Treehouse Foods, Inc.

Welcome to Treehouse Foods' fourth quarter 2020 conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Please note, this event is being recorded. At this time, I would like to turn a call over to Treehouse Foods for the reading of the Safe Harbor Statement.

Good morning and thanks for joining us today. Before we get started, I'd like to point out that we have posted the accompanying slides for our call today on our website at treehousefoods.com. This conference call 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, including COVID-19, 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 is Form 10-K for the period ending December 31, 2019. Treehouse's Form 10-Q for the periods ending March 31, 2020, June 30, 2020, September 30, 2020, 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 forward-looking 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 statements 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. Also, we will be discussing some non-GAAP financial measures, including various adjusted items, organic net sales, and free cash flow. Reconciliations between the most directly comparable GAAP measure and the relevant non-GAAP measure and other information about the non-GAAP financial measures can be found in either the earnings press release or the earnings slides, both of which are posted in the investor relations section of our website, treehousefoods.com. For purposes of our discussion, our results and outlook are provided on a continuing operations basis, which excludes the impact of the snacks division, which was sold last year, and the ready-to-eat cereal business. I'd now like to turn the call over to our CEO and President, Mr. Steve Oakland.

Good morning, everyone, and thank you for joining us. I hope everyone is well as we start the new year. I'd like to again begin my remarks today by expressing my gratitude to our Treehouse employees, especially the roughly 9,500 frontline workers in our supply chain, men and women that throughout the pandemic have shown up at work in our factories and our warehouses to serve our customers. I'm incredibly proud of how well we have managed the challenges of 2020 and continue to do so through this COVID environment. Our strong performance to close out the year was really a product of the entire team's effort and commitment. Now, there are a few key takeaways that I want to cover in my remarks today. First, in a tough operating environment, we have made substantial progress executing our strategy and have delivered on our commitments. We've simplified the portfolio, improved our operations and customer service, and transformed the company to position Treehouse for continued success. All of our efforts were critical to enabling Treehouse to successfully face pandemic-related challenges and will drive future growth and value. Our results for both the fourth quarter and the full year reflect this progress. We drove meaningful top-line growth and are also generating substantial cash flows that will enable us to not only deliver on our strategic growth algorithm, but drive additional growth through disciplined investment and a balanced capital allocation approach. Third, we are pleased with the strong progress we are making on integrating our Riviana acquisitions. which is on track to deliver significant accretion, synergies, and value. Finally, all of this is really just the beginning. After Bill walks you through the details of the quarter and the year, I'll come back and share some details around how we plan to continue to leverage our position as a leader in private label and to evolve our strategy to further drive growth. With that, let's turn to slide five. When I joined Treehouse in March of 2018, nearly three years ago, our work at that time was focused on stabilizing the business. We set forth a clear set of priorities and worked hard to execute against them. Our first priority was becoming operationally excellent. As part of that effort, we reduced roughly 11,000 SKUs, exited 11 manufacturing facilities, and meaningfully reduced the number of warehouse ship points. Importantly, we've also instilled a culture of continuous improvement. We also turned our attention to simplifying our systems by consolidating finance and IT platforms, going from 13 ERPs to three, and 100% order to cash on SAP. Another critical aspect of our work focused on reshaping the portfolio. Divesting the SNACNet business working towards the sale of our ready-to-eat cereal business and selling two in-store bakery facilities. With the exception of RTE, which continues to move forward, we have accomplished every divestiture we targeted. A proof point in 2019 was our service levels, which were solidly above our target the entirety of the year. This led us to pivot our focus to TMOS, lean, and driving continuous improvement mindsets across our supply chain. key to our long-term competitiveness. The stabilization of our operations allowed us to take the next step and build a commercial organization to increase customer intimacy and drive top-line growth, and also invest in our people and talent, focusing on our culture. In total, we delivered on each of our commitments. Our efforts resulted in meaningful financial impact including delivering approximately $400 million in run rate cost savings, offsetting a roughly similar amount of headwind due to inflation and lost volume. With that strong foundational progress made, we fast forward to early 2020, pre-pandemic. We entered 2020 focused on unlocking the potential of our businesses. We reorganized to a two-division structure, snacking and beverages, and meal preparation. Doing so allowed us to better align categories and businesses with how our customers think about the categories' roles, enabling each business to focus on their unique strategies and tactics that would best position them for success. In the simplest of terms, snacking and beverages, our growth engine, is about profitable revenue growth through innovation and distribution expansion. while meal prep, our cash engine, focused on improving profitability and generating cash through value engineering and simplification. As the pandemic took hold, the unprecedented pantry stocking in March and April was like nothing any of us had ever seen. And as we all know, 2020 was a different year than anyone had imagined. As we adapted to keep our people safe and service our customers, What quickly became clear is that Treehouse was well-positioned heading into the pandemic and that all of our hard work over the last several years had prepared us to successfully service the changes in demand, proving the strength of our business model. Our operations ran much harder to fill orders. Our commercial organization engaged with customers more closely than before. Our values guided how we addressed the pandemic. by prioritizing the health, safety, and welfare of our employees. The heightened volume improved our efficiencies and profitability, and our ability to keep our customer shelves stocked further differentiated us as a supplier, one uniquely equipped to support our customers through last year's very volatile period of demand. As we service the pandemic demand, the financial results for Treehouse a significant profit improvement, and strong cash flow. The pandemic allowed us to accelerate the timing for deleveraging our balance sheet and pull forward our discussions on how we can best deploy capital to create long-term shareholder value. Progress over the last few years has dramatically reshaped our business, our capabilities, and our expectations moving forward. Today, we have a very different platform than when I arrived. we are a company with a stronger balance sheet and greater financial flexibility. We are more capable culturally, operationally, and commercially. And I believe the proof is in the results that we delivered for the fourth quarter and the year. Turning to slide six, our results reflect that progress. In the fourth quarter, we delivered organic revenue of $1.17 billion, with Riviana contributing another $12 million. Our results were just over the high end of our guidance range, representing 3.3% growth, or 4% on an organic basis. This was driven by strong organic growth of 8.1% in our snacking and beverage business and steady 1.3% organic growth in our meal preparation business. For the year, we delivered 2.7% organic net sales growth, driven by outsized growth trends and unmeasured channels. increasingly composed of some of the fastest-growing food retailers in the country. Many of them also have heavy exposure to private label. On slide seven, we summarized the tremendous progress we've made in generating free cash flow of nearly $300 million for the year, allowing us to more quickly achieve our leveraged target range. Our strong cash flow and balance sheet enabled us to pursue the attractive and highly accretive acquisition of Riviana, After the acquisition, we finished the year with leverage of 3.1 times. Turning next to slide eight, as you remember, we announced the acquisition of Ebro's Riviana Regional Pasta Business in Q3 and completed it in December. Our integration plan is on track, and we're even more excited about the significant value creation opportunity. Riviana will enable us to build real depth in the pasta category, improve our efficiencies from an operating perspective, and enhance our service of national and regional customers for a mix of private label and regional brand. Financially, the deal will have an immediate impact, as we expect to add $170 to $180 million in revenue on a normalized basis and, in 2021, generate $25 million to $30 million in EBITDA and accretion of 20 to 30 cents per share. Fundamentally, we are confident that private label continues to present meaningful opportunities for Treehouse. As the retail landscape and consumers have adapted to the current environment, we're seeing signs that our customers' desire to strengthen their own brands is returning. This foundational demand is something that we are in a unique position to deliver. We like our position in the market to meet this opportunity as the company with the deepest capabilities in reach today in private label. On slide nine, we've shared some recent commentary from several large retailers around their desire to refocus on their private label programs. To be clear, increasing private label penetration doesn't happen overnight. It takes time to develop new products, reset shelves, and support their introduction. My point is that The commentary is very encouraging, and we have a unique opportunity to participate in that growth in a meaningful way. We are undeniably a leader in private label, and our customers count on us to deliver. It's increasingly clear that we are best able to meet their needs and drive growth and value for Treehouse in categories where we have built real depth in terms of both scale and operating capabilities. Slide 10 shows how that is reflected in our results. As you can see, in Q4, we delivered above-market growth in a number of categories where we have significant scale and depth. Approximately 35% of our revenue is generated from categories like these, which we are outperforming private label. We've developed a formula for winning that's focused on depth, in a category where we have a strong foundation, an efficient supply chain, and deep customer relationships. Looking ahead, these are the type of categories where we believe we can continue to leverage our position and build momentum through our advantage depth. With that, let me turn it over to Bill to go into more detail on our results and our outlook for the year. I'll then come back and talk to you about how we are planning to capitalize on our strength and deliver future growth and value creation. Bill?