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Form 10-Q TreeHouse Foods, Inc. For: Jun 30

August 8, 2022 4:23 PM EDT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2022.
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                to
Commission File Number: 001-32504
TreeHouse Foods, Inc.
(Exact name of the registrant as specified in its charter)
 ths-20220630_g1.jpg
Delaware20-2311383
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
2021 Spring Road, Suite 600
Oak Brook, IL 60523
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (708483-1300

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueTHSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
    
Non-accelerated filerSmaller reporting company
    
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares of the registrant's common stock outstanding as of July 29, 2022 was 56,042,584.
1


Table of Contents
 

2


Part I — Financial Information
Item 1. Financial Statements
TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except per share data)
June 30, 2022December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$199.1 $308.6 
Receivables, net218.2 209.2 
Inventories854.1 677.8 
Prepaid expenses and other current assets80.6 60.2 
Total current assets1,352.0 1,255.8 
Property, plant, and equipment, net988.3 1,019.1 
Operating lease right-of-use assets192.0 165.6 
Goodwill2,180.0 2,181.4 
Intangible assets, net522.8 555.0 
Other assets, net32.3 30.1 
Total assets$5,267.4 $5,207.0 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$915.3 $786.0 
Accrued expenses250.3 274.6 
Current portion of long-term debt8.1 15.6 
Total current liabilities1,173.7 1,076.2 
Long-term debt1,883.5 1,890.7 
Operating lease liabilities166.9 144.0 
Deferred income taxes155.8 156.5 
Other long-term liabilities73.9 94.2 
Total liabilities3,453.8 3,361.6 
Commitments and contingencies (Note 14)
Stockholders' equity:  
Preferred stock, par value $0.01 per share, 10.0 shares authorized, none issued
  
Common stock, par value $0.01 per share, 90.0 shares authorized, 56.0 and 55.8 shares outstanding as of June 30, 2022 and December 31, 2021, respectively
0.6 0.6 
Treasury stock(133.3)(133.3)
Additional paid-in capital2,194.2 2,187.4 
Accumulated deficit(188.1)(155.7)
Accumulated other comprehensive loss(59.8)(53.6)
Total stockholders' equity1,813.6 1,845.4 
Total liabilities and stockholders' equity$5,267.4 $5,207.0 


See Notes to Condensed Consolidated Financial Statements.
3


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net sales$1,197.6 $1,003.2 $2,338.6 $2,060.5 
Cost of sales1,035.7 837.1 2,021.7 1,713.3 
Gross profit161.9 166.1 316.9 347.2 
Operating expenses:
Selling and distribution75.6 62.9 158.3 131.6 
General and administrative74.3 56.3 137.8 119.6 
Amortization expense18.1 18.0 36.3 36.4 
Other operating expense, net15.6 24.8 46.9 44.5 
Total operating expenses183.6 162.0 379.3 332.1 
Operating (loss) income(21.7)4.1 (62.4)15.1 
Other expense (income):
Interest expense20.6 18.5 39.8 43.6 
Loss on extinguishment of debt   14.4 
Loss (gain) on foreign currency exchange2.9 (1.3)0.1 (2.6)
Other income, net(11.6)(6.5)(67.1)(33.9)
Total other expense (income)11.9 10.7 (27.2)21.5 
Loss before income taxes(33.6)(6.6)(35.2)(6.4)
Income tax benefit(3.0)(1.4)(1.8)(1.6)
Net loss from continuing operations(30.6)(5.2)(33.4)(4.8)
Net income from discontinued operations1.2 13.6 1.0 14.7 
Net (loss) income$(29.4)$8.4 $(32.4)$9.9 
Earnings (loss) per common share - basic:
Continuing operations$(0.55)$(0.09)$(0.60)$(0.09)
Discontinued operations0.02 0.24 0.02 0.26 
Earnings (loss) per share basic (1)
$(0.53)$0.15 $(0.58)$0.18 
Earnings (loss) per common share - diluted:
Continuing operations$(0.55)$(0.09)$(0.60)$(0.09)
Discontinued operations0.02 0.24 0.02 0.26 
Earnings (loss) per share diluted (1)
$(0.53)$0.15 $(0.58)$0.18 
Weighted average common shares:
Basic56.0 56.0 55.9 55.8 
Diluted56.0 56.0 55.9 55.8 


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





See Notes to Condensed Consolidated Financial Statements.
4


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  
(Unaudited, in millions) 
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net (loss) income$(29.4)$8.4 $(32.4)$9.9 
Other comprehensive (loss) income:
Foreign currency translation adjustments (10.6)5.8 (6.3)6.7 
Pension and postretirement reclassification adjustment  0.2 0.1 0.3 
Other comprehensive (loss) income(10.6)6.0 (6.2)7.0 
Comprehensive (loss) income$(40.0)$14.4 $(38.6)$16.9 
 






































See Notes to Condensed Consolidated Financial Statements.
5


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in millions)
Accumulated
AdditionalOther
Common StockPaid-InAccumulatedTreasury StockComprehensiveTotal
SharesAmountCapitalDeficitSharesAmountLossEquity
Balance, January 1, 202158.3 $0.6 $2,179.9 $(143.2)(2.4)$(108.3)$(64.0)$1,865.0 
Net income— — — 1.5 — — — 1.5 
Other comprehensive income— — — — — — 1.0 1.0 
Issuance of stock awards0.3 — (7.9)— — — — (7.9)
Stock-based compensation— — 4.9 — — — — 4.9 
Balance, March 31, 202158.6 $0.6 $2,176.9 $(141.7)(2.4)$(108.3)$(63.0)$1,864.5 
Net income— — — 8.4 — — — 8.4 
Other comprehensive income— — — — — — 6.0 6.0 
Treasury stock repurchases— — — — (0.5)(25.0)— (25.0)
Issuance of stock awards — (0.1)— — — — (0.1)
Stock-based compensation— — 4.7 — — — — 4.7 
Balance, June 30, 202158.6 $0.6 $2,181.5 $(133.3)(2.9)$(133.3)$(57.0)$1,858.5 
Balance, January 1, 202258.7 $0.6 $2,187.4 $(155.7)(2.9)$(133.3)$(53.6)$1,845.4 
Net loss— — — (3.0)— — — (3.0)
Other comprehensive income— — — — — — 4.4 4.4 
Issuance of stock awards0.2 — (3.3)— — — — (3.3)
Stock-based compensation— — 4.3 — — — — 4.3 
Balance, March 31, 202258.9 $0.6 $2,188.4 $(158.7)(2.9)$(133.3)$(49.2)$1,847.8 
Net loss— — — (29.4)— — — (29.4)
Other comprehensive loss— — — — — — (10.6)(10.6)
Stock-based compensation— — 5.8 — — — — 5.8 
Balance, June 30, 202258.9 $0.6 $2,194.2 $(188.1)(2.9)$(133.3)$(59.8)$1,813.6 


See Notes to Condensed Consolidated Financial Statements.        
6


TREEHOUSE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended
June 30,
20222021
Cash flows from operating activities:
Net (loss) income$(32.4)$9.9 
Net income from discontinued operations1.0 14.7 
Net loss from continuing operations(33.4)(4.8)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization105.1 107.3 
Stock-based compensation10.1 9.4 
Loss on extinguishment of debt 14.4 
Unrealized gain on derivative contracts(62.3)(27.9)
Other(1.3)6.2 
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Receivables(9.4)49.8 
Inventories(178.2)(115.8)
Prepaid expenses and other assets(11.2)(18.5)
Accounts payable147.4 (19.8)
Accrued expenses and other liabilities6.6 (44.3)
Net cash used in operating activities - continuing operations(26.6)(44.0)
Net cash used in operating activities - discontinued operations (6.8)
Net cash used in operating activities(26.6)(50.8)
Cash flows from investing activities:
Additions to property, plant, and equipment(62.2)(55.1)
Additions to intangible assets(4.6)(6.6)
Proceeds from sale of fixed assets4.8 1.3 
Acquisitions (5.1)
Proceeds from sale of investments 17.2 
Net cash used in investing activities - continuing operations(62.0)(48.3)
Net cash provided by investing activities - discontinued operations 85.3 
Net cash (used in) provided by investing activities(62.0)37.0 
Cash flows from financing activities:
Borrowings under Revolving Credit Facility48.0 133.5 
Payments under Revolving Credit Facility(48.0)(113.5)
Payments on financing lease obligations(0.9)(1.1)
Payment of deferred financing costs(1.6)(7.5)
Payments on Term Loans(14.3)(1,129.6)
Proceeds from refinanced Term Loans 1,430.0 
Repurchase of Notes (602.9)
Payment of debt premium for extinguishment of debt (9.0)
Repurchases of common stock (25.0)
Payments related to stock-based award activities(3.3)(7.9)
Net cash used in financing activities - continuing operations(20.1)(333.0)
Net cash used in financing activities - discontinued operations  
Net cash used in financing activities(20.1)(333.0)
Effect of exchange rate changes on cash and cash equivalents(0.8)(0.4)
Net decrease in cash and cash equivalents(109.5)(347.2)
Cash and cash equivalents, beginning of period308.6 364.6 
Cash and cash equivalents, end of period$199.1 $17.4 
7


Six Months Ended
June 30,
20222021
Supplemental cash flow disclosures:
Interest paid$26.6 $43.6 
Net income taxes paid1.2 1.2 
Non-cash investing and financing activities:
Accrued purchase of property and equipment$21.2 $20.7 
Accrued other intangible assets1.4 3.0 
Right-of-use assets obtained in exchange for lease obligations43.0 6.0 
Accrued deferred financing costs 1.0 










































See Notes to Condensed Consolidated Financial Statements.
8


TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of and for the six months ended June 30, 2022
(Unaudited)
1. BASIS OF PRESENTATION

The unaudited Condensed Consolidated Financial Statements included herein have been prepared by TreeHouse Foods, Inc. and its consolidated subsidiaries (the "Company," "TreeHouse," "we," "us," or "our"), pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to quarterly reporting on Form 10-Q. In our opinion, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted as permitted by such rules and regulations. The Condensed Consolidated Financial Statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Results of operations for interim periods are not necessarily indicative of annual results.

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

A detailed description of the Company's significant accounting policies can be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Adopted

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 was further amended in January 2021 by ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company has identified agreements that reference LIBOR, including interest rate swap agreements, accounts receivable sale agreements, and debt agreements. The new guidance has been or will be applied as these contracts are modified to reference other rates. The Company adopted this guidance during the second quarter of 2022 as a result of a modification to a receivable sale agreement. The adoption did not have a material impact on the Company's financial statements.


9

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. GROWTH, REINVESTMENT, AND RESTRUCTURING PROGRAMS

The Company’s growth, reinvestment, and restructuring activities are part of an enterprise-wide transformation to build long-term sustainable growth and improve profitability for the Company. These activities are aggregated into the following categories: (1) Strategic Growth Initiatives (expected completion in 2023) – a growth and reinvestment strategy and (2) other (collectively the "Growth, Reinvestment, and Restructuring Programs").

Below is a description of each of the Growth, Reinvestment, and Restructuring Programs:

(1) Strategic Growth Initiatives

In the first quarter of 2021, the Company began executing on its growth and reinvestment initiatives designed to invest in our commercial organization, adapt the supply chain to better support long-term growth opportunities, and further enable the Company to build greater depth in growth categories which primarily reside in our Snacking & Beverages segment. These initiatives are intended to better position the Company to accelerate future revenue and earnings growth, and improve the execution of our strategy to be our customers' preferred manufacturing and distribution partner. This reinvestment will occur through 2023, and the cumulative costs incurred to date are $84.6 million. The Company currently expects the total costs will be up to $130.0 million, comprised of consulting and professional fees, employee-related costs, and investment in information technology. Consulting and professional fees are expected to include building digital capabilities and advancing automation and value engineering in our supply chain network. Employee-related costs primarily consist of severance, retention, and dedicated employee costs.

(2) Other
 
Other costs include restructuring costs incurred for retention, severance, information technology system implementation, costs to exit facilities, and other administrative costs. Retention includes one-time cash recognition payments that were expensed ratably from the fourth quarter of 2021 to the first quarter of 2022 as well as additional cash bonuses and stock-based compensation to drive retention through 2023.

The costs by activity for the Growth, Reinvestment, and Restructuring Programs are outlined below:
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (In millions)
Strategic Growth Initiatives$8.8 $14.5 $26.8 $30.6 
Other6.8 7.7 20.9 11.2 
Total$15.6 $22.2 $47.7 $41.8 
 
As part of our growth, reinvestment, and restructuring programs, we generally incur expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee separation costs and other exit costs. Severance and employee separation costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense, pension, and other termination benefits. Other exit costs typically relate to lease and contract terminations. We also incur expenses that are an integral component of, and directly attributable to, our growth, reinvestment, and restructuring activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include asset-related costs and other costs. Asset-related costs primarily relate to accelerated depreciation and certain long-lived asset impairments. Other costs primarily relate to start-up costs of new facilities, consulting and professional fees, information technology implementation, asset relocation costs, and costs to exit facilities.

Expenses associated with these programs are recorded in Other operating expense, net in the Condensed Consolidated Statements of Operations. The Company does not allocate costs associated with Growth, Reinvestment, and Restructuring Programs to reportable segments when evaluating the performance of its segments. As a result, costs associated with Growth, Reinvestment, and Restructuring Programs are not presented by reportable segment. Refer to Note 16 for additional information. 

10

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Below is a summary of costs by type associated with the Growth, Reinvestment, and Restructuring Programs:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
 (In millions)
Employee-related4.2 7.1 $20.8 $12.0 
Other costs11.4 15.1 26.9 29.8 
Total$15.6 $22.2 $47.7 $41.8 
 
For the three and six months ended June 30, 2022 and 2021, employee-related costs primarily consisted of retention, severance, and dedicated project employee cost; and other costs primarily consisted of consulting services. Employee-related and other costs are recognized in Other operating expense, net of the Condensed Consolidated Statements of Operations. 

The table below presents the exit cost liabilities related to severance and retention activity for the Growth, Reinvestment, and Restructuring Programs as of June 30, 2022:  
 SeveranceRetentionTotal Exit Cost Liabilities
 (In millions)
Balance as of December 31, 2021$3.9 $9.7 $13.6 
Expenses recognized7.4 11.5 18.9 
Cash payments(4.8)(15.4)(20.2)
Balance as of June 30, 2022$6.5 $5.8 $12.3 
 
The severance and retention liabilities are included in Accrued expenses in the Condensed Consolidated Balance Sheets.

4. RECEIVABLES SALES PROGRAM
 
The Company has entered into agreements to sell certain trade accounts receivable to unrelated, third-party financial institutions at a discount (collectively, "the Receivables Sales Program"). The agreements can be terminated by either party with 60 days' notice. The Receivables Sales Program is used by the Company to manage liquidity in a cost-effective manner. The Company has no retained interest in the receivables sold under the Receivables Sales Program; however, under the agreements, the Company does have collection and administrative responsibilities for the sold receivables. Under the Receivables Sales Program, the maximum amount of outstanding accounts receivables sold at any time is $500.0 million.

The following table includes the outstanding amount of accounts receivable sold under the Receivables Sales Program and the receivables collected from customers and not remitted to the financial institutions:
June 30, 2022December 31, 2021
 (In millions)
Outstanding accounts receivable sold$426.3 $357.3 
Receivables collected and not remitted to financial institutions241.8 205.0 
Receivables sold under the Receivables Sales Program are derecognized from the Company's Condensed Consolidated Balance Sheet at the time of the sale and the proceeds from such sales are reflected as a component of the change in receivables in the operating activities section of the Condensed Consolidated Statements of Cash Flows. The receivables collected and not remitted to financial institutions are included in Accounts payable in the Condensed Consolidated Balance Sheets.

11

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the cash flows of the Company's accounts receivables associated with the Receivables Sales Program:
Six Months Ended June 30,
20222021
 (In millions)
Receivables sold$1,105.5 $781.9 
Receivables collected and remitted to financial institutions(1,036.5)(829.6)

The loss on sale of receivables represents the discount taken by third-party financial institutions and was $1.4 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $2.0 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively, and is included in Other income, net in the Condensed Consolidated Statements of Operations. The Company has not recognized any servicing assets or liabilities as of June 30, 2022 or December 31, 2021, as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

5. INVENTORIES

June 30, 2022December 31, 2021
 (In millions)
Raw materials and supplies$334.5 $260.9 
Finished goods519.6 416.9 
Total inventories$854.1 $677.8 
 
6. DIVESTITURE

Discontinued Operations

Ready-to-eat Cereal

On June 1, 2021, the Company simultaneously entered into a definitive agreement and completed the sale of its Ready-to-eat ("RTE") Cereal business to Post Holdings, Inc. ("Post") for a base purchase price of $85.0 million, subject to customary purchase price adjustments, resulting in cash proceeds at closing of $88.0 million. The Company classified the proceeds within Net cash provided by investing activities - discontinued operations, and a pre-tax gain was recognized on the transaction upon closing of $18.4 million as a component of Net income from discontinued operations in the Condensed Consolidated Statements of Operations. The sale of this business was part of the Company's portfolio optimization strategy. RTE Cereal operated as two manufacturing plants located in Lancaster, Ohio and Sparks, Nevada.

The Company entered into a Transition Services Agreement ("TSA") with Post, which is designed to ensure and facilitate an orderly transfer of business operations. The services provided under the TSA terminate at various times up to twelve months from the date of sale and certain services were renewed with a maximum of an additional six-month period expected to end in the fourth quarter of 2022. The income received under the TSA was not material for the three and six months ended June 30, 2022 or 2021 and is primarily classified within General and administrative expenses or Cost of sales in the Company's Condensed Consolidated Statements of Operations depending on the functions being supported by the Company.

The Company has reflected the RTE Cereal business (through the date of sale) as a discontinued operation for all periods presented. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations.

12

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Results of discontinued operations are as follows:

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(In millions)(In millions)
Net sales$(0.3)$30.9 $(0.6)$78.4 
Cost of sales(0.6)27.7 (0.6)69.1 
Selling, general, administrative and other operating expenses0.1 3.2  7.4 
Gain on sale of business (18.4) (18.4)
Operating income from discontinued operations0.2 18.4  20.3 
Interest and other expense 0.3  0.7 
Income tax (benefit) expense(1.0)4.5 (1.0)4.9 
Net income from discontinued operations$1.2 $13.6 $1.0 $14.7 

7. GOODWILL AND INTANGIBLE ASSETS
 
Goodwill

Changes in the carrying amount of goodwill for the six months ended June 30, 2022 are as follows:
Meal PreparationSnacking & BeveragesTotal
 (In millions)
Balance at December 31, 2021, before accumulated impairment losses$1,337.4 $888.5 $2,225.9 
Accumulated impairment losses(11.5)(33.0)(44.5)
Balance at December 31, 20211,325.9 855.5 2,181.4 
Foreign currency exchange adjustments(0.8)(0.6)(1.4)
Balance at June 30, 2022$1,325.1 $854.9 $2,180.0 

13

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible Assets

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

 June 30, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
 (In millions)
Intangible assets with finite lives:      
Customer-related$847.5 $(484.4)$363.1 $848.6 $(459.2)$389.4 
Contractual agreements0.5 (0.5) 0.5 (0.5) 
Trademarks96.1 (41.3)54.8 96.2 (38.1)58.1 
Formulas/recipes25.3 (23.3)2.0 25.3 (22.9)2.4 
Computer software211.8 (131.2)80.6 207.4 (124.7)82.7 
Total finite lived intangibles1,181.2 (680.7)500.5 1,178.0 (645.4)532.6 
Intangible assets with indefinite lives:
Trademarks22.3 — 22.3 22.4 — 22.4 
Total intangible assets$1,203.5 $(680.7)$522.8 $1,200.4 $(645.4)$555.0 

8. INCOME TAXES
 
Income taxes were recognized at effective rates of 8.9% and 5.1% for the three and six months ended June 30, 2022, respectively, compared to 21.2% and 25.0% for the three and six months ended June 30, 2021, respectively. The change in the Company's effective tax rate for the three months ended June 30, 2022 compared to 2021 is primarily driven by the estimated amount of annual pre-tax earnings, a change in the income tax benefit from the release of tax reserves, and withholding taxes accrued in 2022. The change in the Company's effective tax rate for the six months ended June 30, 2022 compared to 2021 is primarily driven by the estimated amount of annual pre-tax earnings, a change in the income tax benefit from the release of tax reserves, and a change in the tax deductible stock-based compensation. Our effective tax rate may change from period to period based on recurring and non-recurring factors, including the jurisdictional mix of earnings, enacted tax legislation, state income taxes, settlement of tax audits, and the expiration of the statute of limitations in relation to unrecognized tax benefits.

Management estimates that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by as much as $1.5 million within the next 12 months, primarily as a result of the resolution of audits currently in progress and the lapsing of statutes of limitations. Approximately $0.4 million of the $1.5 million could affect net income when settled. The timing of cash settlement, if any, cannot be reasonably estimated for uncertain tax benefits.

9. LONG-TERM DEBT
 
June 30, 2022December 31, 2021
 (In millions)
Term Loan A$491.3 $496.3 
Term Loan A-1913.7 923.0 
2028 Notes500.0 500.0 
Finance leases2.3 3.1 
Total outstanding debt1,907.3 1,922.4 
Deferred financing costs(15.7)(16.1)
Less current portion(8.1)(15.6)
Total long-term debt$1,883.5 $1,890.7 

14

TREEHOUSE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Credit Agreement

On February 14, 2022, the Company entered into Amendment No. 4 to the Credit Agreement. Amendment No. 4 temporarily increases the leverage covenant threshold from 4.50x to 5.50x through June 30, 2022, then 5.25x through September 30, 2022 and thereafter reverts to 4.50x. The material terms and conditions under the Credit Agreement are otherwise substantially consistent with those contained in the Credit Agreement prior to Amendment No. 4.

The Company's average interest rate on debt outstanding under its Credit Agreement for the three months ended June 30, 2022 was 2.66%. Including the impact