amount of the redevelopment bonds
through May 2019. As of June 30, 2009, $2.7 million remains
outstanding.
10.
Earnings Per Share
In
accordance with SFAS 128,
Earnings Per Share
(Section 260-10 of the
Codification), 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 outstanding options,
restricted stock, restricted stock units and performance
units. Certain outstanding restricted stock unit and restricted stock
awards are subject to market conditions for vesting. For the three
months ended June 30, 2009 and 2008, none of the conditions for vesting were met
for either the restricted stock or restricted stock unit awards, and as a
result, they were excluded from the diluted earnings per share
calculation. For the first half of the six months ended June 30,
2009, the conditions pertaining to the restricted stock awards were met and
these awards were included in the diluted earnings per share
calculation. For the six months ended June 30. 2009, the conditions
for vesting for the restricted stock units were not met and as a result, they
were excluded from the diluted earnings per share calculation. For
the six months ended June 30, 2008, none of the conditions for vesting were met
for either the restricted stock awards or restricted stock unit awards, and were
excluded from the diluted earning per share calculation. The
Company’s performance unit awards contain both service and performance
criteria. For the three and six months ended June 30, 2009, the
performance criteria for a portion of the performance awards were met and,
therefore, have been included in the diluted earnings per share
calculation. For the three months and six months ended June 30, 2008,
none of the performance criteria were met and these awards were excluded from
the diluted earnings per share calculation.
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 per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Weighted
average common shares outstanding
|
|
31,615,772
|
|
|
31,208,730
|
|
|
31,585,869
|
|
|
31,206,834
|
Assumed
exercise of stock options (1)
|
|
95,162
|
|
|
132,112
|
|
|
84,983
|
|
|
117,742
|
Assumed
vesting of restricted stock, restricted stock units
and
performance units
|
|
41,082
|
|
|
—
|
|
|
381,030
|
|
|
—
|
Weighted
average diluted common shares outstanding
|
|
31,752,016
|
|
|
31,340,842
|
|
|
32,051,882
|
|
|
31,324,576
|
|
|
|
(1)
|
|
The
assumed exercise of stock options excludes 1,837,694 options outstanding,
which were anti-dilutive for the three and six months ended June 30, 2009,
and 2,500,035 options outstanding, which were anti-dilutive for the three
and six months ended June 30, 2008.
|
11.
Stock-Based Compensation
Income
before income taxes for the three and six month periods ended June 30, 2009 and
2008 includes share-based compensation expense of $3.2 million, $6.1 million,
$2.6 million and $5.4 million, respectively. The tax benefit
recognized related to the compensation cost of these share-based awards was
approximately $1.2 million and $2.3 million for the three and six month periods
ended June 30, 2009, respectively, and $1.0 million and $2.1 million for the
three and six month periods ended June 30, 2008, respectively.
The
following table summarizes stock option activity during the six months ended
June 30, 2009. Options are granted under our long-term incentive
plan, and have a three year vesting schedule, which vest one-third on each of
the first three anniversaries of the grant date. Options expire 10
years from the grant date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
Employee
|
|
|
|
Director
|
|
|
Exercise
|
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Options
|
|
|
|
Options
|
|
|
Price
|
|
|
|
Term
(yrs)
|
|
|
Value
|
|
Outstanding,
December 31, 2008
|
|
|
2,485,937
|
|
|
|
126,117
|
|
|
$
|
27.21
|
|
|
|
7.4
|
|
|
$
|
3,394,930
|
|
Granted
|
|
|
2,400
|
|
|
|
—
|
|
|
$
|
26.69
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
(17,419
|
)
|
|
|
—
|
|
|
$
|
25.43
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
(12,644
|
)
|
|
|
—
|
|
|
$
|
24.72
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding,
June 30, 2009
|
|
|
2,458,274
|
|
|
|
126,117
|
|
|
$
|
27.23
|
|
|
|
6.9
|
|
|
$
|
5,204,103
|
|
Vested/expected
to vest, at June 30, 2009
|
|
|
2,437,193
|
|
|
|
126,117
|
|
|
$
|
27.25
|
|
|
|
6.9
|
|
|
$
|
5,124,044
|
|
Exercisable,
June 30, 2009
|
|
|
2,001,698
|
|
|
|
111,981
|
|
|
$
|
27.73
|
|
|
|
6.6
|
|
|
$
|
3,405,685
|
|
Compensation
cost related to unvested options totaled $3.9 million at June 30, 2009 and will
be recognized over the remaining vesting period of the grants, which averages
1.4 years. The average grant date fair value of the options granted
in the six months ended June 30, 2009 was $8.97. The Company uses the
Black-Scholes option pricing model to value its stock option
awards. The aggregate intrinsic value of stock options exercised
during the six months ended June 30, 2009 was approximately $45.0
thousand.
In
addition to stock options, the Company also grants restricted stock, restricted
stock units and performance unit awards. These awards are granted
under our long-term incentive plan. Employee restricted stock and
restricted stock unit awards granted during the six months ended June 30, 2009
vest based on the passage of time. These awards generally vest
one-third on each anniversary of the grant date. Director restricted
stock units granted during the six months ended June 30, 2009 vest over 13
months. A description of the restricted stock and restricted stock
unit awards previously granted is presented in the Company’s annual report on
Form 10-K filed on February 26, 2009. The following table summarizes
the restricted stock and restricted stock unit activity during the six months
ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
Employee
|
|
|
Average
|
|
Employee
|
|
|
Average
|
|
|
Director
|
|
Average
|
|
|
|
Restricted
|
|
|
Grant
Date
|
|
Restricted
|
|
|
Grant
Date
|
|
|
Restricted
|
|
Grant
Date
|
|
|
|
Stock
|
|
|
Fair
Value
|
|
Stock
Units
|
|
|
Fair
Value
|
|
|
Stock
Units
|
|
Fair
Value
|
|
Outstanding,
at December 31, 2008
|
|
|
1,412,322
|
|
|
$
|
24.15
|
|
|
|
598,939
|
|
|
$
|
25.28
|
|
|
|
22,200
|
|
|
$
|
24.06
|
|
Granted
|
|
|
59,340
|
|
|
$
|
26.36
|
|
|
|
182,875
|
|
|
$
|
28.47
|
|
|
|
23,400
|
|
|
$
|
28.47
|
|
Vested
|
|
|
(259,771
|
)
|
|
$
|
24.06
|
|
|
|
(4,642
|
)
|
|
$
|
24.06
|
|
|
|
(3,700
|
)
|
|
$
|
24.06
|
|
Forfeited
|
|
|
(6,067
|
)
|
|
$
|
24.45
|
|
|
|
(400
|
)
|
|
$
|
24.06
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding,
at June 30, 2009
|
|
|
1,205,824
|
|
|
$
|
24.28
|
|
|
|
776,772
|
|
|
$
|
26.04
|
|
|
|
41,900
|
|
|
$
|
26.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
compensation cost related to restricted stock and restricted stock units is
approximately $18.9 million as of June 30, 2009, and will be recognized on a
weighted average basis, over the next 2.3 years. The grant date fair
value of the awards granted in 2009 was equal to the Company’s closing stock
price on the grant date.
Performance
unit awards were granted to certain management members. 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 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. The following table
summarizes the performance unit activity during the six months ended June 30,
2009:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Performance
|
|
|
Grant
Date
|
|
|
|
|
Units
|
|
|
Fair
Value
|
|
|
Unvested,
at December 31, 2008
|
|
72,900
|
|
|
$
|
24.06
|
|
|
Granted
|
|
51,475
|
|
|
$
|
28.47
|
|
|
Vested
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
—
|
|
|
|
—
|
|
|
Unvested,
at June 30, 2009
|
|
124,375
|
|
|
$
|
25.89
|
|
|
Future
compensation cost related to the performance units is estimated to be
approximately $3.6 million as of June 30, 2009, and is expected to be recognized
over the next 2.4 years.
12.
Employee Retirement and Postretirement Benefits
Pension, Profit Sharing and
Postretirement Benefits
— Certain of our 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.
Defined Benefit Plans
— The
benefits under our defined benefit plans are based on years of service and
employee compensation.
Components
of net periodic pension expense are as follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Service
cost
|
|
$
|
490
|
|
|
$
|
430
|
|
|
$
|
980
|
|
|
$
|
860
|
|
Interest
cost
|
|
|
524
|
|
|
|
430
|
|
|
|
1,048
|
|
|
|
860
|
|
Expected
return on plan assets
|
|
|
(440
|
)
|
|
|
(358
|
)
|
|
|
(880
|
)
|
|
|
(716
|
)
|
Amortization
of unrecognized net loss
|
|
|
149
|
|
|
|
—
|
|
|
|
298
|
|
|
|
—
|
|
Amortization
of prior service costs
|
|
|
145
|
|
|
|
120
|
|
|
|
290
|
|
|
|
240
|
|
Effect
of settlements
|
|
|
—
|
|
|
|
75
|
|
|
|
—
|
|
|
|
150
|
|
Net
periodic pension cost
|
|
$
|
868
|
|
|
$
|
697
|
|
|
$
|
1,736
|
|
|
$
|
1,394
|
|
We have
contributed $8.3 million to the pension plans in the first six months of
2009. We expect to contribute a total of approximately $9.6 million
in 2009.
Postretirement Benefits
— We
provide healthcare benefits to certain retirees who are covered under specific
group contracts.
Components
of net periodic postretirement expenses are as follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Service
cost
|
|
$
|
63
|
|
|
$
|
59
|
|
|
$
|
126
|
|
|
$
|
118
|
|
Interest
cost
|
|
|
64
|
|
|
|
58
|
|
|
|
128
|
|
|
|
116
|
|
Amortization
of prior service credit
|
|
|
(18
|
)
|
|
|
(18
|
)
|
|
|
(36
|
)
|
|
|
(36
|
)
|
Amortization
of unrecognized net loss
|
|
|
5
|
|
|
|
6
|
|
|
|
10
|
|
|
|
12
|
|
Net
periodic postretirement cost
|
|
$
|
114
|
|
|
$
|
105
|
|
|
$
|
228
|
|
|
$
|
210
|
|
We expect
to contribute $0.1 million to the postretirement health plans during
2009.
13.
Comprehensive Income
The
following table sets forth the components of comprehensive income:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Net
income
|
|
$
|
18,425
|
|
|
$
|
8,292
|
|
|
$
|
31,157
|
|
|
$
|
10,353
|
|
Foreign
currency translation adjustment
|
|
|
16,522
|
|
|
|
3,833
|
|
|
|
12,043
|
|
|
|
(6,583
|
)
|
Amortization
of pension and postretirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
prior
service costs and net loss, net of tax
|
|
|
171
|
|
|
|
67
|
|
|
|
341
|
|
|
|
134
|
|
Amortization
of swap loss, net of tax
|
|
|
41
|
|
|
|
40
|
|
|
|
81
|
|
|
|
80
|
|
Other
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
Comprehensive
income
|
|
$
|
35,164
|
|
|
$
|
12,232
|
|
|
$
|
43,627
|
|
|
$
|
3,984
|
|
We expect
to amortize $0.7 million of prior service costs and net loss, net of tax and
$0.2 million of swap loss, net of tax from other comprehensive income into
earnings during 2009.
14.
Fair Value of Financial Instruments
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. As of
June 30, 2009, the carrying value of the Company’s fixed rate senior notes was
$100.0 million and fair value was estimated to be $95.2 million based on Level 2
inputs. The fair value of the Company’s variable rate debt (revolving
credit facility), with an outstanding balance of $378.9 million as of June 30,
2009, was $354.3 million, using Level 2 inputs. Level 2 inputs are
inputs other than quoted prices that are observable for an asset or liability,
either directly or indirectly.
The fair
value of the Company’s interest rate swap agreement as described in Note 9 as of
June 30, 2009 was a liability of approximately $5.8 million. The fair
value of the swap was determined under SFAS 157 (Section 820-10 of the
Codification) using Level 2 inputs.
The fair
value of the Company’s foreign currency contracts for U.S. dollars as described
in Note 15 as of June 30, 2009 was an asset of approximately $0.2
million. The fair value of the foreign currency contracts were
determined under SFAS 157 (Section 820-10 of the Codification) using Level 2
inputs.
15.
Derivative instruments
The
Company is exposed to certain risks relating to its ongoing business
operations. The primary risks managed by derivative instruments are
the interest rate risk and foreign currency risk. Interest rate swaps
are entered into to manage interest rate risk associated with the Company’s $600
million revolving credit facility. Interest on our credit facility is
variable and use of the interest rate swap establishes a fixed rate over the
term of the facility. The Company’s objective in using an interest
rate swap is to establish a fixed interest rate, thereby enabling the Company to
predict and manage interest expense and cash flows in a more efficient and
effective manner. We did not apply hedge accounting to the interest
rate swap, and it is recorded at fair value on the Company’s Condensed
Consolidated Balance Sheet. See Note 9 for more details of the interest rate
swap, including the notional amount, interest rate and term. Note 14
discusses the fair value of the interest rate swap.
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 certain Canadian raw material purchases that are denominated in U.S.
dollars, thereby enabling the Company to manage its foreign currency exchange
rate risk. In May 2009, the Company entered into three foreign
currency contracts for the purchase of $5.0 million U.S. dollars, in exchange
for $5.6 million Canadian dollars. These contracts expire by the end
of September 2009. We did not apply hedge accounting to these foreign
currency contracts, and they are recorded at fair value on the Company’s
Condensed Consolidated Balance Sheet. Note 14 discusses the fair
value of these contracts.
As of
June 30, 2009, the Company had no other derivative instruments.
The
following table identifies the derivative, its fair value, and location on the
Condensed Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
Liability
Derivatives
|
|
|
|
June
30, 2009
|
|
December
31, 2008
|
|
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
|
|
(In
thousands)
|
|
Derivatives
not designated as hedging instruments under Statement 133 (Section
815-20-25-12 and 15 of the Codification).
|
|
|
|
|
|
|
|
|
|
Interest
rate swap
|
|
Other
long-term liabilities
|
|
$5,774
|
|
Other
long-term liabilities
|
|
$6,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Derivatives
|
|
|
|
June
30, 2009
|
|
December
31, 2008
|
|
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
|
|
(In
thousands)
|
|
Derivatives
not designated as hedging instruments under Statement 133 (Section
815-20-25-12 and 15 of the Codification).
|
|
|
|
|
|
|
|
|
|
Foreign
currency contracts
|
|
Other
current assets
|
|
$191
|
|
—
|
|
—
|
|
The
Company recognized a gain of $1.2 million relating to the change in the fair
value of its interest rate swap derivative for the six months ended June 30,
2009. This gain is recorded in the Other (income) expense, net line
of our Condensed Consolidated Statement of Income.
The
Company recognized a gain of $0.2 million relating to the change in the fair
value of its foreign currency contracts for the six months ended June 30,
2009. This gain is recorded in the Other (income) expense, net line
of our Condensed Consolidated Statement of Income.
The
Company does not use derivatives for speculative or trading
purposes.
16.
Commitments and Contingencies
Litigation, Investigations and
Audits
— We are party in the ordinary course of business to certain
claims, litigation, audits and investigations. We believe that we
have established adequate reserves to satisfy any liability we may incur in
connection with any such currently pending or threatened matters. In
our opinion, the settlement of any such currently pending or threatened matters
is not expected to have a material adverse impact on our financial position,
annual results of operations or cash flows.
17.
Supplemental Cash Flow Information
Cash
payments for interest were $9.4 million and $15.2 million for the six
months ended June 30, 2009 and 2008, respectively. Cash payments for
income taxes were $9.0 million and $9.8 million for the six months ended
June 30, 2009 and 2008, respectively. As of June 30, 2009, the
Company had accrued property, plant and equipment of approximately $2.4
million. For the six months ended June 30, 2009, the Company entered
into capital leases totaling approximately $1.3 million. Non cash
financing activities for the three and six months ended June 30, 2009 include
the gross issuance of 268,113 shares and the repurchase of 11,125 shares to
satisfy the minimum statutory withholding requirements associated with the lapse
of restrictions on restricted stock and restricted stock unit
awards. The weighted average price of the issuance and repurchase of
these shares was $29.09.
18.
Foreign Currency
The
Company enters into foreign currency contracts due to the exposure to
Canadian/U.S. dollar currency fluctuations on cross border
transactions. The Company does not apply hedge accounting to these
contracts and records them at fair value on the Condensed Consolidated Balance
Sheets, with changes in fair value being recorded through the Condensed
Consolidated Statements of Income, within Other (income) expense,
net. In May 2009, the Company entered into three foreign currency
contracts for the purchase of $5.0 million U.S. dollars. The
Contracts were entered into for the purchase of U.S. dollar denominated raw
materials by our Canadian subsidiary. These contracts expire by the
end of September 2009. Prior to these contracts, the Company had
similar contracts that had expired by December 31, 2008. For the
three and six months ended June 30, 2009, the Company recorded a gain on these
contracts totaling approximately $0.2 million. For the three and six
months ended June 30, 2008, the Company recorded a gain on these contracts
totaling approximately $0.2 million and $0.5 million respectively.
The
Company has an intercompany note denominated in Canadian dollars, which is
eliminated during consolidation. A portion of the note is considered
to be permanent, with the remaining portion considered to be
temporary. Foreign currency fluctuations on the permanent portion are
recorded through Accumulated other comprehensive loss, while foreign currency
fluctuations on the temporary portion are recorded in the Company’s Condensed
Consolidated Statements of Income, within Loss (gain) on foreign currency
exchange.
The
Company accrues interest on the intercompany note, which is also considered
temporary. Changes in the balance due to foreign currency
fluctuations are also recorded in the Company’s Condensed Consolidated
Statements of Income within Loss (gain) on foreign currency
exchange.
For the
three and six months ended June 30, 2009 and 2008, the Company recorded a gain
of $3.9 million, $1.8 million, $5.0 thousand and a loss of $1.9 million,
respectively, related to foreign currency fluctuations within Other (income)
expense. For the three and six months ended June 30, 2009 and 2008,
the Company recorded a gain of $16.5 million, $12.0 million, $3.8 million and a
loss of $6.6 million, respectively, in Accumulated other comprehensive loss
related to foreign currency fluctuations on the permanent portion of the
note.
19.
Business and Geographic Information and Major Customers
We manage
operations on a company-wide basis, thereby making determinations as to the
allocation of resources in total rather than on a segment-level
basis. We have designated our reportable segments based on how
management views our business. We do not segregate assets between
segments for internal reporting. Therefore, asset-related information
has not been presented.
We
evaluate the performance of our segments based on net sales dollars, gross
profit and direct operating income (gross profit less freight out, sales
commissions and direct selling and marketing expenses). The amounts
in the following tables are obtained from reports used by our senior management
team and do not include allocated income taxes. There are no
significant non-cash items reported in segment profit or loss other than
depreciation and amortization. Restructuring charges are not
allocated to our segments, as we do not include them in the measure of
profitability as reviewed by our chief operating decision maker. Also
excluded from the determination of direct operating income are warehouse
distribution facility start up costs of approximately $1.8 and $3.1 million
incurred during the three and six months ended June 30, 2009, respectively, as
we did not include them in the measure of profitability as reviewed by our chief
operating decision maker. These costs are included in the Company’s
cost of sales as presented in the Condensed Consolidated Statements of
Income. The accounting policies of our segments are the same as those
described in the summary of significant accounting policies set forth in Note 1
to our 2008 Consolidated Financial Statements contained in our Annual Report on
Form 10-K.
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Net
sales to external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
$
|
235,853
|
|
|
$
|
222,880
|
|
|
$
|
466,535
|
|
|
$
|
442,520
|
|
Food
Away From Home
|
|
|
75,029
|
|
|
|
76,641
|
|
|
|
141,782
|
|
|
|
147,567
|
|
Industrial
and Export
|
|
|
61,723
|
|
|
|
67,848
|
|
|
|
119,684
|
|
|
|
137,905
|
|
Total
|
|
$
|
372,605
|
|
|
$
|
367,369
|
|
|
$
|
728,001
|
|
|
$
|
727,992
|
|
Direct
operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American Retail Grocery
|
|
$
|
35,928
|
|
|
$
|
25,053
|
|
|
$
|
70,233
|
|
|
$
|
50,545
|
|
Food
Away From Home
|
|
|
8,097
|
|
|
|
8,567
|
|
|
|
15,103
|
|
|
|
16,135
|
|
Industrial
and Export
|
|
|
9,930
|
|
|
|
6,810
|
|
|
|
16,610
|
|
|
|
16,413
|
|
Direct
operating income
|
|
|
53,955
|
|
|
|
40,430
|
|
|
|
101,946
|
|
|
|
83,093
|
|
Unallocated
warehouse start-up costs (1)
|
|
|
(1,766
|
)
|
|
|
—
|
|
|
|
(3,050
|
)
|
|
|
—
|
|
Unallocated
selling and distribution expenses
|
|
|
(863
|
)
|
|
|
(749
|
)
|
|
|
(1,639
|
)
|
|
|
(1,687
|
)
|
Unallocated
corporate expense
|
|
|
(23,366
|
)
|
|
|
(20,216
|
)
|
|
|
(42,640
|
)
|
|
|
(49,867
|
)
|
Operating
income
|
|
|
27,960
|
|
|
|
19,465
|
|
|
|
54,617
|
|
|
|
31,539
|
|
Other
(expense) income
|
|
|
196
|
|
|
|
(7,582
|
)
|
|
|
(6,250
|
)
|
|
|
(16,859
|
)
|
Income
before income taxes
|
|
$
|
28,156
|
|
|
$
|
11,883
|
|
|
$
|
48,367
|
|
|
$
|
14,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Included
in Cost of sales in the Condensed Consolidated Statements of
Income.
Geographic
Information
— We had revenues
to customers outside of the United States of approximately 13.4% and 14.5% of
total consolidated net sales in the six months ended June 30, 2009 and 2008,
respectively, with 12.7% and 14.0% going to Canada, respectively.
Major Customers
— Wal-Mart
Stores, Inc. and affiliates accounted for approximately 14.3% and 11.3% of our
consolidated net sales in the six months ended June 30, 2009 and 2008,
respectively. No other customer accounted for more than 10% of our
consolidated net sales.
Product Information
— The
following table presents the Company’s net sales by major products for the three
and six months ended June 30, 2009 and 2008:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-dairy
powdered creamer
|
|
$
|
74,554
|
|
|
$
|
79,832
|
|
|
$
|
160,609
|
|
|
$
|
167,287
|
|
Pickles
|
|
|
87,653
|
|
|
|
92,692
|
|
|
|
158,104
|
|
|
|
172,013
|
|
Soup
and infant feeding
|
|
|
68,003
|
|
|
|
66,746
|
|
|
|
147,001
|
|
|
|
144,877
|
|
Salad
dressing
|
|
|
55,628
|
|
|
|
48,918
|
|
|
|
99,763
|
|
|
|
87,995
|
|
Jams and
other
|
|
|
38,983
|
|
|
|
35,731
|
|
|
|
71,297
|
|
|
|
69,145
|
|
Aseptic
|
|
|
20,843
|
|
|
|
20,854
|
|
|
|
40,670
|
|
|
|
41,750
|
|
Mexican
sauces
|
|
|
17,769
|
|
|
|
12,312
|
|
|
|
32,824
|
|
|
|
24,324
|
|
Refrigerated
|
|
|
9,172
|
|
|
|
10,284
|
|
|
|
17,733
|
|
|
|
20,601
|
|
Total
net sales
|
|
$
|
372,605
|
|
|
$
|
367,369
|
|
|
$
|
728,001
|
|
|
$
|
727,992
|
|
Item 2
. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Business
Overview
We
believe we are the largest manufacturer of non-dairy powdered creamer and
pickles in the United States, and the largest manufacturer of private label
salad dressings in the United States and Canada, based upon total sales
volumes. We believe we are also the leading retail private label
supplier of non-dairy powdered creamer, soup and pickles in the United States,
and jams in Canada. We sell our products primarily to the retail
grocery and foodservice channels.
The
following discussion and analysis presents the factors that had a material
effect on our results of operations for the three and six months ended June 30,
2009 and 2008. Also discussed is our financial position, as of the
end of those periods. This 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 contain forward-looking
statements. See “Cautionary Statement Regarding Forward-Looking
Statements” for a discussion of the uncertainties, risks and assumptions
associated with these statements.
We
discuss the following segments in this Management’s Discussion and Analysis of
Financial Condition and Results of Operations: North American Retail Grocery,
Food Away From Home, and Industrial and Export. The key performance
indicators of our segments are net sales dollars, gross profit and direct
operating income, which is gross profit less the cost of transporting products
to customer locations (referred to in the tables below as “freight out”),
commissions paid to independent sales brokers, and direct sales and marketing
expenses.
Our
current operations consist of the following:
|
•
|
Our
North American Retail Grocery segment sells branded and private label
products to customers within the United States and
Canada. These products include pickles, peppers, relishes,
Mexican sauces, condensed and ready to serve soup, broths, gravies, jams,
salad dressings, sauces, non-dairy powdered creamer, aseptic products, and
baby food.
|
|
•
|
Our
Food Away From Home segment sells pickle products, non-dairy powdered
creamers, Mexican sauces, aseptic and refrigerated products, and sauces to
food service customers, including restaurant chains and food distribution
companies, within the United States and
Canada.
|
|
•
|
Our
Industrial and Export segment includes the Company’s co-pack business and
non-dairy powdered creamer sales to industrial customers for use in
industrial applications, including for repackaging in portion control
packages and for use as an ingredient by other food
manufacturers. Export sales are primarily to industrial
customers outside of North America.
|
Current
economic conditions continue to remain constrained. During these
times, the Company has focused its efforts not only on protecting its volume,
but also on cost containment, pricing and margin improvement. This
strategy has resulted in operating income growth of 43.6% for the three months
ended June 30, 2009 when compared to the three months ended June 30,
2008. Likewise, operating income increased 73.2% for the six months
ended June 30, 2009 when compared to the six months ended June 30,
2008.
Recent
Developments
On
November 3, 2008, the Company announced plans to close its salad dressings
manufacturing plant in Cambridge, Ontario. Manufacturing operations
in Cambridge ceased at the end of June 2009. Production is being
transitioned to the Company’s other manufacturing facilities in Canada and the
United States. The change will result in the Company’s production
capabilities being more aligned with the needs of our customers. The
majority of the closure costs were included as costs of the acquisition of E.D.
Smith and are not expected to significantly impact earnings.
Results
of Operations
The
following table presents certain information concerning our financial results,
including information presented as a percentage of net sales:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
|
Percent
|
|
|
Dollars
|
|
|
|
Percent
|
|
|
Dollars
|
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
|
$
|
372,605
|
|
|
100.0
|
%
|
|
$
|
367,369
|
|
|
|
100.0
|
%
|
|
$
|
728,001
|
|
|
|
100.0
|
%
|
|
$
|
727,992
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
292,761
|
|
|
78.6
|
|
|
|
298,740
|
|
|
|
81.3
|
|
|
|
576,446
|
|
|
|
79.2
|
|
|
|
588,974
|
|
|
|
80.9
|
|
Gross
profit
|
|
|
79,844
|
|
|
21.4
|
|
|
|
68,629
|
|
|
|
18.7
|
|
|
|
151,555
|
|
|
|
20.8
|
|
|
|
139,018
|
|
|
|
19.1
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and distribution
|
|
|
28,517
|
|
|
7.7
|
|
|
|
28,948
|
|
|
|
7.9
|
|
|
|
54,298
|
|
|
|
7.5
|
|
|
|
57,612
|
|
|
|
7.9
|
|
General
and administrative
|
|
|
19,863
|
|
|
5.3
|
|
|
|
15,760
|
|
|
|
4.3
|
|
|
|
35,636
|
|
|
|
4.9
|
|
|
|
31,002
|
|
|
|
4.3
|
|
Other
operating expense, net
|
|
|
183
|
|
|
—
|
|
|
|
928
|
|
|
|
0.2
|
|
|
|
425
|
|
|
|
—
|
|
|
|
11,850
|
|
|
|
1.6
|
|
Amortization
expense
|
|
|
3,321
|
|
|
0.9
|
|
|
|
3,528
|
|
|
|
1.0
|
|
|
|
6,579
|
|
|
|
0.9
|
|
|
|
7,015
|
|
|
|
1.0
|
|
Total
operating expenses
|
|
|
51,884
|
|
|
13.9
|
|
|
|
49,164
|
|
|
|
13.4
|
|
|
|
96,938
|
|
|
|
13.3
|
|
|
|
107,479
|
|
|
|
14.8
|
|
Operating
income
|
|
|
27,960
|
|
|
7.5
|
|
|
|
19,465
|
|
|
|
5.3
|
|
|
|
54,617
|
|
|
|
7.5
|
|
|
|
31,539
|
|
|
|
4.3
|
|
Other
(income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
4,839
|
|
|
1.3
|
|
|
|
7,561
|
|
|
|
2.0
|
|
|
|
9,337
|
|
|
|
1.3
|
|
|
|
15,292
|
|
|
|
2.1
|
|
Interest
income
|
|
|
(18
|
)
|
|
—
|
|
|
|
(87
|
)
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
—
|
|
|
|
(107
|
)
|
|
|
—
|
|
Loss
(gain) on foreign currency exchange
|
|
|
(3,864
|
)
|
|
(1.0
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
(1,804
|
)
|
|
|
(0.2
|
)
|
|
|
1,855
|
|
|
|
0.2
|
|
Other
(income) expense, net
|
|
|
(1,153
|
)
|
|
(0.3
|
)
|
|
|
113
|
|
|
|
—
|
|
|
|
(1,265
|
)
|
|
|
(0.2
|
)
|
|
|
(181
|
)
|
|
|
—
|
|
Total
other (income) expense
|
|
|
(196
|
)
|
|
—
|
|
|
|
7,582
|
|
|
|
2.0
|
|
|
|
6,250
|
|
|
|
0.9
|
|
|
|
16,859
|
|
|
|
2.3
|
|
Income
before income taxes
|
|
|
28,156
|
|
|
7.5
|
|
|
|
11,883
|
|
|
|
3.3
|
|
|
|
48,367
|
|
|
|
6.6
|
|
|
|
14,680
|
|
|
|
2.0
|
|
Income
taxes
|
|
|
9,731
|
|
|
2.6
|
|
|
|
3,591
|
|
|
|
1.0
|
|
|
|
17,210
|
|
|
|
2.3
|
|
|
|
4,327
|
|
|
|
0.6
|
|
Net
income
|
|
$
|
18,425
|
|
|
4.9
|
%
|
|
$
|
8,292
|
|
|
|
2.3
|
%
|
|
$
|
31,157
|
|
|
|
4.3
|
%
|
|
$
|
10,353
|
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2009 Compared to Three Months Ended June 30,
2008
Net Sales
— Second quarter
net sales increased 1.4% to $372.6 million in 2009 compared to $367.4 million in
the second quarter of 2008. The increase is primarily due to price
increases taken in the second half of 2008, which more than offset the volume
declines in the quarter and reduced revenues from the impact of foreign currency
fluctuations. Net sales by segment are shown in the following
table:
|
|
Three
Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
$
Increase/
|
|
|
%
Increase/
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
(Dollars
in thousands)
|
|
North
American Retail Grocery
|
|
$
|
235,853
|
|
|
$
|
222,880
|
|
|
$
|
12,973
|
|
|
5.8
|
%
|
Food
Away From Home
|
|
|
75,029
|
|
|
|
76,641
|
|
|
|
(1,612
|
)
|
|
(2.1
|
)%
|
Industrial
and Export
|
|
|
61,723
|
|
|
|
67,848
|
|
|
|
(6,125
|
)
|
|
(9.0
|
)%
|
Total
|
|
$
|
372,605
|
|
|
$
|
367,369
|
|
|
$
|
5,236
|
|
|
1.4
|
%
|
Cost of Sales
— All expenses
incurred to bring a product to completion are included in cost of
sales. These costs include raw materials, ingredient and packaging
costs, labor costs, facility and equipment costs, including costs to operate and
maintain our warehouses, and costs associated with transporting our finished
products from our manufacturing facilities to our own distribution
centers. Cost of sales as a percentage of net sales was 78.6% in
the second quarter of 2009 compared to 81.3% in 2008. Although we
have experienced increases in certain costs such as metal caps, glass, meat
products and cucumbers in the second quarter of 2009 compared to 2008, these
increases have been more than offset by decreases in the cost of casein, oils
and plastic containers. Raw material, ingredient and packaging costs
continue to be volatile, and we anticipate this trend to
continue. The combination of price increases and the changes in
commodity costs in the second quarter of 2009 versus 2008 has resulted in
improvement in our consolidated gross margins.
Operating Expenses
— Total
operating expenses were $51.9 million during the second quarter of 2009 compared
to $49.2 million in 2008. Selling and distribution expenses decreased
$0.4 million or 1.5% in the second quarter of 2009 compared to the second
quarter of 2008 primarily due to a reduction in freight costs related to reduced
volume and a reduction in freight rates. General and administrative
expenses increased $4.1 million in the second quarter of 2009 compared to
2008. The increase was primarily related to incentive based
compensation expense and stock based compensation related to the Company’s
performance. Other operating expense decreased $0.7 million during
the second quarter of 2009 compared to 2008, and reflects costs incurred related
to the closure of the Portland, Oregon plant in 2008.
O
perating Income
— Operating
income for the second quarter of 2009 was $28.0 million, an increase of $8.5
million, or 43.6%, from operating income of $19.5 million in the second quarter
of 2008. Our operating margin was 7.5% in the second quarter of 2009
compared to 5.3% in 2008 due to favorable pricing and cost reductions partially
offset by an increase in general and administrative expenses.
Interest
Expense
— Interest expense
decreased to $4.8 million in the second quarter of 2009, compared to $7.6
million in 2008 due to lower average interest rates and lower debt
levels.
Foreign Currency
— The
Company’s foreign currency gain increased to $3.9 million for the three months
ended June 30, 2009 compared to $5.0 thousand in 2008, primarily due to
fluctuations in currency exchange rates between the U.S. and Canadian
dollar.
Other (
I
ncome)
Expense
,
N
et
—
Other income increased
for the three months ended June 30, 2009 by $1.3 million primarily reflecting
the gain associated with the Company’s fair value adjustment of the interest
rate swap.
Income Taxes
— Income tax
expense was recorded at an effective rate of 34.6% in the second quarter of 2009
compared to 30.2% in the prior year’s quarter. The Company’s
effective tax rate is favorably impacted by an intercompany financing structure
entered into in conjunction with the E.D. Smith, Canadian
acquisition. As consolidated earnings for the three months ended June
30, 2009 were significantly higher than consolidated earnings for the three
months ended June 30, 2008, this tax benefit was proportionally much smaller,
therefore, increasing the net effective rate in the second quarter of 2009
compared to 2008.
Three
Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008 —
Results by Segment
North
American Retail Grocery —
|
|
Three
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
|
$
|
235,853
|
|
|
|
100.0
|
%
|
|
$
|
222,880
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
178,859
|
|
|
|
75.8
|
|
|
|
177,240
|
|
|
|
79.5
|
|
Gross
profit
|
|
|
56,994
|
|
|
|
24.2
|
|
|
|
45,640
|
|
|
|
20.5
|
|
Freight
out and commissions
|
|
|
13,214
|
|
|
|
5.6
|
|
|
|
14,821
|
|
|
|
6.7
|
|
Direct
selling and marketing
|
|
|
7,852
|
|
|
|
3.4
|
|
|
|
5,766
|
|
|
|
2.6
|
|
Direct
operating income
|
|
$
|
35,928
|
|
|
|
15.2
|
%
|
|
$
|
25,053
|
|
|
|
11.2
|
%
|
Net sales
in the North American Retail Grocery segment increased by $13.0 million, or 5.8%
in the second quarter of 2009 compared to the second quarter of
2008. This change in net sales from 2008 to 2009 was due to the
following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
222,880
|
|
|
|
|
|
Volume
|
|
|
(1,451
|
)
|
|
|
(0.7
|
)%
|
Pricing
|
|
|
22,229
|
|
|
|
10.0
|
|
Mix/other
|
|
|
(7,805
|
)
|
|
|
(3.5
|
)
|
2009
Net sales
|
|
$
|
235,853
|
|
|
|
5.8
|
%
|
The
increase in net sales from 2008 to 2009 resulted primarily from the carryover
effect of price increases taken in the second half of 2008 due to rising raw
material and packaging costs. While overall case sales decreased
slightly in this segment, the Company experienced volume increases in soups,
Mexican sauces and salad dressings offset by reduced revenues due to the impact
of foreign currency fluctuations.
Cost of
sales as a percentage of net sales decreased from 79.5% in the second quarter of
2008 to 75.8% in 2009 primarily as a result of price increases taken in the
second half 2008 to offset the commodity, material and packaging cost increases
previously incurred by the Company. Also contributing to the decrease
were several cost reduction initiatives, a shift in sales mix and moving away
from certain low margin customers over the past year.
Freight
out and commissions paid to independent sales brokers were $13.2 million in the
second quarter of 2009 compared to $14.8 million in 2008, a decrease of 10.8%,
primarily due to lower freight costs, as fuel prices have decreased since last
year.
Direct
selling and marketing increased $2.1 million, or 36.2% from 2008 due to
increased levels of incentive based compensation associated with the Company’s
performance and new label design costs.
Food
Away From Home —
|
|
Three
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
|
$
|
75,029
|
|
|
|
100.0
|
%
|
|
$
|
76,641
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
62,242
|
|
|
|
83.0
|
|
|
|
62,799
|
|
|
|
81.9
|
|
Gross
profit
|
|
|
12,787
|
|
|
|
17.0
|
|
|
|
13,842
|
|
|
|
18.1
|
|
Freight
out and commissions
|
|
|
2,600
|
|
|
|
3.5
|
|
|
|
3,709
|
|
|
|
4.9
|
|
Direct
selling and marketing
|
|
|
2,090
|
|
|
|
2.7
|
|
|
|
1,566
|
|
|
|
2.0
|
|
Direct
operating income
|
|
$
|
8,097
|
|
|
|
10.8
|
%
|
|
$
|
8,567
|
|
|
|
11.2
|
%
|
Net sales
in the Food Away From Home segment decreased by $1.6 million, or 2.1%, in the
second quarter of 2009 compared to the prior year. The change in net
sales from 2008 to 2009 was due to the following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
76,641
|
|
|
|
|
|
Volume
|
|
|
(4,475
|
)
|
|
|
(5.8
|
)%
|
Pricing
|
|
|
4,787
|
|
|
|
6.2
|
|
Mix/other
|
|
|
(1,924
|
)
|
|
|
(2.5
|
)
|
2009
Net sales
|
|
$
|
75,029
|
|
|
|
(2.1
|
)%
|
Net sales
decreased during the second quarter of 2009 compared to 2008 primarily due to
lower volumes resulting from the recent economic downturn, as consumers reduce
their spending on dining and eating out. This segment also
experienced a shift in the sales mix. Net sales of pickle products
fell by 3.5%. Increased pricing in response to commodity cost
increases over the past year partially offset these volume and sales mix
declines.
Cost of
sales as a percentage of net sales increased from 81.9% in the second quarter of
2008 to 83.0% in 2009, as sales price increases realized in the quarter
partially offset increases in raw material and packaging costs from earlier
periods. Additionally we experienced a shift in mix from higher
margin food distributors to lower margin national account quick serve
customers.
Freight
out and commissions paid to independent sales brokers were $2.6 million in the
second quarter of 2009 compared to $3.7 million in 2008, a decrease of 29.9%,
primarily due to reduced volumes and lower freight costs, as fuel costs have
decreased since last year.
Direct
selling and marketing increased $0.5 million in the second quarter of 2009
compared to 2008, an increase of 33.5% primarily due to higher levels of
incentive based compensation associated with the Company’s performance relative
to targets established at the beginning of the year.
Industrial
and Export —
|
|
Three
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
Net
sales
|
|
$
|
61,723
|
|
|
|
100.0
|
%
|
|
$
|
67,848
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
49,894
|
|
|
|
80.8
|
|
|
|
58,701
|
|
|
|
86.5
|
|
Gross
profit
|
|
|
11,829
|
|
|
|
19.2
|
|
|
|
9,147
|
|
|
|
13.5
|
|
Freight
out and commissions
|
|
|
1,370
|
|
|
|
2.2
|
|
|
|
2,155
|
|
|
|
3.2
|
|
Direct
selling and marketing
|
|
|
529
|
|
|
|
0.9
|
|
|
|
182
|
|
|
|
0.3
|
|
Direct
operating income
|
|
$
|
9,930
|
|
|
|
16.1
|
%
|
|
$
|
6,810
|
|
|
|
10.0
|
%
|
Net sales
in the Industrial and Export segment decreased $6.1 million or 9.0% in the
second quarter of 2009 compared to the prior year. The change in net
sales from 2008 to 2009 was due to the following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
67,848
|
|
|
|
|
|
Volume
|
|
|
(16,753
|
)
|
|
|
(24.7
|
)%
|
Pricing
|
|
|
578
|
|
|
|
0.9
|
|
Mix/other
|
|
|
10,050
|
|
|
|
14.8
|
|
2009
Net sales
|
|
$
|
61,723
|
|
|
|
(9.0
|
)%
|
The
decrease in net sales is primarily due to reduced volumes resulting from a
decline in co-pack sales along with a significant decrease in export sales due
to the strength of the U.S. dollar. While the decline in net sales
included the majority of the products sold within this segment, the most
significant declines were in the non-dairy powdered creamer, baby food and
refrigerated products. Partially offsetting the volume declines was a
shift in product sales mix due to reduced export and co-pack sales.
Cost of
sales as a percentage of net sales decreased from 86.5% in the second quarter of
2008 to 80.8% in 2009 reflecting price increases taken in 2008 that offset
increased raw materials and packaging costs. Also contributing to the
reduction were productivity improvements realized in the quarter and decreases
in certain input costs.
Freight
out and commissions paid to independent sales brokers were $1.4 million in the
second quarter of 2009 compared to $2.2 million in 2008, a decrease of 36.4%,
primarily due to reduced volumes and lower freight costs, as fuel costs have
decreased since last year.
Direct
selling and marketing was $0.5 million in the second quarter of 2009 compared to
$0.2 million in the second quarter of 2008, an increase of $0.3 million, due to
increased trade development costs and higher levels of incentive based
compensation associated with the Company’s overall performance.
Six
Months Ended June 30, 2009 Compared to Six Months Ended June 30,
2008
Net Sales
— Net sales
remained at $728.0 million in the first six months of 2009 and
2008. Reduced volume, the impact of foreign currency and a shift in
sales mix were offset by increased pricing. Net sales by segment are
shown in the following table:
|
|
Six
Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
$
Increase/
|
|
|
%
Increase/
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
(Dollars
in thousands)
|
|
North
American Retail Grocery
|
|
$
|
466,535
|
|
|
$
|
442,520
|
|
|
$
|
24,015
|
|
|
5.4
|
%
|
Food
Away From Home
|
|
|
141,782
|
|
|
|
147,567
|
|
|
|
(5,785
|
)
|
|
(3.9
|
)%
|
Industrial
and Export
|
|
|
119,684
|
|
|
|
137,905
|
|
|
|
(18,221
|
)
|
|
(13.2
|
)%
|
Total
|
|
$
|
728,001
|
|
|
$
|
727,992
|
|
|
$
|
9
|
|
|
0.0
|
%
|
Cost of Sales
— All expenses
incurred to bring a product to completion are included in cost of
sales. These costs include raw materials, ingredient and packaging
costs, labor costs, facility and equipment costs, including costs to operate and
maintain our warehouses, and costs associated with transporting our finished
products from our manufacturing facilities to our own distribution
centers. Cost of sales as a percentage of net sales was 79.2% in the
first six months of 2009 compared to 80.9% in 2008. We have
experienced increases certain costs, such as metal cans, metal caps, glass, meat
products, sweeteners and cucumbers in the first six months of 2009 compared to
2008. These increases have been more than offset by decreases in the
cost of casein, oils and plastic containers. The combination of price
increases, which have now caught up with the commodity cost increases
experienced last year and the net decrease in ingredient and packaging costs in
the first six months of 2009 versus 2008, have resulted in improvement in our
consolidated gross margins.
Operating Expenses
— Total
operating expenses were $96.9 million during the first six months of 2009
compared to $107.5 million in 2008. Selling and distribution expenses
decreased $3.3 million or 5.8% in the second quarter of 2009 compared to the
first six months of 2008 primarily due to a reduction in freight costs related
to lower unit volume and a reduction in freight rates. General and
administrative expenses increased $4.6 million in the second quarter of 2009
compared to 2008. This increase was primarily related to incentive
based compensation expense and stock based compensation related to the Company’s
performance. Other operating expense was $0.4 million during the
first six months of 2009, and reflected net costs incurred related to the
closed Portland, Oregon plant. This is down significantly from the
$11.9 million in 2008, reflecting the initial Portland plant closing costs of
approximately $11.4 million and $0.5 million related to the fire at our New
Hampton, Iowa facility in 2008.
O
perating Income
— Operating
income for the first six months of 2009 was $54.6 million, an increase of $23.1
million, or 73.2%, from operating income of $31.5 million in the first six
months of 2008. Our operating margin was 7.5% in the first six months
of 2009 compared to 4.3% in 2008 due to higher profit margins resulting
from favorable pricing and cost reductions, and significantly lower costs
in 2009 related to the Portland plant closure and New Hampton fire in
2008.
Interest
Expense
— Interest expense
decreased to $9.3 million in the first six months of 2009, compared to $15.3
million in 2008 due to lower average interest rates and lower debt
levels.
Foreign Currency
—
Foreign currency gains were $1.8 million for the six months ended June 30, 2009
compared to a loss of $1.9 million for the six months ended June 30, 2008,
primarily due to fluctuations in currency exchange rates between the U.S. and
Canadian dollar.
Other (Income)
Expense
,
N
et
—
Other income increased
for the six months ended June 30, 2009 by $1.1 million, primarily reflecting the
gain associated with the Company’s fair value adjustment of its interest rate
swap.
Income Taxes
— Income tax
expense was recorded at an effective rate of 35.6% in the first six
months of 2009 compared to 29.5% in 2008. The Company’s
effective tax rate is favorably impacted by an intercompany financing structure
entered into in conjunction with the E.D. Smith, Canadian
acquisition. As consolidated earnings for the six months ended June
30, 2009 were significantly higher than consolidated earnings for the six months
ended June 30, 2008, this tax benefit was proportionally much smaller,
therefore, increasing the net effective rate in the first six months of 2009
compared to 2008.
Six
Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008 — Results
by Segment
North
American Retail Grocery —
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
|
$
|
466,535
|
|
|
|
100.0
|
%
|
|
$
|
442,520
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
356,211
|
|
|
|
76.4
|
|
|
|
351,612
|
|
|
|
79.5
|
|
Gross
profit
|
|
|
110,324
|
|
|
|
23.6
|
|
|
|
90,908
|
|
|
|
20.5
|
|
Freight
out and commissions
|
|
|
25,539
|
|
|
|
5.4
|
|
|
|
28,769
|
|
|
|
6.5
|
|
Direct
selling and marketing
|
|
|
14,552
|
|
|
|
3.1
|
|
|
|
11,594
|
|
|
|
2.6
|
|
Direct
operating income
|
|
$
|
70,233
|
|
|
|
15.1
|
%
|
|
$
|
50,545
|
|
|
|
11.4
|
%
|
Net sales
in the North American Retail Grocery segment increased by $24.0 million, or 5.4%
in the first six months of 2009 compared to the first six months of
2008. This change in net sales from 2008 to 2009 was due to the
following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
442,520
|
|
|
|
|
|
Volume
|
|
|
(15,087
|
)
|
|
|
(3.4
|
)%
|
Pricing
|
|
|
46,928
|
|
|
|
10.6
|
|
Mix/other
|
|
|
(7,826
|
)
|
|
|
(1.8
|
)
|
2009
Net sales
|
|
$
|
466,535
|
|
|
|
5.4
|
%
|
The
increase in net sales from 2008 to 2009 resulted from the carryover effect of
price increases taken in the second half of 2008 to cover the rising raw
material and packaging costs, partially offset by lower case sales of baby food
and retail branded pickles, and the impact of foreign currency. While
overall case sales decreased in this segment, the Company experienced modest
volume increases in soups, Mexican sauces and dressings.
Cost of
sales as a percentage of net sales decreased from 79.5% in for the first six
months of 2008 to 76.4 % in 2009 primarily as a result of price increases which
have now caught up to the raw material and packaging cost increases
experienced by the Company in earlier periods. Also contributing to
the decrease were several cost reduction initiatives and moving away from
certain low margin customers over the past year.
Freight
out and commissions paid to independent sales brokers was $25.5 million in the
first six months of 2009 compared to $28.8 million in 2008, a decrease of 11.2%,
primarily due to reduced volumes and lower freight costs, as fuel prices have
decreased since last year.
Direct
selling and marketing was $14.6 million in the first six months of 2009 compared
to $11.6 million in 2008, an increase of $3.0 million or 25.5%, due to increased
levels of incentive based compensation associated with the Company’s
performance. Also contributing to the increase are costs related to
new label designs.
Food
Away From Home —
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
|
$
|
141,782
|
|
|
|
100.0
|
%
|
|
$
|
147,567
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
|
117,913
|
|
|
|
83.2
|
|
|
|
120,864
|
|
|
|
81.9
|
|
Gross
profit
|
|
|
23,869
|
|
|
|
16.8
|
|
|
|
26,703
|
|
|
|
18.1
|
|
Freight
out and commissions
|
|
|
5,128
|
|
|
|
3.6
|
|
|
|
7,170
|
|
|
|
4.9
|
|
Direct
selling and marketing
|
|
|
3,638
|
|
|
|
2.5
|
|
|
|
3,398
|
|
|
|
2.3
|
|
Direct
operating income
|
|
$
|
15,103
|
|
|
|
10.7
|
%
|
|
$
|
16,135
|
|
|
|
10.9
|
%
|
Net sales
in the Food Away From Home segment decreased by $5.8 million, or 3.9%, in the
first six months of 2009 compared to the prior year. The change
in net sales from 2008 to 2009 was due to the following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
147,567
|
|
|
|
|
|
Volume
|
|
|
(9,816
|
)
|
|
|
(6.7
|
)%
|
Pricing
|
|
|
8,801
|
|
|
|
6.0
|
|
Mix/other
|
|
|
(4,770
|
)
|
|
|
(3.2
|
)
|
2009
Net sales
|
|
$
|
141,782
|
|
|
|
(3.9
|
)%
|
Net sales
decreased during the first six months of 2009 compared to 2008 primarily due to
reduced volumes resulting from the recent economic down turn, as consumers
reduced their spending on dining and eating out. This segment also
experienced a decrease in net sales due to both a shift in the sales mix and the
impact of foreign currency changes. Increased pricing in response to
commodity cost increases over the past year partially offset the volume
declines.
Cost of
sales as a percentage of net sales increased from 81.9% in the first six months
of 2008 to 83.2% in 2009, as sales price increases only partially
offset increases in input costs from earlier periods, as well as a shift in
mix from higher margin food distributors to lower margin national account quick
serve customers.
Freight
out and commissions paid to independent sales brokers was $5.1 million in the
first six months of 2009 compared to $7.2 million in 2008, a decrease of 28.5%,
primarily due to reduced volumes and lower freight costs, as fuel costs have
decreased since last year.
Direct
selling and marketing was $3.6 million in the first six months of 2009 compared
to $3.4 million in 2008, primarily due to higher levels of incentive
compensation associated with the Company’s performance relative to targets
established at the beginning of the year.
Industrial
and Export —
|
Six
Months Ended June 30,
|
|
|
2009
|
|
|
2008
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
Net
sales
|
$
|
119,684
|
|
|
|
|
100.0
|
%
|
|
$
|
137,905
|
|
|
|
100.0
|
%
|
Cost
of sales
|
|
99,272
|
|
|
|
|
82.9
|
|
|
|
116,498
|
|
|
|
84.5
|
|
Gross
profit
|
|
20,412
|
|
|
|
|
17.1
|
|
|
|
21,407
|
|
|
|
15.5
|
|
Freight
out and commissions
|
|
2,883
|
|
|
|
|
2.4
|
|
|
|
4,579
|
|
|
|
3.3
|
|
Direct
selling and marketing
|
|
919
|
|
|
|
|
0.8
|
|
|
|
415
|
|
|
|
0.3
|
|
Direct
operating income
|
$
|
16,610
|
|
|
|
|
13.9
|
%
|
|
$
|
16,413
|
|
|
|
11.9
|
%
|
Net sales
in the Industrial and Export segment decreased $18.2 million or 13.2% in the
first six months of 2009 compared to the prior year. The change in
net sales from 2008 to 2009 was due to the following:
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars
in thousands)
|
|
2008
Net sales
|
|
$
|
137,905
|
|
|
|
|
|
Volume
|
|
|
(30,712
|
)
|
|
|
(22.3
|
)%
|
Pricing
|
|
|
4,414
|
|
|
|
3.2
|
|
Mix/other
|
|
|
8,077
|
|
|
|
5.9
|
|
2009
Net sales
|
|
$
|
119,684
|
|
|
|
(13.2
|
)%
|
The
decrease in net sales is primarily due to reduced volumes resulting from lower
co-pack sales, and export sales decreasing significantly due to the strength of
the U.S. dollar. While the decline in net sales included the majority
of the products sold within this segment, the most significant were in the
non-dairy powdered creamer, soup and baby food products. Partially
offsetting the volume declines were price increases taken since last year in an
effort to offset the increases in input costs and a positive mix
variance.
Cost of
sales as a percentage of net sales decreased from 84.5% in the first six months
of 2008 to 82.9% in 2009 as price increases have caught up to input cost
increases experienced in prior periods. Also contributing to the
reduction were productivity improvements realized in the first half of 2009 and
decreases in certain input costs.
Freight
out and commissions paid to independent sales brokers were $2.9 million in the
first six months of 2009 compared to $4.6 million in 2008, a decrease of 37.0%,
primarily due to reduced volumes and lower freight costs, as fuel costs have
decreased since last year.
Direct
selling and marketing was $0.9 million in the first six months of 2009 compared
to $0.4 million in 2008, an increase of $0.5 million, due to increased trade
development costs and higher levels of incentive compensation associated with
the Company’s overall performance.
Liquidity
and Capital Resources
Cash
Flow
Management
assesses the Company’s liquidity in terms of its ability to generate cash to
fund its operating, investing and financing activities. The Company
continues to generate positive cash flow from operating activities and remains
in a strong financial position, with resources available for reinvestment in
existing businesses, acquisitions and managing its capital structure on a short
and long-term basis. If additional borrowing is needed to finance
future acquisitions, approximately $212.5 million was available under the
revolving credit facility as of June 30, 2009. This facility expires
in 2011. We believe that, given our cash flow from operating
activities and our available credit capacity, we can comply with the current
terms of the credit facility and meet foreseeable financial
requirements.
The
Company’s cash flows from operating, investing and financing activities, as
reflected in the Condensed Consolidated Statements of Cash Flows is summarized
in the following tables:
|
Six
Months Ended June 30,
|
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
31,157
|
|
|
$
|
10,353
|
|
Depreciation
& amortization
|
|
22,977
|
|
|
|
23,932
|
|
Stock-based
compensation
|
|
6,059
|
|
|
|
5,381
|
|
Loss
(gain) on foreign currency exchange
|
|
(2,146
|
)
|
|
|
1,855
|
|
Mark
to market adjustment on interest rate swap
|
|
(1,206
|
)
|
|
|
—
|
|
Write-down
of impaired assets
|
|
—
|
|
|
|
5,197
|
|
Deferred
income taxes
|
|
7,293
|
|
|
|
3,964
|
|
Changes
in operating assets and liabilities, net of acquisitions
|
|
|
|
|
|
|
|
Receivables
|
|
4,086
|
|
|
|
(11,290
|
)
|
Inventories
|
|
(27,880
|
)
|
|
|
20,176
|
|
Prepaid
expenses and other current assets
|
|
3,224
|
|
|
|
(4,699
|
)
|
Accounts
payable, accrued expenses and other liabilities
|
|
(29,117
|
)
|
|
|
1,739
|
|
Other
|
|
582
|
|
|
|
(693
|
)
|
Net
cash provided by operating activities
|
$
|
15,029
|
|
|
$
|
55,915
|
|
|
|
|
|
|
|
|
|
Our cash
from operations decreased from $55.9 million in the first six months of 2008 to
$15.0 million in 2009. Higher net income achieved in the quarter and
a reduction in receivables due to continued focus on reducing days sales
outstanding was more than offset by a decrease in accounts payable from the high
level at the end of 2008, and a build in inventories due to early pickle
production and the closing of the Cambridge facility.
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(In
thousands)
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
|
|
|
$
|
(22,553
|
)
|
|
$
|
(29,683
|
)
|
Other
|
|
|
|
|
|
|
24
|
|
|
|
939
|
|
Net
cash used in investing activities
|
|
|
|
|
|
$
|
(22,529
|
)
|
|
$
|
(28,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the
first six months of 2009, cash used in investing activities decreased by $6.2
million compared to 2008. Capital additions were $22.6 million for
the first six months of 2009, compared to $29.7 million in 2008 as the Company
completed several large projects early in 2009. Capital spending in
2009 included upgrades to our Pittsburgh plant water and power systems, capacity
expansion at our North East, Pennsylvania facility and repair of our New
Hampton, Iowa facility, which was damaged by fire in February of 2008, along
with routine upgrades and improvements to our other plants.
We expect
capital spending programs to be approximately $32.0 million in
2009. Capital spending in the balance of 2009 will focus on
productivity improvements, and routine equipment upgrades or replacements at all
of our facilities, which number 16 across the United States and
Canada.
|
Six
Months Ended June 30,
|
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
borrowing (repayment) of debt
|
$
|
6,479
|
|
|
$
|
(32,884
|
)
|
Other
|
|
(42
|
)
|
|
|
287
|
|
Net
cash provided by (used in) financing activities
|
$
|
6,437
|
|
|
$
|
(32,597
|
)
|
|
|
|
|
|
|
|
|
Net cash
used in financing activities changed from a $32.6 million use of funds in the
first six months of 2008 to a $6.4 million source of funds in 2009, as the
cash provided from operating activities for the six months ended June 30, 2009
was $40.8 million less than 2008. See cash flows from operating
activities.
Our
short-term financing needs are primarily for financing working capital during
the year. Due to the seasonality of pickle and fruit production,
driven by harvest cycles, which occur primarily during late spring and summer,
inventories generally are at a low point in late spring and at a high point
during the fall, increasing our working capital requirements. In
addition, we build inventories of salad dressings in the spring and soup in the
late summer months in anticipation of large seasonal shipments that begin late
in the second and third quarter, respectively. Our long-term
financing needs will depend largely on potential acquisition
activity. Our revolving credit agreement, plus cash flow from
operations, is expected to be adequate to provide liquidity for our planned
growth strategy and current operations, and is not expected to be impacted by
the current credit crisis.
Debt
Obligations
At June
30, 2009, we had $378.9 million in borrowings under our revolving credit
facility, senior notes of $100.0 million and $4.6 million of tax increment
financing and other obligations. In addition, at June 30, 2009, there
were $8.6 million in letters of credit under the revolver that were issued but
undrawn.
Our
revolving credit facility provides for an aggregate commitment of $600 million
of which $212.5 million was available at June 30, 2009. Interest
rates are tied to variable market rates which averaged 1.0% on debt outstanding
as of June 30, 2009. We are in compliance with the applicable
covenants as of June 30, 2009.
See Note
9 to our Condensed Consolidated Financial Statements.
Other
Commitments and Contingencies
We also
have the following commitments and contingent liabilities, in addition to
contingent liabilities related to ordinary course of litigation, investigations
and tax audits:
|
•
|
|
certain
lease obligations, and
|
|
|
|
•
|
|
selected
levels of property and casualty risks, primarily related to employee
health care, workers’ compensation claims and other casualty
losses.
|
See Note
16 to our Condensed Consolidated Financial Statements and Note 20 in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for more
information about our commitments and contingent obligations.
In 2009,
we expect cash interest to be approximately $18.2 million based on anticipated
debt levels and cash income taxes are expected to be approximately $24.5
million.
Recent
Accounting Pronouncements
Information
regarding recent accounting pronouncements is provided in Note 2 to the
Company’s Condensed Consolidated Financial Statements.
Critical
Accounting Policies
A
description of the Company’s critical accounting policies is contained in our
Annual Report on Form 10-K for the year ended December 31,
2008. There were no material changes to our critical accounting
policies in the six months ended June 30, 2009.
Off-Balance
Sheet Arrangements
We do not
have any obligations that meet the definition of an off-balance sheet
arrangement, other than operating leases, which have or are reasonably likely to
have a material effect on our Condensed Consolidated Financial
Statements.
Forward
Looking Statements
From time
to time, we and our representatives may provide information, whether orally or
in writing, including certain statements in this Quarterly Report on Form 10-Q,
which are deemed to be “forward-looking” within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Litigation Reform
Act”). These forward-looking statements and other information are
based on our beliefs as well as assumptions made by us using information
currently available.
The words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “should” and similar
expressions, as they relate to us, are intended to identify forward-looking
statements. Such statements reflect our current views with respect to
future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. We do not intend to update these
forward-looking statements.
In
accordance with the provisions of the Litigation Reform Act, we are making
investors aware that such forward-looking statements, because they relate to
future events, are by their very nature subject to many important factors that
could cause actual results to differ materially from those contemplated by the
forward-looking statements contained in this Quarterly Report on Form 10-Q and
other public statements we make. Such factors include, but are not
limited to: the outcome of litigation and regulatory proceedings to which we may
be a party; actions of competitors; changes and developments affecting our
industry; quarterly or cyclical variations in financial results; our ability to
obtain suitable pricing for our products; development of new products and
services; our level of indebtedness; cost of borrowing; our ability to maintain
and improve cost efficiency of operations; changes in foreign currency exchange
rates, interest rates and raw material and commodity costs; changes in economic
conditions, political conditions, reliance on third parties for manufacturing of
products and provision of services; and other risks that are set forth in the
Risk Factors section, the Legal Proceedings section, the Management’s Discussion
and Analysis of Financial Condition and Results of Operations section and other
sections of this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K
for the year ended December 31, 2008 as well as in our Current Reports on Form
8-K.
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
Interest
Rate Fluctuations
The
Company entered into a $200 million long term interest rate swap agreement with
an effective date of November 19, 2008 to lock into a fixed LIBOR interest rate
base. Under the terms of agreement, $200 million in floating rate
debt will be swapped for a fixed 2.9% interest rate base for a period of 24
months, amortizing to $50 million for an additional nine months at the same 2.9%
interest rate. Under the terms of the Company’s revolving credit
agreement and in conjunction with our credit spread, this will result in an all
in borrowing cost on the swapped principal being no more than 3.8% during the
life of the swap agreement.
In July
2006, we entered into a forward interest rate swap transaction for a notional
amount of $100 million as a hedge of the forecasted private placement of $100
million senior notes. The interest rate swap transaction was
terminated on August 31, 2006, which resulted in a pre-tax loss of $1.8
million. The unamortized loss is reflected, net of tax, in
Accumulated other comprehensive loss in our Condensed Consolidated Balance
Sheets. The total loss will be reclassified ratably to our Condensed
Consolidated Statements of Income as an increase to interest expense over the
term of the senior notes, providing an effective interest rate of 6.29% over the
terms of our senior notes.
We do not
utilize financial instruments for trading purposes or hold any derivative
financial instruments, which could expose us to significant interest rate market
risk, other than our interest rate swap agreement, as of June 30, 2009.
Our exposure to market risk for changes in interest rates relates
primarily to the increase in the amount of interest expense we expect to pay
with respect to our revolving credit facility, which is tied to variable market
rates. Based on our outstanding debt balance of $378.9 million under our
revolving credit facility at June 30, 2009, and adjusting for the $200 million
fixed rate swap agreement, as of June 30, 2009, each 1% rise in our interest
rate would increase our interest expense by approximately $1.8 million
annually.
Input
Costs
The costs
of raw materials, as well as packaging materials and fuel, have varied widely in
recent years and future changes in such costs may cause our results of
operations and our operating margins to fluctuate significantly. Many
of the raw materials that we use in our products rose to unusually high levels
during 2008, including processed vegetables and meats, soybean oil, casein,
cheese and packaging materials. During 2009, certain input costs have
decreased from the high levels experienced in 2008, but continue to remain at
levels in excess of historical costs. Other input costs such as metal
cans, lids and caps continue to rise even though the underlying commodity cost
has decreased. The reason for the continued rise in cost is due in
part to the limited number of suppliers. In addition, fuel costs,
which represent the most important factor affecting utility costs at our
production facilities and our transportation costs, rose to unusually high
levels in the middle of 2008, but have decreased proportionately to the general
reduction in overall economic activity in 2009. Furthermore, certain
input requirements, such as glass used in packaging, are available only from a
limited number of suppliers. We expect the volatile nature of these
costs to continue, with an overall slightly upward trend.
The most
important raw material used in our pickle operations is cucumbers. We
purchase cucumbers under seasonal grower contracts with a variety of growers
strategically located to supply our production facilities. Bad
weather or disease in a particular growing area can damage or destroy the crop
in that area, which would impair crop yields. If we are not able to
buy cucumbers from local suppliers, we would likely either purchase cucumbers
from foreign sources, such as Mexico or India, or ship cucumbers from other
growing areas in the United States, thereby increasing our production
costs.
Changes
in the prices of our products may lag behind changes in the costs of our
materials. Competitive pressures also may limit our ability to
quickly raise prices in response to increased raw materials, packaging and fuel
costs. Accordingly, if we are unable to increase our prices to offset
increasing raw material, packaging and fuel costs, our operating profits and
margins could be materially adversely affected. In addition, in
instances of declining input costs, customers may be looking for price
reductions in situations where we have locked into pricing at higher
costs.
Fluctuations
in Foreign Currencies
The
Company is exposed to fluctuations in the value of our foreign currency
investment in E.D. Smith, located in Canada. Input costs for certain
Canadian sales are denominated in U.S. dollars, further impacting the effect
foreign currency fluctuations may have on the Company.
The
Company’s financial statements are presented in U.S. dollars, which require the
Canadian assets, liabilities, revenues, and expenses to be translated into U.S.
dollars at the applicable exchange rates. Accordingly, we are exposed
to volatility in the translation of foreign currency earnings due to
fluctuations in the value of the Canadian dollar, which may negatively impact
the Company’s results of operations and financial position. For the
six months ended June 30, 2009 the Company recognized a foreign currency
exchange gain of approximately $13.8 million, of which $12.0 million was
recorded as a component of Accumulated other comprehensive loss and $1.8 million
was recorded on the Company’s Condensed Consolidated Statements of Income within
the Other (income) expense line. For the six months ended June 30,
2008 the Company recognized a loss of approximately $8.5 million, of which $6.6
million was recorded as a component of Accumulated other comprehensive loss and
$1.9 million was recorded on the Company’s Condensed Consolidated Statements of
Income within the Other (income) expense line.
The
Company enters into foreign currency contracts due to the exposure to
Canadian/U.S. dollar currency fluctuations on cross border
transactions. The Company does not apply hedge accounting to these
contracts and records them at fair value on the Condensed Consolidated Balance
Sheets, with changes in fair value being recorded through the Condensed
Consolidated Statements of Income, within Other (income) expense. In
May 2009, the Company entered into three foreign currency contracts for the
purchase of $5.0 million U.S. dollars. The contracts were entered
into for the purchase of U.S. dollar denominated raw materials by our Canadian
subsidiary. These contracts expire by the end of September
2009. Prior to these contracts, the Company had similar contracts
that had expired by December 31, 2008. For the three and six months
ended June 30, 2009, the Company recorded a gain on these contracts totaling
approximately $0.2 million. For the three and six months ended June
30, 2008, the Company recorded a gain on these contracts totaling approximately
$0.2 million and $0.5 million, respectively.
Item 4
. Controls and Procedures
Evaluations
were carried out under the supervision and with the participation of the
Company’s management, including our Chief Executive Officer and Chief Financial
Officer of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
report. Based upon those evaluations, the Chief Executive Officer and
Chief Financial Officer have concluded that as of June 30, 2009, these
disclosure controls and procedures were effective.
There
have been no changes in our internal control over financial reporting during the
quarter ended June 30, 2009 that have materially affected, or are likely to
materially affect, the Company’s internal control over financial
reporting.
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Stockholders of
TreeHouse
Foods, Inc.
Westchester,
IL
We have
reviewed the accompanying condensed consolidated balance sheet of TreeHouse
Foods, Inc. and subsidiaries (the “Company”) as of June 30, 2009, and the
related condensed consolidated statements of income for the three and six month
periods ended June 30, 2009 and 2008 and of cash flows for the six month periods
ended June 30, 2009 and 2008. These interim financial statements are
the responsibility of the Company’s management.
We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on
our reviews, we are not aware of any material modifications that should be made
to such condensed consolidated interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
TreeHouse Foods, Inc. and subsidiaries as of December 31, 2008, and the related
consolidated statements of income, stockholders’ equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 25,
2009, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2008 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/
Deloitte & Touche LLP
Chicago,
Illinois
August 6,
2009
We are
party to a variety of legal proceedings arising out of the conduct of our
business. While the results of proceedings cannot be predicted with
certainty, management believes that the final outcome of these proceedings will
not have a material adverse effect on our consolidated financial statements,
annual results of operations or cash flows.
Information
regarding risk factors appears in
Management’s Discussion and Analysis
of Financial Condition and Results of Operations — Information Related to
Forward-Looking Statements
, in Part I — Item 2 of this Form 10-Q and in
Part I — Item 1A of the TreeHouse Foods, Inc. Annual Report on Form 10-K for the
year ended December 31, 2008. There have been no material changes
from the risk factors previously disclosed in the TreeHouse Foods, Inc. Annual
Report on Form 10-K for the year ended December 31, 2008.
Item 2.
Unregistered Sales of Equity Securities and Use
of Proceeds
None.
Item 3
. Defaults Upon Senior Securities
None.
Item 4
. Submission of Matters to a Vote of Security
Holders
Information
regarding the matters submitted to a vote of security holders for the period
covered by this Quarterly Report on Form 10-Q can be found in the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
None.
|
|
|
10.1*
|
|
Form
of employee Cash Long-Term Incentive Award Agreement
|
|
|
|
10.2*
|
|
Form
of employee Performance Unit Agreement
|
|
|
|
10.3*
|
|
Form
of employee Restricted Stock Agreement
|
|
|
|
10.4*
|
|
Form
of employee Restricted Stock Unit Agreement
|
|
|
|
10.5*
|
|
Form
of employee Non-Statutory Stock Option Agreement
|
|
|
|
10.6*
|
|
Form
of non-employee director Restricted Stock Unit
Agreement
|
|
|
|
10.7*
|
|
Form
of non-employee director Non-Statutory Stock Option
Agreement
|
|
|
|
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
|
*
Compensatory plan or arrangement
SIGNATURES
Pursuant
to the requirement of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
TREEHOUSE
FOODS, INC.
|
|
|
/s/
Dennis F. Riordan
|
|
|
Dennis
F. Riordan
|
|
|
Senior
Vice President and Chief Financial Officer
|
|
August 6,
2009
-33-
TREEHOUSE
FOODS, INC.
CASH
LONG-TERM INCENTIVE AWARD AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of
stock-based and cash incentive awards to certain eligible Employees, Consultants
and non-Employee Directors of the Company and its Affiliates; and
WHEREAS,
the Compensation Committee (the“Committee”) has selected the Participant to
participate in the Plan and has awarded the cash incentive award described in
this Agreement (the “
Performance
Award”) to
the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Performance Award; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as an Employee of the Company (or an Affiliate) and to promote the success of
the business of the Company and its Affiliates, the parties hereby agree as
follows:
1.
Grant of
Performance
Award. The Company
hereby grants to the Participant, effective as of the date shown on the attached
Notice of Grant (the “Date of Grant”), and on the terms and subject to the
conditions, limitations and restrictions set forth in the Plan and in this
Agreement, the
Performance
Award shown on the
attached Notice of Grant. The Participant hereby accepts the
Performance
Award from the Company
on the terms and conditions stated herein.
2.
Transfer
Restrictions. The
Performance
Award shall not be
assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the
Participant.
3.
Accrual
and Termination.
(a)
For each
of the Performance Periods (___________________, ________ and _____________), a
Performance
Award shall accrue equal to (a)
___ of the
Performance
Award designated on the
Notice of Grant multiplied by (b) the applicable “Percentage of
Performance
Award Accrued” as
indicated on the chart below based on the achievement during the applicable
Performance Period of the Operating Net Income goal at the threshold, target or
maximum level designated below. In addition, for the cumulative
Performance Period (_________ though _____________), a
Performance
Award shall accrue equal
to (i) the cumulative
Performance
Award
multiplied by (ii) the applicable Percentage of
Performance
Award Accrued as
indicated on the chart below based on the achievement earned during the
cumulative Performance Period of the Operating Net Income goal at the threshold,
target or maximum level designated below, minus (iii) any
Performance
Award accrued during the
Performance Periods. For purposes of this Agreement, Operating Net
Income shall mean
income
from ordinary business activities after operating expenses, income taxes
and interest are deducted, adjusted for one time and non-recurring
items.
(b)
The
accrued
Performance
Award (determined as
described in the paragraph above) shall be paid in cash on the _____ anniversary
of the Date of Grant (but no later than the 45th day after the _____
anniversary), provided that, and except as otherwise provided in paragraph (c)
below, (1) the Committee certifies the attainment of such Operating Net Income
goals in the manner set forth in the Plan and (2) the Participant continues to
be employed by the Company (or an Affiliate) through the ______ anniversary of
the Date of Grant.
(c)
If the
Participant’s Service terminates during one of the Performance Periods due to
death, Disability or
Retirement, or the
Company terminates the Participant’s Service without Cause during a Performance
Period, the Participant shall receive any portion of the
Performance
Award accrued in prior
Performance Periods, plus a pro rata portion of the
Performance
Award that would have
accrued for the Performance Period in which such Participant’s death,
Disability, Retirement, or termination by the Company without Cause
occurs. Such pro rata portion shall be based on the number of full
calendar months of the Participant’s Service during the applicable Performance
Period divided by the length of that Performance Period. The
Participant will receive the cumulative Performance Award if the Participant is
employed through _________ Such
Performance
Award shall be paid on
the anniversary of the Date of Grant immediately following the end of the
Performance Period in which such Participant’s death, Disability, Retirement, or
termination by the Company without Cause occurs (but no later than the 45th day
after such anniversary). Notwithstanding the preceding sentence, if
the Participant is a “specified employee” as determined under Section 409A of
the Internal Revenue Code of 1986, as amended, and (1) his or her Service
terminates during one of the Performance Periods due to Retirement or (2) the
Company terminates the Participant’s Service without Cause during a Performance
Period, such Participant shall receive such
Performance
Award on the date that is the later
of: (A) the first day following the six month anniversary of the Participant’s
separation from Service, or (B) the anniversary of the Date of Grant immediately
following the end of the Performance Period in which such Participant’s
Retirement or termination by the Company without Cause occurs (but no later than
the 45th day after such date).
Performance
Period(s)
|
|
Threshold Operating
Net Income Goal
|
|
Target Operating Net
Income Goal
|
|
Maximum Operating Net
Income Goal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Achieved Operating Net
Income
|
Percentage
of
Performance
Award
Accrued
*
*
|
Below
Threshold
|
0%
|
Threshold
|
__%
|
Target
|
___%
|
Maximum
|
___%
|
*
*
Such percentage shall be prorated for
any achievement between threshold, target and maximum.
4.
Forfeiture. Except
as provided in paragraph 3, the
Performance
Award shall be forfeited
to the Company upon the Participant’s termination of employment with the Company
and its Affiliates for any reason prior to the ______ anniversary of the Date of
Grant. The final determination of whether or not the Participant has
been discharged or terminated Service for any of the reasons specified in
paragraph 3 shall be made by the Committee in its sole and absolute
discretion.
5.
Tax
Withholding. The Company shall have the right to withhold from the
Performance
Award payable to the
Participant an amount sufficient to satisfy all federal, state and local
withholding tax requirements as provided in the Plan.
6.
Plan
Incorporated. The
Participant accepts the
Performance
Award
subject to all the provisions of the Plan, which are incorporated into this
Agreement, including the provisions that authorize the Committee to administer
and interpret the Plan and which provide that the Committee’s decisions,
determinations and interpretations with respect to the Plan are final and
conclusive on all persons affected thereby. Except as otherwise set
forth in this Agreement, terms defined in the Plan have the same meanings
herein.
7.
Miscellaneous.
(a)
No
Guaranteed Service or Employment. Neither the granting of the
Performance
Award, nor any provision
of this Agreement or the Plan, shall (a) affect the right of the Company to
terminate the Participant at any time, with or without Cause, or (b) shall be
deemed to create any rights to employment or Service or continued employment or
continued Service on the part of the Participant or any rights to participate in
any employee benefit plan or program (other than the Plan) of the Company or any
Affiliate or to receive any benefits or rights associated with employment or
Service with the Company. The rights and obligations arising under
this Agreement are not intended to and do not affect the employment or Service
relationship that otherwise exists between the Company (or any Affiliate) and
the Participant, whether such relationship is at will or defined by an
employment contract. Moreover, this Agreement is not intended to and
does not amend any existing employment contract between the Company and the
Participant; to the extent there is a conflict between this Agreement and such
an employment contract, the employment contract shall govern and take
priority.
(b)
Notices. Any
notice to be given to the Company under the terms of this Agreement shall be
addressed to the Company at its principal executive offices, and any notice to
be given to the Participant shall be addressed to the Participant at the address
set forth on the attached Notice of Grant, or at such other address for a party
as such party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given if mailed, postage prepaid,
addressed as aforesaid.
(c)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the
Performance
Award, this Agreement
shall be binding upon and inure to the benefit of the representatives,
executors, successors or beneficiaries of the parties hereto.
(d)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(e)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(f)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(g)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(h)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or
condition.
(i)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(j)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(k)
Plan
Document Governs.
The
Performance
Award is granted
pursuant to the Plan, and the
Performance
Award and this Agreement are in all respects governed by the Plan and subject to
all of the terms and provisions thereof, whether such terms and provisions are
incorporated in this Agreement by reference or are expressly
cited. Any inconsistency between the Agreement and the Plan shall be
resolved in favor of the Plan. The Participant hereby acknowledges
receipt of a copy of the Plan.
(l)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and shall be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s
estate.
(m)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(n)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of
the Performance
Award under
this Agreement is made on a fully discretionary basis by the Company and that
this Agreement does not lead to a vested right to further
Performance
Awards in the
future.
(o)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past
Performance
Awards and
current Performance Awards outstanding under the Plan (“Data”), for the purpose
of managing and administering the Plan. The Participant is not
obliged to consent to such collection, use, processing and transfer of personal
data, but a refusal to provide such consent may affect his or her ability to
participate in the Plan. The Company, or its Affiliates, may transfer
Data among themselves or to third parties as necessary for the purpose of
implementation, administration and management of the Plan. These
various recipients of Data may be located elsewhere throughout the
world. The Participant authorizes these various recipients of Data to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing the
Plan. The Participant may, at any time, review Data with respect to
the Participant and require any necessary amendments to such
Data. The Participant may withdraw his or her consent to use Data
herein by notifying the Company in writing; however, the Participant understands
that by withdrawing his or her consent to use Data, the Participant may affect
his or her ability to participate in the Plan.
(p)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-3-
TREEHOUSE
FOODS, INC.
PERFORMANCE
UNIT AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of
stock-based awards and cash incentive awards to certain eligible Employees,
Consultants and non-Employee Directors of the Company and its Affiliates;
and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the performance units described in this
Agreement (the “Units”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Units; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as an Employee of the Company (or an Affiliate) and to promote the success of
the business of the Company and its Affiliates, the parties hereby agree as
follows:
1.
Grant of
Units. The Company hereby grants to the Participant, effective as of
the date shown on the attached Notice of Grant (the “Date of Grant”), and on the
terms and subject to the conditions, limitations and restrictions set forth in
the Plan and in this Agreement, the number of Units shown on the attached Notice
of Grant. The Participant hereby accepts the Units from the
Company.
2.
Transfer
Restrictions. None of the Units shall be sold, assigned, pledged or
otherwise transferred, voluntarily or involuntarily, by the Participant prior to
the conversion of Units pursuant to paragraph 3, and until permitted
pursuant to the terms of the Plan.
3.
Accrual
and Conversion of Units.
(a)
For each
of the Performance Periods (________________, _________ and _________), a number
of Units shall accrue equal to approximately (a) ___ of the Units
designated on the Notice of Grant multiplied by (b) the applicable
“Percentage of Units Accrued” as indicated on the chart below based on the
achievement during the applicable Performance Period of the Operating Net Income
goal at the threshold, target or maximum level designated below. In
addition, for the cumulative Performance Period (_____________________), a
number of cumulative Units shall accrue equal to (i) the number of Units
multiplied by (ii) the applicable “Percentage of Units Accrued” as
indicated on the chart below based on the achievement during the cumulative
Performance Period of the Operating Net Income goal at the threshold, target or
maximum level designated below, minus (iii) any Units accrued during the
Performance Periods. For purposes of this Agreement, Operating Net
Income shall mean
income
from ordinary business activities after operating expenses, income taxes and
interest are deducted, adjusted for one time and non-recurring
items.
(b)
The
accrued Units (determined as described in the paragraph above) shall be
converted to Stock or cash, at the discretion of the Committee, on the _____
anniversary of the Date of Grant (but no later than the 45th day after the _____
anniversary), provided that, and except as otherwise provided in paragraph (c)
below, (1) the Committee certifies the attainment of such Operating Net
Income goals in the manner set forth in the Plan and (2) the Participant
continues to be employed by the Company (or an Affiliate) through the _____
anniversary of the Date of Grant. Each accrued Unit shall be
converted to either (x) one share of Stock or (y) cash equal to the
Fair Market Value of a share of Stock on the _____ anniversary of the Date of
Grant (but no later than the 45th day after the _____ anniversary).
(c)
If the
Participant’s Service terminates during one of the Performance Periods due to
death, Disability or
Retirement, or the
Company terminates the Participant’s Service without Cause during a Performance
Period, the Participant shall receive any portion of the Units accrued in prior
Performance Periods plus a pro rata portion of the Units that would have accrued
for the Performance Period in which such Participant’s death, Disability,
Retirement, or termination by the Company without Cause occurs. Such
pro rata portion shall be based on the number of full calendar months of the
Participant’s Service during the Performance Period divided by the length of the
Performance Period. Participant shall receive the cumulative
Units if the Participant is employed through
_________________. Such Units shall be converted to Stock or
cash, at the discretion of the Committee, on the anniversary of the Date of
Grant immediately following the end of the Performance Period in which such
Participant’s death, Disability, Retirement, or termination by the Company
without Cause occurs (but not later than the 45th day after the _____
anniversary). Notwithstanding the preceding sentence, if the
Participant is a “specified employee” as determined under Section 409A of
the Internal Revenue Code of 1986, as amended, and (1) his or her Service
terminates during one of the Performance Periods due to Retirement or
(2) the Company terminates the Participant’s Service without Cause during a
Performance Period, such Participant shall have such Units converted on the date
that is the later of: (x) the first day following the six month
anniversary of the Participant’s separation from Service, or (y) the
anniversary of the Date of Grant immediately following the end of the
Performance Period in which such Participant’s Retirement or termination by the
Company without Cause occurs (but no later than the 45th day after such
date).
Performance
Period(s)
|
|
Threshold Operating
Net Income Goal
|
|
Target Operating Net
Income Goal
|
|
Maximum Operating Net
Income Goal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Achieved Operating Net
Income
|
Percentage
of
Performance
Award
Accrued
*
*
|
Below
Threshold
|
0%
|
Threshold
|
__%
|
Target
|
___%
|
Maximum
|
___%
|
**
Such percentage shall be prorated for
any achievement between threshold, target and maximum.
4.
Forfeiture. Except
as provided in paragraph 3, the Units shall be forfeited to the Company upon the
Participant’s termination of employment with the Company and its Affiliates for
any reason prior to the _____ anniversary of the Date of Grant. The
final determination of whether or not the Participant has been discharged or
terminated Service for any of the reasons specified in paragraph 3 shall be
made by the Committee in its sole and absolute discretion.
5.
Rights as
a Stockholder. The Participant shall not be entitled to any of the
rights of a stockholder with respect to the Units unless and until the Units are
converted to shares of Stock, including without limitation the right to vote and
tender Stock and the right to receive dividends and other distributions payable
with respect to Stock.
6.
Tax
Withholding. The Company shall have the right to require the
Participant to remit to the Company, or to withhold from other amounts payable
to the Participant, as compensation or otherwise, an amount sufficient to
satisfy all federal, state and local withholding tax requirements as provided in
the Plan, or the Company shall have the right to retain (or the Participant may
be offered the opportunity to elect to tender) the number of shares of stock
whose Fair Market Value equals such amount required to be withheld.
7.
Plan
Incorporated. The Participant accepts the Units subject to all the
provisions of the Plan, which are incorporated into this Agreement, including
the provisions that authorize the Committee to administer and interpret the Plan
and which provide that the Committee’s decisions, determinations and
interpretations with respect to the Plan are final and conclusive on all persons
affected thereby. Except as otherwise set forth in this Agreement,
terms defined in the Plan have the same meanings herein.
8.
Miscellaneous.
(a)
No
Guaranteed Service or Employment. Neither the granting of the Units,
nor any provision of this Agreement or the Plan, shall (a) affect the right
of the Company to terminate the Participant at any time, with or without Cause,
or (b) shall be deemed to create any rights to employment or Service or
continued employment or continued Service on the part of the Participant or any
rights to participate in any employee benefit plan or program (other than the
Plan) of the Company or any Affiliate or to receive any benefits or rights
associated with employment or Service with the Company. The rights
and obligations arising under this Agreement are not intended to and do not
affect the employment or Service relationship that otherwise exists between the
Company (or any Affiliate) and the Participant, whether such relationship is at
will or defined by an employment contract. Moreover, this Agreement
is not intended to and does not amend any existing employment contract between
the Company and the Participant; to the extent there is a conflict between this
Agreement and such an employment contract, the employment contract shall govern
and take priority.
(b)
Notices. Any
notice to be given to the Company under the terms of this Agreement shall be
addressed to the Company at its principal executive offices, and any notice to
be given to the Participant shall be addressed to the Participant at the address
set forth on the attached Notice of Grant, or at such other address for a party
as such party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given if mailed, postage prepaid,
addressed as aforesaid.
(c)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Units, this Agreement shall be binding
upon and inure to the benefit of the representatives, executors, successors or
beneficiaries of the parties hereto.
(d)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(e)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(f)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(g)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(h)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or
condition.
(i)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(j)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(k)
Plan
Document Governs.
The Units are granted
pursuant to the Plan, and the Units and this Agreement are in all respects
governed by the Plan and subject to all of the terms and provisions thereof,
whether such terms and provisions are incorporated in this Agreement by
reference or are expressly cited. Any inconsistency between the
Agreement and the Plan shall be resolved in favor of the Plan. The
Participant hereby acknowledges receipt of a copy of the Plan.
(l)
Beneficiary
Designation. The Participant may, from time to time, in accordance with
procedures set forth by the Committee, name any beneficiary or beneficiaries
(who may be named contingently) to whom any benefit under this Agreement is to
be paid in case of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and shall be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s
estate.
(m)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(n)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Units under this Agreement is made on a fully discretionary basis by
the Company and that this Agreement does not lead to a vested right to further
Unit awards in the future.
(o)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Unit awards and current Unit awards outstanding under the
Plan (“Data”), for the purpose of managing and administering the
Plan. The Participant is not obliged to consent to such collection,
use, processing and transfer of personal data, but a refusal to provide such
consent may affect his or her ability to participate in the Plan. The
Company, or its Affiliates, may transfer Data among themselves or to third
parties as necessary for the purpose of implementation, administration and
management of the Plan. These various recipients of Data may be
located elsewhere throughout the world. The Participant authorizes
these various recipients of Data to receive, possess, use, retain and transfer
the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan. The Participant may, at any
time, review Data with respect to the Participant and require any necessary
amendments to such Data. The Participant may withdraw his or her
consent to use Data herein by notifying the Company in writing; however, the
Participant understands that by withdrawing his or her consent to use Data, the
Participant may affect his or her ability to participate in the
Plan.
(p)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
TREEHOUSE
FOODS, INC.
RESTRICTED
STOCK AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units and other types of stock-based awards to
certain eligible Employees, Consultants and non-Employee Directors of the
Company and its Affiliates; and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the shares of restricted stock described
in this Agreement (the “Restricted Stock”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Restricted Stock; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as an Employee of the Company (or an Affiliate) and to promote the success of
the business of the Company and its Affiliates, the parties hereby agree as
follows:
1.
Grant of
Restricted Stock. The Company hereby grants to the Participant,
effective as of the date shown on the attached Notice of Grant (the “Date of
Grant”), and on the terms and subject to the conditions, limitations and
restrictions set forth in the Plan and in this Agreement, the number of shares
of Restricted Stock shown on the attached Notice of Grant. The
Participant hereby accepts the Restricted Stock from the Company.
2.
Transfer
Restrictions. None of the Restricted Stock shall be sold, assigned,
pledged or otherwise transferred, voluntarily or involuntarily, by the
Participant prior to the lapse of restrictions pursuant to paragraph 3, and
until permitted pursuant to the terms of the Plan.
3.
Lapse of
Restrictions. Subject to paragraph 4, the restrictions set forth
in paragraph 2 shall lapse in
___________________________________________________
In
addition to the lapse provisions contained in the foregoing sentence, the
restrictions on the Restricted Stock shall immediately lapse in full upon a
Change in Control. Upon the termination of the Participant’s Service
due to death, Disability or Retirement, the restrictions on a pro rata portion
of the Restricted Stock that would be eligible for a lapse of restrictions on
the next anniversary of the Date of Grant shall lapse. Such pro rata
portion shall be determined based on the number of full calendar months of the
Participant’s Service since the Date of Grant, or anniversary thereof, as
applicable, divided by twelve.
4.
Forfeiture. All
of the Restricted Stock with respect to which restrictions have not lapsed
pursuant to paragraph 3 shall be forfeited to the Company upon the earlier
of (a) the Participant’s termination of employment with the Company and its
Affiliates for any reason or (b) the _____ anniversary of the Date of
Grant. The final determination of whether or not the Participant has
been discharged or terminated Service for any of the reasons specified in
paragraph 3 shall be made by the Committee in its sole and absolute
discretion.
5.
Rights as
a Stockholder. During the restriction period, the Participant shall
not be entitled to any of the rights of a stockholder with respect to the
Restricted Stock until such restriction lapse, including without limitation the
right to vote and tender such Restricted Stock and the right to receive
dividends and other distributions payable with respect to Stock.
Notwithstanding the
preceding sentence, the Participant shall be eligible to receive any
extraordinary dividend, as determined by the Committee.
6.
Tax
Withholding. The Company shall have the right to require the
Participant to remit to the Company, or to withhold from other amounts payable
to the Participant, as compensation or otherwise, an amount sufficient to
satisfy all federal, state and local withholding tax requirements as provided in
the Plan.
7.
Plan
Incorporated. The Participant accepts the Restricted Stock subject to all
the provisions of the Plan, which are incorporated into this Agreement,
including the provisions that authorize the Committee to administer and
interpret the Plan and which provide that the Committee’s decisions,
determinations and interpretations with respect to the Plan are final and
conclusive on all persons affected thereby. Except as otherwise set
forth in this Agreement, terms defined in the Plan have the same meanings
herein.
8.
Miscellaneous.
(a)
No
Guaranteed Service or Employment. Neither the granting of the
Restricted Stock, nor any provision of this Agreement or the Plan, shall
(a) affect the right of the Company to terminate the Participant at any
time, with or without Cause, or (b) shall be deemed to create any rights to
employment or Service or continued employment or continued Service on the part
of the Participant or any rights to participate in any employee benefit plan or
program (other than the Plan) of the Company or any Affiliate or to receive any
benefits or rights associated with employment or Service with the
Company. The rights and obligations arising under this Agreement are
not intended to and do not affect the employment or Service relationship that
otherwise exists between the Company (or any Affiliate) and the Participant,
whether such relationship is at will or defined by an employment
contract. Moreover, this Agreement is not intended to and does not
amend any existing employment contract between the Company and the Participant;
to the extent there is a conflict between this Agreement and such an employment
contract, the employment contract shall govern and take priority.
(b)
Notices. Any
notice to be given to the Company under the terms of this Agreement shall be
addressed to the Company at its principal executive offices, and any notice to
be given to the Participant shall be addressed to the Participant at the address
set forth on the attached Notice of Grant, or at such other address for a party
as such party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given if mailed, postage prepaid,
addressed as aforesaid.
(c)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Restricted Stock, this Agreement shall
be binding upon and inure to the benefit of the representatives, executors,
successors or beneficiaries of the parties hereto.
(d)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(e)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(f)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(g)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(h)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition
(i)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(j)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(k)
Plan
Document Governs
.
The
Restricted Stock is granted pursuant to the Plan, and the Restricted Stock and
this Agreement are in all respects governed by the Plan and subject to all of
the terms and provisions thereof, whether such terms and provisions are
incorporated in this Agreement by reference or are expressly
cited. Any inconsistency between the Agreement and the Plan shall be
resolved in favor of the Plan. The Participant hereby acknowledges
receipt of a copy of the Plan.
(l)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and shall be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s estate or
exercised by the Participant’s estate.
(m)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(n)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Restricted Stock under this Agreement is made on a fully
discretionary basis by the Company and that this Agreement does not lead to a
vested right to further Restricted Stock awards in the future.
(o)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Restricted Stock awards and current Restricted Stock awards
outstanding under the Plan (“Data”), for the purpose of managing and
administering the Plan. The Participant is not obliged to consent to
such collection, use, processing and transfer of personal data, but a refusal to
provide such consent may affect his or her ability to participate in the
Plan. The Company, or its Affiliates, may transfer Data among
themselves or to third parties as necessary for the purpose of implementation,
administration and management of the Plan. These various recipients
of Data may be located elsewhere throughout the world. The
Participant authorizes these various recipients of Data to receive, possess,
use, retain and transfer the Data, in electronic or other form, for the purposes
of implementing, administering and managing the Plan. The Participant
may, at any time, review Data with respect to the Participant and require any
necessary amendments to such Data. The Participant may withdraw his
or her consent to use Data herein by notifying the Company in writing; however,
the Participant understands that by withdrawing his or her consent to use Data,
the Participant may affect his or her ability to participate in the
Plan.
(p)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-3-
TREEHOUSE
FOODS, INC.
RESTRICTED
STOCK UNIT AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of
stock-based awards and cash incentive awards to certain eligible Employees,
Consultants and non-Employee Directors of the Company and its Affiliates;
and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the restricted stock units described in
this Agreement (the “Units”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Units; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as an Employee of the Company (or an Affiliate) and to promote the success of
the business of the Company and its Affiliates, the parties hereby agree as
follows:
1.
Grant of
Units. The Company hereby grants to the Participant, effective as of
the date shown on the attached Notice of Grant (the “Date of Grant”), and on the
terms and subject to the conditions, limitations and restrictions set forth in
the Plan and in this Agreement, the number of Units shown on the attached Notice
of Grant. The Participant hereby accepts the Units from the
Company.
2.
Transfer
Restrictions. None of the Units shall be sold, assigned, pledged or
otherwise transferred, voluntarily or involuntarily, by the Participant prior to
vesting of Units pursuant to paragraph 3, and until permitted pursuant to
the terms of the Plan.
3.
Vesting. Subject
to paragraph 4, the Units shall vest in
_______________________________________________________ provided the Participant
continues to be employed by the Company (or an Affiliate) on
___________________________.
4.
Upon the
termination of the Participant’s Service to death, Disability or Retirement, a
pro rata portion of the Units shall vest. Such pro rata portion shall
be based on the number of full calendar months of Particpant’s Service since the
Date of Grant or anniversary thereof, as applicable, divided by
twelve.
5.
Forfeiture. All
of the Units that have not vested pursuant to paragraph 3 or 4 shall be
forfeited to the Company upon the Participant’s termination of Service with the
Company and its Affiliates for any reason.
6.
Payment. The
Units shall be converted to Stock or cash, at the discretion of the Committee,
and paid to the Participant as soon as practicable after the date on which Units
vest (but no later than 45 days following such vesting).
7.
Rights as
a Stockholder. During the restriction period, the Participant shall
not be entitled to any of the rights of a stockholder with respect to the Units
until such Units vest and are converted to shares of Stock, including without
limitation the right to vote and tender Stock and the right to receive dividends
and other distributions payable with respect to Stock.
8.
Tax
Withholding. The Company shall have the right to require the
Participant to remit to the Company, or to withhold from other amounts payable
to the Participant, as compensation or otherwise, an amount sufficient to
satisfy all federal, state and local withholding tax requirements as provided in
the Plan, or the Company shall have the right to retain (or the Participant may
be offered the opportunity to elect to tender) the number of shares of stock
whose Fair Market Value equals such amount required to be
withheld.
9.
Plan
Incorporated. The Participant accepts the Units subject to all the
provisions of the Plan, which are incorporated into this Agreement, including
the provisions that authorize the Committee to administer and interpret the Plan
and which provide that the Committee’s decisions, determinations and
interpretations with respect to the Plan are final and conclusive on all persons
affected thereby. Except as otherwise set forth in this Agreement,
terms defined in the Plan have the same meanings herein.
10.
Miscellaneous.
(a)
No
Guaranteed Service or Employment. Neither the granting of the Units,
nor any provision of this Agreement or the Plan, shall (a) affect the right
of the Company to terminate the Participant at any time, with or without Cause,
or (b) shall be deemed to create any rights to employment or Service or
continued employment or continued Service on the part of the Participant or any
rights to participate in any employee benefit plan or program (other than the
Plan) of the Company or any Affiliate or to receive any benefits or rights
associated with employment or Service with the Company. The rights
and obligations arising under this Agreement are not intended to and do not
affect the employment or Service relationship that otherwise exists between the
Company (or any Affiliate) and the Participant, whether such relationship is at
will or defined by an employment or service contract. Moreover, this
Agreement is not intended to and does not amend any existing employment or
service contract between the Company and the Participant; to the extent there is
a conflict between this Agreement and such a contract, the contract shall govern
and take priority.
(b)
Notices. Any
notice to be given to the Company under the terms of this Agreement shall be
addressed to the Company at its principal executive offices, and any notice to
be given to the Participant shall be addressed to the Participant at the address
set forth on the attached Notice of Grant, or at such other address for a party
as such party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given if mailed, postage prepaid,
addressed as aforesaid.
(c)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Units, this Agreement shall be binding
upon and inure to the benefit of the representatives, executors, successors or
beneficiaries of the parties hereto.
(d)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(e)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(f)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(g)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(h)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or
condition.
(i)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(j)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(k)
Plan
Document Governs.
The Units are granted
pursuant to the Plan, and the Units and this Agreement are in all respects
governed by the Plan and subject to all of the terms and provisions thereof,
whether such terms and provisions are incorporated in this Agreement by
reference or are expressly cited. Any inconsistency between the
Agreement and the Plan shall be resolved in favor of the Plan. The
Participant hereby acknowledges receipt of a copy of the Plan.
(l)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and shall be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s
estate.
(m)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(n)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Units under this Agreement is made on a fully discretionary basis by
the Company and that this Agreement does not lead to a vested right to further
Unit awards in the future.
(o)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Unit awards and current Unit awards outstanding under the
Plan (“Data”), for the purpose of managing and administering the
Plan. The Participant is not obliged to consent to such collection,
use, processing and transfer of personal data, but a refusal to provide such
consent may affect his or her ability to participate in the Plan. The
Company, or its Affiliates, may transfer Data among themselves or to third
parties as necessary for the purpose of implementation, administration and
management of the Plan. These various recipients of Data may be
located elsewhere throughout the world. The Participant authorizes
these various recipients of Data to receive, possess, use, retain and transfer
the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan. The Participant may, at any
time, review Data with respect to the Participant and require any necessary
amendments to such Data. The Participant may withdraw his or her
consent to use Data herein by notifying the Company in writing; however, the
Participant understands that by withdrawing his or her consent to use Data, the
Participant may affect his or her ability to participate in the
Plan.
(p)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-3-
TREEHOUSE
FOODS, INC.
NON-STATUTORY
STOCK OPTION AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units and other types of stock-based awards to
certain eligible Employees, Consultants and non-Employee Directors of the
Company and its Affiliates; and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the Non-statutory Stock Option described
in this Agreement (the “Option”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Option; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as an Employee of the Company (or an Affiliate) and to promote the success of
the business of the Company and its Affiliates, the parties hereby agree as
follows:
1.
Grant of
Option. The Company hereby grants to the Participant, effective as of
the date shown on the attached Notice of Grant (the “Date of Grant”), and on the
terms and subject to the conditions, limitations and restrictions set forth in
the Plan and in this Agreement, an Option to purchase all or any portion of the
number of shares shown on the attached Notice of Grant for the per share price
shown on the attached Notice of Grant (the “Exercise Price”). The
Participant hereby accepts the Option from the Company.
2.
Vesting. The
shares of Stock subject to the Option shall vest in
______________________________________________________________. In
addition to the vesting provisions contained in the foregoing sentence, the
shares of Stock subject to the Options shall immediately vest in full upon (a)
termination of the Participant’s Service due to death or Disability; or (b) a
Change in Control.
3.
Exercise. In
order to exercise the Option with respect to any vested portion that has not yet
expired, the Participant shall notify the Company (or its duly authorized
designee for such purpose) in writing or by electronic or other acceptable
means, in accordance with procedures established by the Company and communicated
to the Participant, either sent to the Corporate Secretary’s attention at the
Company’s principal office or to his duly authorized designee for such
purpose. At the time of exercise, the Participant shall pay to the
Company the Exercise Price set forth on the attached Notice of Grant, multiplied
by the number of vested shares as to which the Option is being
exercised. The Option will not be deemed to be exercised and shares
of Stock will not be issued unless and until the applicable Exercise Price is
received by the Company and the exercise is otherwise approved by the
Company. The Participant shall make such payment (a) in cash or its
equivalent, (b) by exchanging shares of Stock owned by the Participant for at
least six months (or such greater or lesser period as the Committee may
determine from time to time), (c) if permitted by the Committee, through a
broker-assisted “cashless” exercise of the Option, or (d) any combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any Stock tendered to the Company, valued as of the
date of such tender, is at least equal to the total applicable Exercise
Price. In addition, the Committee may, in its discretion, allow for
the Option to be “net exercised” in which event the net amount of Stock
underlying the Option shall be delivered to the Participant upon exercise after
deducting such amount of Stock necessary to satisfy the Exercise
Price.
4.
Expiration
of Option. The Option shall expire, and shall not be exercisable with
respect to any vested portion as to which the Option has not been exercised, on
the first to occur
of:_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________. Notwithstanding
any provision of the Plan or this Agreement to the contrary, the Participant may
not, under any circumstances, exercise the Option (whether or not then vested or
exercisable) following termination of the Participant’s Service for Cause, and
the unvested portion of any Option shall expire and be forfeited immediately
upon the termination of the Participant’s Service for any reason. The
final determination of whether or not the Participant has been discharged or has
terminated Service for any of the reasons specified in this paragraph 4 will be
made by the Committee in its sole and absolute discretion.
5.
Tax
Withholding. Any provision of this Agreement to the contrary
notwithstanding, the Company may take such steps as it deems necessary or
desirable for the withholding of any taxes that it is required by law or
regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Stock subject
hereto. Such steps shall include but shall not be limited to (a)
requiring the Participant pay to the Company, simultaneous with any exercise
pursuant to paragraph 3 above, the amount of any taxes required to be withheld
(or a reasonable estimate thereof), or (b) retaining by the Company (or the
Participant may be offered the opportunity to elect to tender) the number of
shares of Stock (or a reasonable estimate thereof) whose Fair Market Value
equals (or approximately equals) such amount required to be
withheld. The Participant acknowledges and agrees that the
Participant is responsible for the tax consequences, if any, associated with the
grant of the Option and its exercise.
6.
Assignment
or Transfer of Option. The Option is not assignable or transferable,
except in accordance with the provisions of the Plan.
7.
Administrative
Delay. Option exercise requests will be processed as soon as
administratively practicable following the receipt of the Participant’s request
which is complete in all respects. The Company shall not be liable
for any delay in exercising the option as a result of administrative delay or
error.
8.
Certain
Legal Restrictions. The Company shall not be obligated to sell or
issue any shares of Stock upon the exercise of the Option or otherwise unless
and until the issuance and delivery of such shares complies with (a) Company
policies and procedures relating to insider trading or otherwise relating to
federal or state securities laws; and (b) all relevant provisions of law and
other legal requirements including, without limitation, any applicable federal
or state securities laws and the requirements of any stock exchange upon which
shares of the Stock may then be listed, as determined by the Company in its sole
discretion. As a condition to the exercise of the Option or the sale
by the Company of any additional shares of Stock to the Participant, the Company
may require the Participant to make such representations and warranties as it
may deem necessary to comply with applicable laws. The Company
reserves the right to delay any exercise of the Option or the delivery of shares
of Stock following such exercise and the Company shall not be liable for any
such delay or refusal to sell or issue any shares of Stock if the Company cannot
obtain authority from the appropriate regulatory bodies deemed by the Company to
be necessary to lawfully sell or issue such shares or if the Company otherwise
deems such delay or refusal to be necessary and appropriate under applicable
federal or state securities laws or pursuant to applicable Company policies and
procedures.
9.
Plan
Incorporated. The
Participant accepts the Option subject to all the provisions of the Plan, which
are incorporated into this Agreement, including the provisions that authorize
the Committee to administer and interpret the Plan and which provide that the
Committee’s decisions, determinations and interpretations with respect to the
Plan are final and conclusive on all persons affected thereby. Except
as otherwise set forth in this Agreement, terms defined in the Plan have the
same meanings herein.
10.
Miscellaneous.
(a)
No ISO
Treatment. The Option is intended to be a non-statutory stock option
under applicable tax laws, and it is not to be characterized or treated as an
incentive stock option under such laws.
(b)
No
Guaranteed Service or Employment. Neither the granting of the Option,
nor any provision of this Agreement or the Plan, shall (a) impose any obligation
upon the Participant to exercise the Option or any part thereof; (b) affect the
right of the Company to terminate the Participant at any time, with or without
Cause, or (c) shall be deemed to create any rights to employment or Service or
continued employment or continued Service on the part of the Participant or any
rights to participate in any employee benefit plan or program (other than the
Plan) of the Company or any Affiliate or to receive any benefits or rights
associated with employment or Service with the Company. The rights
and obligations arising under this Agreement are not intended to and do not
affect the employment or Service relationship that otherwise exists between the
Company (or any Affiliate) and the Participant, whether such relationship is at
will or defined by an employment contract. Moreover, this Agreement
is not intended to and does not amend any existing employment contract between
the Company and the Participant; to the extent there is a conflict between this
Agreement and such an employment contract, the employment contract shall govern
and take priority.
(c)
No
Stockholder Rights. Neither the Participant nor any person claiming
under or through the Participant shall be or shall have any of the rights or
privileges of a stockholder of the Company in respect of any of the shares of
Stock issuable upon the exercise of the Option herein unless and until
certificates representing such shares shall have been issued and delivered to
the Participant or such Participant’s agent.
(d)
Notices. Any
notice to be given to the Company under the terms of this Agreement or any
delivery of the Option to the Company shall be addressed to the Company at its
principal executive offices, and any notice to be given to the Participant shall
be addressed to the Participant at the address set forth on the attached Notice
of Grant, or at such other address for a party as such party may hereafter
designate in writing to the other. Any such notice shall be deemed to
have been duly given if mailed, postage prepaid, addressed as
aforesaid.
(e)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Option and any shares of Stock, this
Agreement shall be binding upon and inure to the benefit of the representatives,
executors, successors or beneficiaries of the parties hereto.
(f)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(g)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(h)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(i)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(j)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition
(k)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(l)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(m)
Plan
Document Governs
.
The
Option is granted pursuant to the Plan, and the Option and this Agreement are in
all respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Agreement by
reference or are expressly cited. Any inconsistency between the
Agreement and the Plan shall be resolved in favor of the Plan. The
Participant hereby acknowledges receipt of a copy of the Plan.
(n)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and will be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s estate or
exercised by the Participant’s estate.
(o)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(p)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Options under this Agreement are made on a fully discretionary basis
by the Company and that this Agreement does not lead to a vested right to
further Option awards in the future.
(q)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Option awards and current Option awards outstanding under
the Plan (“Data”), for the purpose of managing and administering the
Plan. The Participant is not obliged to consent to such collection,
use, processing and transfer of personal data, but a refusal to provide such
consent may affect his or her ability to participate in the Plan. The
Company, or its Affiliates, may transfer Data among themselves or to third
parties as necessary for the purpose of implementation, administration and
management of the Plan. These various recipients of Data may be
located elsewhere throughout the world. The Participant authorizes
these various recipients of Data to receive, possess, use, retain and transfer
the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan. The Participant may, at any
time, review Data with respect to the Participant and require any necessary
amendments to such Data. The Participant may withdraw his or her
consent to use Data herein by notifying the Company in writing; however, the
Participant understands that by withdrawing his or her consent to use Data, the
Participant may affect his or her ability to participate in the
Plan.
(r)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-4-
TREEHOUSE
FOODS, INC.
RESTRICTED
STOCK UNIT AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of
stock-based awards and cash incentive awards to certain eligible Employees,
Consultants and non-Employee Directors of the Company and its Affiliates;
and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the restricted stock units described in
this Agreement (the “Units”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Units; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as a non-Employee Director of the Company (or an Affiliate) and to promote the
success of the business of the Company and its Affiliates, the parties hereby
agree as follows:
1.
Grant of
Units. The Company hereby grants to the Participant, effective as of
the date shown on the attached Notice of Grant (the “Date of Grant”), and on the
terms and subject to the conditions, limitations and restrictions set forth in
the Plan and in this Agreement, the number of Units shown on the attached Notice
of Grant. The Participant hereby accepts the Units from the
Company.
2.
Transfer
Restrictions. None of the Units shall be sold, assigned, pledged or
otherwise transferred, voluntarily or involuntarily, by the Participant prior to
vesting of Units pursuant to paragraph 3, and until permitted pursuant to
the terms of the Plan.
3.
Vesting. Subject
to paragraph 4, the Units shall vest on ____________________. In
addition to the vesting provision contained in the foregoing sentence, the Units
shall immediately vest in full upon a Change in Control. Upon the
termination of the Participant’s Service due to death, Disability or Retirement
(which shall mean the Participant’s resignation or decision not to be
re-nominated at the expiration of his or her term, or a failure to be re-elected
for a new term), a pro rata portion of the Units shall vest. Such pro
rata portion shall be based on the number of full calendar months of the
Participant’s Service since the Date of Grant divided by thirteen.
4.
Forfeiture. All
of the Units that have not vested pursuant to paragraph 3 shall be
forfeited to the Company upon the Participant’s termination of Service with the
Company and its Affiliates for any reason. The final determination of
whether or not the Participant has been discharged or terminated Service for any
of the reasons specified in paragraph 3 shall be made by the Committee in
its sole and absolute discretion.
5.
Payment. The
Units shall be converted to Stock or cash, at the discretion of the Committee,
and paid to the Participant as soon as practicable after the date on which Units
vest (but no later than 45 days following such
vesting). Notwithstanding the preceding sentence, the Participant may
make an irrevocable election within 30 days of the Date of Grant to defer
conversion of the Units to a later date, in accordance with the attached
Exhibit A and the terms of the Plan. If the Participant makes
such a deferral election, then, notwithstanding any provision of this Agreement
to the contrary, the Participant shall not have any rights as a stockholder with
respect to such deferred Units.
6.
Rights as
a Stockholder. During the restriction period, the Participant shall
not be entitled to any of the rights of a stockholder with respect to the Units
until such Units vest and are converted to shares of Stock, including without
limitation the right to vote and tender Stock and the right to receive dividends
and other distributions payable with respect to Stock.
7.
Tax
Withholding. The Company shall have the right to require the
Participant to remit to the Company, or to withhold from other amounts payable
to the Participant, as compensation or otherwise, an amount sufficient to
satisfy all federal, state and local withholding tax requirements as provided in
the Plan.
8.
Plan
Incorporated. The Participant accepts the Units subject to all the
provisions of the Plan, which are incorporated into this Agreement, including
the provisions that authorize the Committee to administer and interpret the Plan
and which provide that the Committee’s decisions, determinations and
interpretations with respect to the Plan are final and conclusive on all persons
affected thereby. Except as otherwise set forth in this Agreement,
terms defined in the Plan have the same meanings herein.
9.
Miscellaneous.
(a)
No
Guaranteed Service or Employment. Neither the granting of the Units,
nor any provision of this Agreement or the Plan, shall (a) affect the right
of the Company to terminate the Participant at any time, with or without Cause,
or (b) shall be deemed to create any rights to employment or Service or
continued employment or continued Service on the part of the Participant or any
rights to participate in any employee benefit plan or program (other than the
Plan) of the Company or any Affiliate or to receive any benefits or rights
associated with employment or Service with the Company. The rights
and obligations arising under this Agreement are not intended to and do not
affect the employment or Service relationship that otherwise exists between the
Company (or any Affiliate) and the Participant, whether such relationship is at
will or defined by an employment or service contract. Moreover, this
Agreement is not intended to and does not amend any existing employment or
service contract between the Company and the Participant; to the extent there is
a conflict between this Agreement and such a contract, the contract shall govern
and take priority.
(b)
Notices. Any
notice to be given to the Company under the terms of this Agreement shall be
addressed to the Company at its principal executive offices, and any notice to
be given to the Participant shall be addressed to the Participant at the address
set forth on the attached Notice of Grant, or at such other address for a party
as such party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given if mailed, postage prepaid,
addressed as aforesaid.
(c)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Units, this Agreement shall be binding
upon and inure to the benefit of the representatives, executors, successors or
beneficiaries of the parties hereto.
(d)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(e)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(f)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(g)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(h)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or
condition.
(i)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(j)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(k)
Plan
Document Governs.
The Units are granted
pursuant to the Plan, and the Units and this Agreement are in all respects
governed by the Plan and subject to all of the terms and provisions thereof,
whether such terms and provisions are incorporated in this Agreement by
reference or are expressly cited. Any inconsistency between the
Agreement and the Plan shall be resolved in favor of the Plan. The
Participant hereby acknowledges receipt of a copy of the Plan.
(l)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and shall be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s
estate.
(m)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(n)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Units under this Agreement is made on a fully discretionary basis by
the Company and that this Agreement does not lead to a vested right to further
Unit awards in the future.
(o)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Unit awards and current Unit awards outstanding under the
Plan (“Data”), for the purpose of managing and administering the
Plan. The Participant is not obliged to consent to such collection,
use, processing and transfer of personal data, but a refusal to provide such
consent may affect his or her ability to participate in the Plan. The
Company, or its Affiliates, may transfer Data among themselves or to third
parties as necessary for the purpose of implementation, administration and
management of the Plan. These various recipients of Data may be
located elsewhere throughout the world. The Participant authorizes
these various recipients of Data to receive, possess, use, retain and transfer
the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan. The Participant may, at any
time, review Data with respect to the Participant and require any necessary
amendments to such Data. The Participant may withdraw his or her
consent to use Data herein by notifying the Company in writing; however, the
Participant understands that by withdrawing his or her consent to use Data, the
Participant may affect his or her ability to participate in the
Plan.
(p)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-3-
TREEHOUSE
FOODS, INC.
NON-STATUTORY
STOCK OPTION AGREEMENT
THIS
AGREEMENT (the “Agreement”), effective as of the date indicated on the attached
Notice of Grant, is made and entered into by and between TreeHouse Foods, Inc.,
a Delaware corporation (the “Company”), and the individual named on the attached
Notice of Grant (the “Participant”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has adopted and approved the TreeHouse
Foods, Inc. Equity and Incentive Plan (the “Plan”), which was approved, as
required, by the Company’s stockholders and provides for the grant of Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units and other types of stock-based awards to
certain eligible Employees, Consultants and non-Employee Directors of the
Company and its Affiliates; and
WHEREAS,
the Compensation Committee (the “Committee”) has selected the Participant to
participate in the Plan and has awarded the Non-statutory Stock Option described
in this Agreement (the “Option”) to the Participant; and
WHEREAS,
the parties hereto desire to evidence in writing the terms and conditions of the
Option; and
WHEREAS,
capitalized terms used herein and not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements herein contained, and as an inducement to the Participant to continue
as a non-Employee Director of the Company (or an Affiliate) and to promote the
success of the business of the Company and its Affiliates, the parties hereby
agree as follows:
1.
Grant of
Option. The Company hereby grants to the Participant, effective as of
the date shown on the attached Notice of Grant (the “Date of Grant”), and on the
terms and subject to the conditions, limitations and restrictions set forth in
the Plan and in this Agreement, an Option to purchase all or any portion of the
number of shares shown on the attached Notice of Grant for the per share price
shown on the attached Notice of Grant (the “Exercise Price”). The
Participant hereby accepts the Option from the Company.
2.
Vesting. The
shares of Stock subject to the Option shall vest on
___________________. In addition to the vesting provisions contained
in the foregoing sentence, the shares of Stock subject to the Options shall
immediately vest in full upon (a) termination of the Participant’s Service due
to death or Disability; (b) the Participant’s retirement (which shall mean the
Participant’s resignation or decision not to be re-nominated at the expiration
of his or her term, or a failure to be re-elected for a new term); or (c) a
Change in Control.
3.
Exercise. In
order to exercise the Option with respect to any vested portion that has not yet
expired, the Participant shall notify the Company (or its duly authorized
designee for such purpose) in writing or by electronic or other acceptable
means, in accordance with procedures established by the Company and communicated
to the Participant, either sent to the Corporate Secretary’s attention at the
Company’s principal office or to his duly authorized designee for such
purpose. At the time of exercise, the Participant shall pay to the
Company the Exercise Price set forth on the attached Notice of Grant, multiplied
by the number of vested shares as to which the Option is being
exercised. The Option will not be deemed to be exercised and shares
of Stock will not be issued unless and until the applicable Exercise Price is
received by the Company and the exercise is otherwise approved by the
Company. The Participant shall make such payment (a) in cash or its
equivalent, (b) by exchanging shares of Stock owned by the Participant for at
least six months (or such greater or lesser period as the Committee may
determine from time to time), (c) if permitted by the Committee, through a
broker-assisted “cashless” exercise of the Option, or (d) any combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any Stock tendered to the Company, valued as of the
date of such tender, is at least equal to the total applicable Exercise
Price. In addition, the Committee may, in its discretion, allow for
the Option to be “net exercised” in which event the net amount of Stock
underlying the Option shall be delivered to the Participant upon exercise after
deducting such amount of Stock necessary to satisfy the Exercise
Price.
4.
Expiration
of Option. The Option shall expire, and shall not be exercisable with
respect to any vested portion as to which the Option has not been exercised, on
the first to occur
of:__________________________________________________________________________________. Notwithstanding
any provision of the Plan or this Agreement to the contrary, the Participant may
not, under any circumstances, exercise the Option (whether or not then vested or
exercisable) following termination of the Participant’s Service for Cause, and
the unvested portion of any Option shall expire and be forfeited immediately
upon the termination of the Participant’s Service for any reason. The
final determination of whether or not the Participant has been discharged or
terminated Service for any of the reasons specified in this paragraph 4 will be
made by the Committee in its sole and absolute discretion.
5.
Tax
Withholding. Any provision of this Agreement to the contrary
notwithstanding, the Company may take such steps as it deems necessary or
desirable for the withholding of any taxes that it is required by law or
regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Stock subject
hereto. Such steps shall include but shall not be limited to (a)
requiring the Participant pay to the Company, simultaneous with any exercise
pursuant to paragraph 3 above, the amount of any taxes required to be withheld
(or a reasonable estimate thereof), or (b) retaining by the Company (or the
Participant may be offered the opportunity to elect to tender) the number of
shares of Stock (or a reasonable estimate thereof) whose Fair Market Value
equals (or approximately equals) such amount required to be
withheld. The Participant acknowledges and agrees that the
Participant is responsible for the tax consequences, if any, associated with the
grant of the Option and its exercise.
6.
Assignment
or Transfer of Option. The Option is not assignable or transferable,
except in accordance with the provisions of the Plan.
7.
Administrative
Delay. Option exercise requests will be processed as soon as
administratively practicable following the receipt of the Participant’s request
which is complete in all respects. The Company shall not be liable
for any delay in exercising the option as a result of administrative delay or
error.
8.
Certain
Legal Restrictions. The Company shall not be obligated to sell or
issue any shares of Stock upon the exercise of the Option or otherwise unless
and until the issuance and delivery of such shares complies with (a) Company
policies and procedures relating to insider trading or otherwise relating to
federal or state securities laws; and (b) all relevant provisions of law and
other legal requirements including, without limitation, any applicable federal
or state securities laws and the requirements of any stock exchange upon which
shares of the Stock may then be listed, as determined by the Company in its sole
discretion. As a condition to the exercise of the Option or the sale
by the Company of any additional shares of Stock to the Participant, the Company
may require the Participant to make such representations and warranties as it
may deem necessary to comply with applicable laws. The Company
reserves the right to delay any exercise of the Option or the delivery of shares
of Stock following such exercise and the Company shall not be liable for any
such delay or refusal to sell or issue any shares of Stock if the Company cannot
obtain authority from the appropriate regulatory bodies deemed by the Company to
be necessary to lawfully sell or issue such shares or if the Company otherwise
deems such delay or refusal to be necessary and appropriate under applicable
federal or state securities laws or pursuant to applicable Company policies and
procedures.
9.
Plan
Incorporated. The Participant accepts the Option subject to all the
provisions of the Plan, which are incorporated into this Agreement, including
the provisions that authorize the Committee to administer and interpret the Plan
and which provide that the Committee’s decisions, determinations and
interpretations with respect to the Plan are final and conclusive on all persons
affected thereby. Except as otherwise set forth in this Agreement,
terms defined in the Plan have the same meanings herein.
10.
Miscellaneous.
(a)
No ISO
Treatment. The Option is intended to be a non-statutory stock option
under applicable tax laws, and it is not to be characterized or treated as an
incentive stock option under such laws.
(b)
No
Guaranteed Service or Employment. Neither the granting of the Option,
nor any provision of this Agreement or the Plan, shall (a) impose any obligation
upon the Participant to exercise the Option or any part thereof; (b) affect the
right of the Company to terminate the Participant at any time, with or without
Cause, or (c) shall be deemed to create any rights to employment or Service or
continued employment or continued Service on the part of the Participant or any
rights to participate in any employee benefit plan or program (other than the
Plan) of the Company or any Affiliate or to receive any benefits or rights
associated with employment or Service with the Company. The rights
and obligations arising under this Agreement are not intended to and do not
affect the employment or Service relationship that otherwise exists between the
Company (or any Affiliate) and the Participant, whether such relationship is at
will or defined by an employment or service contract. Moreover, this
Agreement is not intended to and does not amend any existing employment or
service contract between the Company and the Participant; to the extent there is
a conflict between this Agreement and such a contract, the contract shall govern
and take priority.
(c)
No
Stockholder Rights. Neither the Participant nor any person claiming
under or through the Participant shall be or shall have any of the rights or
privileges of a stockholder of the Company in respect of any of the shares of
Stock issuable upon the exercise of the Option herein unless and until
certificates representing such shares shall have been issued and delivered to
the Participant or such Participant’s agent.
(d)
Notices. Any
notice to be given to the Company under the terms of this Agreement or any
delivery of the Option to the Company shall be addressed to the Company at its
principal executive offices, and any notice to be given to the Participant shall
be addressed to the Participant at the address set forth on the attached Notice
of Grant, or at such other address for a party as such party may hereafter
designate in writing to the other. Any such notice shall be deemed to
have been duly given if mailed, postage prepaid, addressed as
aforesaid.
(e)
Binding
Agreement. Subject to the limitations in this Agreement on the
transferability by the Participant of the Option and any shares of Stock, this
Agreement shall be binding upon and inure to the benefit of the representatives,
executors, successors or beneficiaries of the parties hereto.
(f)
Governing
Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Illinois and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(g)
Severability. If
any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefore another provision
that is legal and enforceable and achieves the same objectives.
(h)
Headings. All
section titles and captions in this Agreement are for convenience only, shall
not be deemed part of this Agreement, and in no way shall define, limit, extend
or describe the scope or intent of any provisions of this
Agreement.
(i)
Entire
Agreement. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(j)
No
Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition
(k)
Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same
counterpart.
(l)
Relief. In
addition to all other rights or remedies available at law or in equity, the
Company shall be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement.
(m)
Plan
Document Governs
.
The
Option is granted pursuant to the Plan, and the Option and this Agreement are in
all respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Agreement by
reference or are expressly cited. Any inconsistency between the
Agreement and the Plan shall be resolved in favor of the Plan. The
Participant hereby acknowledges receipt of a copy of the Plan.
(n)
Beneficiary
Designation
.
The
Participant may, from time to time, in accordance with procedures set forth by
the Committee, name any beneficiary or beneficiaries (who may be named
contingently) to whom any benefit under this Agreement is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the Participant, shall be in a form prescribed by the Company, and will be
effective only if and when it is properly completed and filed by the Participant
in writing with the Company during the Participant’s lifetime. In the
absence of any such valid and effective designation, benefits remaining unpaid
at the Participant’s death shall be paid to the Participant’s estate or
exercised by the Participant’s estate.
(o)
Administration.
This Agreement and the rights of the Participant hereunder are subject to all
the terms and conditions of the Plan, as the same may be amended from time to
time, as well as to such rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate, in its sole discretion, to the administration of the
Plan and this Agreement, all of which shall be binding upon the
Participant.
(p)
No Vested
Right to Future Awards. Participant acknowledges and agrees that the
granting of Options under this Agreement are made on a fully discretionary basis
by the Company and that this Agreement does not lead to a vested right to
further Option awards in the future.
(q)
Use of
Personal Data. By executing this Agreement, Participant acknowledges
and agrees to the collection, use, processing and transfer of certain personal
data, including his or her name, salary, nationality, job title, position, and
details of all past Option awards and current Option awards outstanding under
the Plan (“Data”), for the purpose of managing and administering the
Plan. The Participant is not obliged to consent to such collection,
use, processing and transfer of personal data, but a refusal to provide such
consent may affect his or her ability to participate in the Plan. The
Company, or its Affiliates, may transfer Data among themselves or to third
parties as necessary for the purpose of implementation, administration and
management of the Plan. These various recipients of Data may be
located elsewhere throughout the world. The Participant authorizes
these various recipients of Data to receive, possess, use, retain and transfer
the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan. The Participant may, at any
time, review Data with respect to the Participant and require any necessary
amendments to such Data. The Participant may withdraw his or her
consent to use Data herein by notifying the Company in writing; however, the
Participant understands that by withdrawing his or her consent to use Data, the
Participant may affect his or her ability to participate in the
Plan.
(r)
Amendment. Any
amendment to the Agreement shall be in writing and signed by the
Company.
# # # # #
-4-
Exhibit 15.1
TreeHouse
Foods, Inc.
Two
Westbrook Corporate Center
Suite
1070
Westchester,
Illinois
We have
reviewed, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the unaudited interim financial information of
TreeHouse Foods, Inc. and subsidiaries for the periods ended June 30, 2009 and
2008, as indicated in our report dated August 6, 2009; because we did not
perform an audit, we expressed no opinion on that information.
We are
aware that our report referred to above, which is included in your Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009, is incorporated by
reference in Registration Statements No. 333-126161 and No. 333-150053 on Form
S-8.
We also
are aware that the aforementioned report, pursuant to Rule 436(c) under the
Securities Act of 1933, is not considered a part of the Registration Statements
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
/s/
Deloitte & Touche LLP
Chicago,
Illinois
August 6,
2009
Exhibit 31.1
CERTIFICATION
PURSUANT TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I, Sam K.
Reed, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of TreeHouse Foods,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b.
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c.
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluations;
and
|
|
d.
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
functions):
|
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
August 6, 2009
|
/s/
Sam K. Reed
|
|
|
Sam
K. Reed
|
|
|
Chairman
of the Board and Chief Executive Officer
|
|
Exhibit 31.2
CERTIFICATION
PURSUANT TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I, Dennis
F. Riordan, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of TreeHouse Foods,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b.
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c.
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluations;
and
|
|
d.
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
functions):
|
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
August 6, 2009
|
/s/
Dennis F. Riordan
|
|
|
Dennis
F. Riordan
Senior
Vice President and Chief Financial Officer
|
|
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of TreeHouse Foods, Inc. (the
“Company”) for the period ended June 30, 2009, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Sam K. Reed, Chairman
of the Board and Chief Executive Officer of the Company, certify to the best of
my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
|
/s/
Sam K. Reed
|
|
|
Sam
K. Reed
|
|
|
Chairman
of the Board and Chief Executive Officer
|
|
Date:
August 6, 2009
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of TreeHouse Foods, Inc. (the
“Company”) for the period ended June 30, 2009, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Dennis F.
Riordan,
Senior
Vice President and Chief Financial Officer of the Company, certify to the best
of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
|
/s/
Dennis F. Riordan
|
|
|
Dennis
F. Riordan
|
|
|
Senior
Vice President and Chief Financial Officer
|
|
Date:
August 6, 2009