PERFORMANCE TRANSFORMATION PLAN

As announced on April 17, 2017, our Board of Directors and senior management team have been conducting a comprehensive review of our Company’s operations with the goal of significantly improving its financial performance to deliver greater value to shareholders. As a result of this review, we have initiated a Performance Transformation Plan (the "Transformation Plan") focused on six key areas:


•	SG&A Expense Efficiency. Reduce direct spending and accelerate zero-based budgeting to improve indirect costs.


•	Manufacturing and Supply Chain Productivity. Reduce manufacturing and distribution network complexity and improve productivity.


•	Product and Portfolio Optimization. Reduce business complexity through stock keeping unit ("SKU") rationalization and ongoing portfolio maintenance.


•	Price Realization. Improve trade spend productivity and effectiveness and optimize brand assortment.


•	Marketing Investment Optimization. Reset working/non-working ratios and increase investment in our core branded portfolio.


•	Channel Execution Excellence. Elevate the performance of the existing independent business owner direct store delivery partnership.

As a part of the plan, on June 26, 2017, our Board of Directors approved the closure of our manufacturing facility in Perry, Florida and an incremental reduction in workforce across the organization. In total, this will eliminate approximately 300 jobs. The production of products currently manufactured in the Perry facility will be shifted to facilities with available capacity. As a result of these actions, we incurred a non-cash impairment expense of $7.2 million and severance expense of $7.4 million in the first six months of 2017. All of the impairment expense was recorded in the second quarter of 2017. Severance expense of $0.5 million was recorded in the first quarter of 2017 and $6.9 million was recorded in the second quarter of 2017. $4.4 million and $4.8 million of the severance expense was recognized in selling, general and administrative expenses in the second quarter and first six months of 2017, respectively. $2.5 million and $2.6 million was recognized in cost of sales in the second quarter and first six months of 2017, respectively. A liability of $6.9 million is included in accrued compensation on the Condensed Consolidated Balance Sheet as of July 1, 2017. The cash payments related to this liability are expected to occur primarily in the third quarter of 2017.



(in thousands)	Severance and Related Costs			Asset Impairments			Total
Liability balance, December 31, 2016 ⁽¹⁾	$	—		$	—		$	—
Charges	7,394			7,216			14,610
Cash spent	(708		)	—			(708		)
Non-cash settlements/adjustments	209			(7,216		)	(7,007		)
Liability balance, July 1, 2017 ⁽¹⁾	$	6,895		$	—		$	6,895

⁽¹⁾This represents only the accrued severance and related costs for the Transformation Plan. This does not include all severance accrued as of December 31, 2016 or July 1, 2017.

In addition, and in connection with the Transformation Plan, we announced plans to restructure our sales organization to enable greater alignment of our people, resources and strategies with those of our customers. As part of the restructure, we announced the appointment of John Maples as Chief Customer Officer, effective July 25, 2017. Mr. Maples joined our Company in 2015 and most recently served as President, Direct Sales Division. In addition, and as part of the restructure, Frank Schuster, formerly President, DSD Division, was appointed to President, Sales Execution reporting to Mr. Maples. He will continue to lead our national distribution network and in-store execution.

The full scope of the Transformation Plan and specific actions to be taken are currently being developed by senior management and our Board of Directors. At this point in time, we cannot reasonably estimate the future expenses and cash payments, nor their timing other than those outlined above. The Transformation Plan is targeting completion by 2019.