William Blair Growth Stock Conference Presentation June 14, 2016
Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as guidance, may, should, could, expects, seeks to, anticipates, plans, believes, estimates, approximately, nearly, intends, predicts, projects, potential, promises or continue or the negative of such terms and other comparable terminology. These statements are only predictions. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause the Company or its industry s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievement expressed or implied by these forward looking statements. TreeHouse s Form 10-K for the period ending December 31, 2015 and other filings with the SEC, discuss some of the risk factors that could contribute to these differences. You are cautioned not to unduly rely on such forwardlooking statements, which speak only as of the date made, when evaluating the information presented during this conference call. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in expectations with regard thereto, or any other change in events, conditions or circumstances on which any statement is based. For the purpose of our discussion today, statements such as Private Brands or the Private Brands business refer to the ConAgra Private Brands business. Private label, on the other hand, refers to the customer and corporate brand industry. 2
Today s Agenda Transformation of Our TreeHouse The Growing Importance of Private Label Update on Private Brands Integration and Coffee Program Financial Summary 3
Management Presenters Experienced and Proven Senior Management Team Name Experience Tenure Position Sam K. Reed 36 Years Since Inception Chairman of the Board, President & Chief Executive Officer Rachel R. Bishop 15 Years 2 Years Senior Vice President & Chief Strategy Officer Chris D. Sliva 16 Years 4 Years Executive Vice President & Chief Operating Officer Dennis F. Riordan 20 Years 10 Years Executive Vice President & Chief Financial Officer 4
The Transformation of TreeHouse
Beginning 2005 Category Industrial Might 6
TreeHouse: More than a Decade of Growth in Scale and Diversification Significant Opportunities for Operational Improvements Spin-off of 1 Specialty Foods Group Creates the Nation s Largest Private Label Food & Beverage Manufacturer Expands Product Portfolio by 10 Sizable Complementary Categories Private Brands Acquisition 2005 Net Sales: $708 mm 2015 Net Sales: $3,206 mm Experienced Operating Team Led by Industry Veterans 12th Major Deal Over Last 10 Years; Tenfold Increase in Sales Substantial Free Cash Flow Generation for Debt Repayment and Growth Source: TreeHouse Public Filings. Note: Pro Forma represented by 9/30/15 year end for TreeHouse and 11/29/15 year end for Private Brands. PF LTM Net Sales: $7,055 mm 7
Growth 2010 Customer Premium Destination Brands Brand Architecture Value Added Own Brands Premium Tiers Private Label Commodity Generic 8
Private Brands Marks Our 12 th Major Deal Over the Last 10 Years; Tenfold Increase in Sales Net Sales ($ in millions) Adjusted EBITDA ($ in millions) $7,055 $2,946 $3,206 $704 $708 $939 $76 $109 $1,158 $138 $157 $1,501 $1,512 $191 $1,817 $2,050 $283 $300 $297 $2,182 $2,294 $323 $389 $395 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Pro Forma Source: Company Filings and Private Brands audited and unaudited financials. Note: Pro Forma represented by 9/30/15 year end for TreeHouse and 11/29/15 year end for Private Brands. For a reconciliation of non-gaap measures to the most comparable GAAP measures, see the respective 8-K and press release filed with the SEC. First quarter 2016 non-gaap reconciliations provided in the Appendix. 9
Evolution 2015 Consumer Brand Brand Innovation Shopper Insights Service NBE Quality Customer Marketing Fast Follower Transaction Lowest Cost 10
Transaction Rationale: Stronger Together Both businesses are better together due to increased: Scale Customers will reap benefits of improved: Reliability, distribution efficiency and cost savings Partnership Capabilities Efficiency and coordination (one point-of-contact) Portfolio Innovation and category insight 11
2020 Transformation Capability Process 12
The Transformation of Our TreeHouse Growing From To Strong, Transformation Beginning Standing Tall 13
The Growing Importance of Private Label
Our Growing Opportunity General Non-Foods Merch Grocery Health & Beauty Aids $118 Billion Private Label Grocery Non Shelf Stable Edibles 24.6% growth 2009-2014 Dry Grocery Source: Nielsen Strategic Planner (2009 data) and Nielsen Answers (2014 data), Total U.S. All Outlets Combined (xaoc),, UPC coded Note: Non Shelf Stable Edibles includes Dairy, Frozen Foods, Fresh Produce, Deli, Packaged Meat, Fresh Meat and Alcoholic Beverages 15
Consumers Are Seeking Benefits and Value Number of Brands* 41,281 +9% 45,066 Benefits Price = Value 2011 2014 As the number of brands multiplies, consumers have a wider array of benefits offered and lower price options, so they are seeking more value Note*: Includes brands with more than $10,000 of sales Source: Nielsen Scantrack 2014, 2011; TCG Analysis 16
Seeking Value, They Become Less Brand Loyal 80 Shopper Attitudes on Private Label (Top 2 Box) Store brands are 60 40 20 0 Good alternative to name brands Usually extremely good value for money Quality as good as name brands Some are higher quality than name brand For people on tight budgets & can t afford the best 2008 2014 Source: Nielsen Homescan Survey, January/February 2014 17
Especially Millennials 61% Attitudes Towards Brands & Loyalty 47% 51% 40% 39% 30% Brand names are important in my grocery purchasing decision I change brand names frequently I have no real preference between private label vs. national brands Millennials Boomers Source: Trouble in Aisle 5 Jefferies-Alix Partners (June 2012), Nielsen Homescan, Nielsen Scantrak; TCG Analysis 18
Value vs. Benefits Orientation Value- Focused Benefits- Focused Private Label Shopper Segmentation Private Label Segments Key Dimensions (Size of Bubble Reflects Segment s Share of Total PL Spend) Quality Purists Brand Loyalists Detached Habitualist Active Solution Seekers Value Optimizers Low Openness to Innovation High 19
Corporate Brands Evolution Drives Growth Premium Natural & Organic National Brand Equivalent (NBE) Value 20
Update on Private Brands Integration
Integration Update 1 Deliver CY2016 business plans 2 Accelerate stabilization of Private Brands 3 Integrate the businesses 22
Integration Structure Steering Committee Senior executives from both THS and Private Brands Dennis Riordan, CFO & Interim President Private Brands Business Operations Rachel Bishop, CSO & Integration Lead Dedicated Lead Resources Stabilize & Accelerate Integrate and Capture Synergies Snacks Bars Cereals Pasta Strategy / 2016 Business Plans Customer Service Operations & Supply Chain On-Site Admin Condiments Retail Bakery Sales / GTM TSA Procurement Corporate Finance Human Resources Business Reporting Culture & Communications Rob Hanlon, CIO & TSA Lead Ensure alignment among TreeHouse, Private Brands and ConAgra to achieve no loss of services for both businesses 23
Integration Phasing Phase One Phase Two Phase Three Phase Four + Q3 2016 Q1 2017 Q3 2017 Q3 2018 ERP Integration ERP System ERP System ERP System ERP System Distribution TPB Products CAG DC to THS DC THS Network Optimization THS THS THS THS Operational Synergies THS TPB THS TPB THS TPB HR & Org Dev t Structure GTM Location Integration Location Stabilization Stabilization Structure GTM Integration THS & TPB Talent Development Program Private Label 101 IT CAG SAP Infrastructure HR/Benefits Reporting Support Systems 24
Combined Manufacturing Footprint * * * TreeHouse Private Brands Source: TreeHouse and ConAgra Public filings * TreeHouse closed the City of Industry (COI), California manufacturing facility in Q1 2016, and announced the intent to close the Ripon, Wisconsin facility in Q4 2016 and the Ayer, Massachusetts and Azusa, California facilities in 2017 25
Update on Coffee Program
Brewer Sales (Q1 YoY) Brewer sales rebounded in Q1 2016 75% of brewers are now sold at sub-$100 price points Q1 Units In 000 s 1,100 1,000 900 800 700 600 500 400 300 200 100 0 764 +8.5% -9.2% +27.1% +8.5% 1,053 1,039 971 957 2012 2013 2014 2015 2016 Source: NPD data reported Apr 2016; note that NPD estimates capture only 62% of market sales 27
Single Serve Beverages continues to see strong growth with the growth of Private Label continuing to outpace the total category $ Sales (mm) $4,000 Branded SSB PL SSB $3,406 $3,918 $3,996 $3,000 $2,720 $2,000 $1,885 $929 $1,000 $0 2011 2012 2013 2014 2015 L52 W 4-24-16 Category Growth 157% 103% 44% 25% 15% 11% PL Growth NM NM 737% 80% 45% 38% PL Share 0% 1% 7% 10% 12% 13% Source: IRI Multi-Outlet, 52 WE 12-27-15; 52 WE 4-24-16. 28
Single Serve Beverages continues to see strong growth with the growth of Private Label continuing to outpace the total category Total Single Serve Beverage $ Sales (bn) and Growth Rate +15% +25% Private Label Single Serve Beverage $ Sales (mm) and Growth Rate +45% +157% +103% $1.9 +44% $2.7 $3.4 $3.9 +6% +737% +80% $332 $482 +34% $0.9 $1.1 $1 $22 $184 $162 2011 2012 2013 2014 2015 Q1 2016 2011 2012 2013 2014 2015 Q1 2016 Source: IRI Multi-Outlet, 52 WE 12-27-15; 13 WE 3-27-16. 29
Financial Summary
TreeHouse First Quarter 2016 Financial Performance Q1 2016 Earnings Q1'15 Q1'16 $ Change % Change Net Sales $ 783.1 $ 1,270.2 $ 487.1 62.2% Gross Profit $ 152.4 $ 224.6 $ 72.2 47.4% % Margin 19.5% 17.7% Adj. EBITDA $ 84.5 $ 125.2 $ 40.7 48.2% % Margin 10.8% 9.9% Net sales increased from prior year driven by the inclusion of business from the Private Brands acquisition, partially offset by lower volume/mix and unfavorable Canadian foreign exchange Gross margins as a percent of net sales decreased from prior year primarily due to lower margin business from the Private Brands acquisition (130 bps of the decline) and the unfavorable impact of Canadian foreign exchange, partially offset by operational efficiencies and favorable input costs EBITDAS increased due to the inclusion of operating income from the Private Brands acquisition, operating efficiencies, and favorable commodity costs, partially offset by unfavorable Canadian foreign exchange and lower legacy volumes. Source: TreeHouse public filings. For a reconciliation of non-gaap measures to the most comparable GAAP measures, see Appendix. 31
First Quarter 2016 Operating Segments ($ in 000 s) North American Retail Grocery Food Away From Home Industrial & Export 2015 2016 Inc/(Dec) 2015 2016 Inc/(Dec) 2015 2016 Inc/(Dec) Net Sales $ 592,413 $ 1,019,310 72.1% $ 88,277 $ 112,597 27.5% $ 102,455 $ 138,266 35.0% DOI $ 77,317 $ 127,955 65.5% $ 12,026 $ 15,915 32.3% $ 21,536 $ 21,090-2.1% DOI % 13.1% 12.6% 13.6% 14.1% 21.0% 15.3% Net sales growth primarily due to acquisitions Margin declines in North American Retail Grocery primarily due to lower margin Private Brands business and unfavorable foreign exchange, partially offset by operational efficiencies and favorable commodity costs 32
TreeHouse Debt Capacity Outstanding as of 3/31/2016 Availability Interest Rate Expiration Revolving Credit $335 mm $512 mm (2) 2.54% (3) February 2021 Term Loan A $294 mm 2.54% (3) February 2021 Term Loan A-1 $187 mm 2.54% (3) February 2021 Term Loan A-2 $1,025 mm 2.54% (3) February 2021 2022 High Yield Notes $400 mm 4.875% March 2022 2024 High Yield Notes $775 mm 6.00% February 2024 Total Debt $3,022 mm (1) Proforma leverage was less than 4.0 times debt to Adjusted EBITDA at 3/31/2016 Notes: (1) Includes $6 million of tax increment financing and other debt (2) Letters of credit issued but undrawn totaling $53 million have been included as a reduction to the calculation of available credit (3) Average interest rate on debt outstanding under the Credit Facility for the three months ended March 31, 2016 33
Key Investment Highlights 1 We Are North America s Largest Private Label Food and Beverage Manufacturer 2 We Have an Experienced Operating Team Led by Industry Veterans 3 We Have Completed Our 12 th Major Deal Over the Last 10 Years, Delivering a Tenfold Increase in Sales 4 We Have Significant Opportunities for Operational Improvements 5 We Generate Substantial Free Cash Flow for Debt Repayment and Growth 34
Growing Strong, Standing Tall 35
Appendix
Comparison of Adjusted Information to GAAP Information COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION TREEHOUSE FOODS, INC. RECONCILIATION OF REPORTED EARNINGS TO ADJUSTED EBITDA (In thousands) Three Months Ended March 31, 2016 2015 (unaudited) Net (loss) income per GAAP $ (3,346) $ 17,852 Interest expense 25,668 11,692 Interest income (2,819) (1,769) Income taxes (1,434) 7,949 Depreciation and amortization 57,637 30,647 Stock-based compensation expense 6,154 5,949 Foreign currency (gain) loss on re-measurement of intercompany notes (6,543) 10,871 Mark-to-market adjustments 4,703 (417) Acquisition, integration, and related costs 41,294 1,483 Restructuring/facility consolidation costs 3,903 215 Adjusted EBITDA $ 125,217 $ 84,472 Adjusted EBITDA is provided in order to allow investors to make meaningful comparisons of the Company s operating performance between periods and to view the Company s business from the same perspective as Company management. Because the Company cannot predict the timing and amount of charges associated with items such as acquisition, integration and related costs, or facility closings and reorganizations, management does not consider these costs when evaluating the Company s performance, when making decisions regarding the allocation of resources, in determining incentive compensation for management, or in determining earnings estimates. Adjusted EBITDA represents adjusted net income (GAAP net (loss) income adjusted for the net expense or net gain items defined in our first quarter 2016 earnings release) before interest expense, income tax expense, depreciation and amortization expense, and non-cash stock based compensation expense. Adjusted EBITDA is a performance measure used by management, and the Company believes it is commonly reported and widely used by investors and other interested parties, as a measure of a company s operating performance. This non-gaap financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. These non-gaap measures may be different from similar measures used by other companies. A full reconciliation table between reported net (loss) income for the three month periods ended March 31, 2016 and 2015 calculated according to GAAP and Adjusted EBITDA is provided. Given the inherent uncertainty regarding adjusted items in any future period, a reconciliation of forward-looking financial measures to the most directly comparable GAAP measure is not feasible. 37