Company: THS
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0001320695-25-000007
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Company: TreeHouse Foods, Inc.
Filing Date: 2025-02-14
Form: 10-K
Item: Item 7A
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Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to the amount of interest expense we expect to pay with respect to our Credit Agreement, which is tied to variable market rates including SOFR and prime interest rates.

The Company has entered into long-term interest rate swap agreements to mitigate its variable rate debt exposures that have a notional amount of $1,750.0 million as of December 31, 2024 and $1,175.0 million as of December 31, 2023. Under the terms of the agreements, the weighted average fixed interest rate base for the $875.0 million of interest rate swaps maturing on February 28, 2025 is approximately 2.91%, and for the $875.0 million of interest rate swaps effective February 28, 2025 through February 29, 2028, is approximately 3.69%. Based on the weighted average rates, when using the one month SOFR rate as of December 31, 2024 and potential changes to credit spreads due to changes in our covenant leverage ratio, the cost of borrowings under the credit facility with the interest rate swaps would range from 4.32% to 4.82% during the life of the swap agreements.

Our variable-rate debt is nearly fully hedged by our fixed rate interest rate swaps as of December 31, 2024. Based on our outstanding variable-rate debt balance of $905.0 million under the Credit Agreement at December 31, 2024, and by including the impact of $875.0 million in effective interest rate swap agreements, each 1% rise in interest rates would increase our annual interest expense by approximately $0.3 million ($9.1 million excluding the $875.0 million in interest rate swap agreements).

Commodity Price Risk

Certain commodities we use in the production and distribution of our products are exposed to market price risk. To manage that risk, we utilize derivative contracts, the majority of which qualify for the normal purchases and normal sales scope exception and are not recorded on the Consolidated Balance Sheets. There can be no assurance that our forward purchasing programs will result in the optimal price. To evaluate the market price risk of these contracts, we prepare a sensitivity analysis to quantify the Company’s potential exposure to commodity price risk with respect to our derivative portfolio. Based on our analysis, a 10%