Treehouse Foods, Inc.

Welcome to the Treehouse Foods third quarter 2022 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, please press star one again. Please note that this event is being recorded. At this time, I would like to turn the call over to Treehouse Foods for the reading of the Safe Harbor Statement.

Good morning. Thanks for joining us today. This morning we issued our earnings release, which is available along with the slide deck in the Investor Relations section of our website at treehousefoods.com. Before we begin, we'd like to advise you that all forward-looking statements made on today's call are intended to fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning those risks is contained in the company's filings with the FCC. On August 11th, we announced the sale of a significant portion of our meal preparation business. On October 3rd, we completed the divestiture of that business, now known as Winland Foods, to Invest Industrial for a base purchase price of $950 million. For the purposes of our discussion today, we will first cover our third quarter results on a whole company basis as we own the divested business through the entirety of the quarter. Results for the quarter are provided on a continuing and discontinued operations basis in the press release. However, the majority of our discussion today around our operating and financial results will center around performance on an adjusted continuing operations basis. We have provided recasted historical financials for Treehouse continuing operations for 2019 and 2020 on an annual basis and 2021 and 2022 on a quarterly basis so that you can best compare past and future operating performance. Please note that these financial statements differ from the GAAP pro forma financials filed shortly after the transaction closed because they take into account historical one-time adjustments and certain costs associated with the divested business, as well as certain pro forma adjustments only required by SEC rules. A reconciliation of non-GAAP measures to their most direct comparable GAAP measures can be found in the release and the appendix tables of today's earnings deck. With that, let me now turn the call over to our CEO and President, Mr. Steve Oakwood.

Steve Oakwood Thank you, PI, and thank you all for joining us today. It's been a very busy few months since we last spoke. We reached a strategic milestone, having completed the divestiture of a significant portion of our meal prep business in early October. The transaction is a major step in our strategic transformation to drive greater focus, simplification, and growth across our portfolio and reflects the culmination of the Board's strategic review process launched literally a year ago. The $950 million transaction comprised of $530 million in cash and a $420 million note receivable represented a compelling value of $13.6 times 2022 adjusted EBITDA for the divested business. I want to express my gratitude to our teams. I'm proud of all that we have accomplished to date. Over the last month, I've been to several plants, met with leaders at key customers, and spent time in person with our leadership teams across the organization. As we embark on this journey as a new treehouse, The outpouring of enthusiasm and ideas has been energizing, further building my competence in our future. Today, we are a simpler business, having divested 11 categories and 14 plants. Our portfolio is now more focused around snacking and beverages. And on slide five, we've listed many of our categories. We operate across attractive, growing categories fueled by strong consumer demand trends. We have positioned ourselves to capture the continued momentum in private label and improve the consistency of our execution to drive more profitable growth. We plan to come back to you in 2023 with an Investor Day to provide more detail around our future plans. Slide 6 gives you a sense of the historical private label growth rates for the categories across our portfolio today. While 2020 and 2021 were unusual years due to COVID, over the longer term, we expect these categories to grow in the 3% to 5% range. As a result, we now have a stronger financial profile with healthier margins. Pat will get into this in more detail, but we also have a stronger balance sheet following the transaction. After the close in October, we used $500 million in proceeds to significantly reduce our debt. Let me now turn to slide 7 and say a couple of words about the macro environment, private label, and the third quarter before I turn it over to Pat to walk you through the financials. Today, 65% of consumers have a high level of concern about the economy, as seen in the first chart. Inflation is up over 8%, and personal savings has declined. Shelf prices for total edibles, on the bottom left, have continued to increase. As a result, shopper behavior is shifting. You've heard this from several retailers. Consumers are recognizing the strong value proposition of private label. In the third quarter, private label continued to post share gains. On the left of slide 8, you see price gaps to national brands remain wide at 27%, which is at the high end of the historical range of 21% to 24% for the categories within the new treehouse. As I've said before, this combination of high shelf prices and wide price gaps translates to a basket of private label goods that represents significant savings for the consumer. On the right, we've taken a shopper basket of national brand goods across our categories and compared it to that same basket for private label. We estimate the absolute dollar savings for just this one shopping trip is about $20. The private label value proposition has never been greater on a dollar basis. On slide 9 on the left is sales and volume growth for total edibles. Units for private brands outpaced national brands by 400 basis points. Narrowing the data set a bit further, The right-hand chart indicates the performance in our new treehouse categories. Here, the margin by which private brands outpaced national brands was more than double, about 900 basis points in the third quarter, demonstrating that our new portfolio is advantaged. While demand is strong, service was 96% in October. Service continues to improve sequentially but it's still not back to where we need it to be for us to take advantage of the full opportunity. We continue to make progress in our efforts to mitigate the disruption and anticipate that service will continue to improve over the next few quarters. But we do face the challenges in the operating environment which are impacting our industry. I'm also pleased by our efforts around continuous improvement across our network. which we believe will improve not only capacity and production in the near term, but will drive savings and profit improvement well into the future. With that, let me turn it over to Pat to take you through the quarter, our recast financials and guidance, and I'll come back at the end to wrap it up and talk about the work we've done to position the new treehouse for the future. Pat?