NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share information or where indicated otherwise)
NOTE 1 — BACKGROUND
Post Holdings, Inc. (“Post” or the “Company”) is a consumer packaged goods holding company operating in the center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition food categories. The Company also participates in the private brand food category, including through its investment with third parties in 8th Avenue Food & Provisions, Inc. (“8th Avenue”). The Company’s products are sold through a variety of channels, including grocery, club and drug stores, mass merchandisers, foodservice, food ingredient and eCommerce. As of September 30, 2021, Post operates in five reportable segments: Post Consumer Brands, Weetabix, Foodservice, Refrigerated Retail and BellRing Brands. The Post Consumer Brands segment includes the North American ready-to-eat (“RTE”) cereal and Peter Pan nut butters businesses; the Weetabix segment includes primarily the United Kingdom (the “U.K.”) RTE cereal and muesli business; the Foodservice segment includes primarily egg and potato products; the Refrigerated Retail segment includes primarily side dish, egg, cheese and sausage products; and the BellRing Brands segment includes ready-to-drink (“RTD”) protein shakes and other RTD beverages, powders and nutrition bars.
Unless otherwise stated or the context otherwise indicates, all references in these financial statements and notes to “Post,” “the Company,” “us,” “our” or “we” mean Post Holdings, Inc. and its consolidated and non-consolidated subsidiaries.
The Company completed its acquisitions of the Egg Beaters liquid egg brand (“Egg Beaters”) and the Peter Pan nut butter brand (“Peter Pan”) on May 27, 2021 and January 25, 2021, respectively. The year-end close date for both Egg Beaters and Peter Pan was September 26, 2021. As the amounts associated with the additional four days are immaterial, results of these entities have not been adjusted to conform with Post’s fiscal calendar.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation — The consolidated financial statements include the operations of Post and its consolidated subsidiaries. All intercompany transactions have been eliminated.
Use of Estimates and Allocations — The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require certain elections as to accounting policy, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amount of net revenues and expenses during the reporting periods. Significant accounting policy elections, estimates and assumptions include, among others, pension and benefit plan assumptions, valuation assumptions of goodwill and other intangible assets, marketing programs, self-insurance reserves and income taxes. Actual results could differ from those estimates.
Business Combinations — The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company’s financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Any excess of the estimated fair values of the identifiable net assets over the purchase price is recorded as a gain on bargain purchase.
Cash Equivalents — Cash equivalents include all highly liquid investments with original maturities of less than three months.
Restricted Cash — Restricted cash includes items such as cash deposits which serve as collateral for certain commodity hedging contracts as well as the Company’s high deductible workers’ compensation insurance program.
Receivables — Receivables are reported at net realizable value. This value includes appropriate allowances for credit losses, cash discounts and other amounts which the Company does not ultimately expect to collect. To calculate an allowance for credit losses, the Company estimates uncollectible amounts based on a review of past due balances, historical loss information and an evaluation of customer accounts for potential future losses. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. Receivables are written off against the allowance when the customer files for bankruptcy protection or are otherwise deemed to be uncollectible based upon the Company’s evaluation of the customer’s solvency. As of September 30, 2021 and 2020, the Company did not have off-balance sheet credit exposure related to its customers. The Weetabix segment sells certain receivables to third party institutions without recourse. Receivables sold during the years ended September 30, 2021 and 2020 were $140.2 and $125.0, respectively.
Inventories — Inventories, other than flocks, are generally valued at the lower of average cost (determined on a first-in, first-out basis) or net realizable value (“NRV”). Reported amounts have been reduced by an allowance for obsolete product and packaging materials based on a review of inventories on hand compared to estimated future usage and sales. Flock inventory represents the cost of purchasing and raising chicken flocks to egg laying maturity. The costs included in our flock inventory include the costs of the chicks, the feed fed to the birds and the labor and overhead costs incurred to operate the pullet facilities until the birds are transferred into the laying facilities, at which time their cost is amortized to operations, as cost of goods sold, over their expected useful lives of one to two years.
Restructuring Expenses — Restructuring charges and related charges principally consist of one-time termination benefits, severance, contract termination benefits, accelerated stock compensation and other employee separation costs and accelerated depreciation. The Company recognizes restructuring obligations and liabilities for exit and disposal activities at fair value in the period the liability is incurred. Employee severance costs are expensed when they become probable and reasonably estimable under established severance plans. Depreciation expense related to assets that will be disposed of or idled as a part of the restructuring activity is accelerated through the expected date of the asset shut down. See Note 6 for information about restructuring expenses.
Property — Property is recorded at cost, and depreciation expense is generally provided on a straight-line basis over the estimated useful lives of the properties. Estimated useful lives range from 1 to 29 years for machinery and equipment; 1 to 35 years for buildings, building improvements and leasehold improvements; and 1 to 7 years for software. Total depreciation expense was $224.7, $209.6 and $218.3 in fiscal 2021, 2020 and 2019, respectively. Any gains and losses incurred on the sale or disposal of assets are included in “Other operating expenses, net” in the Consolidated Statements of Operations. Repair and maintenance costs incurred in connection with ongoing and planned major maintenance activities are accounted for under the direct expensing method. Property consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
Land and land improvements
|
$
|
106.9
|
|
|
$
|
93.1
|
|
|
Buildings and leasehold improvements
|
944.9
|
|
|
880.5
|
|
|
Machinery and equipment
|
1,962.2
|
|
|
1,766.8
|
|
|
Software
|
113.5
|
|
|
111.4
|
|
|
Construction in progress
|
112.0
|
|
|
127.4
|
|
|
|
3,239.5
|
|
|
2,979.2
|
|
|
Accumulated depreciation
|
(1,400.1)
|
|
|
(1,199.5)
|
|
|
|
$
|
1,839.4
|
|
|
$
|
1,779.7
|
|
Other Intangible Assets — Other intangible assets consist primarily of customer relationships, trademarks and brands acquired in business combinations and include both indefinite and definite-lived assets. Amortization expense related to definite-lived intangible assets, which is provided on a straight-line basis over the estimated useful lives of the assets, was $194.4, $160.3 and $161.3 in fiscal 2021, 2020 and 2019, respectively. For the definite-lived intangible assets recorded as of September 30, 2021, amortization expense of $166.0, $165.9, $164.6, $163.3 and $163.3 is expected for fiscal 2022, 2023, 2024, 2025 and 2026, respectively. Other intangible assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
|
Carrying
Amount
|
|
Accum.
Amort.
|
|
Net
Amount
|
|
Carrying
Amount
|
|
Accum.
Amort.
|
|
Net
Amount
|
|
Subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
2,341.7
|
|
|
$
|
(791.7)
|
|
|
$
|
1,550.0
|
|
|
$
|
2,304.8
|
|
|
$
|
(681.9)
|
|
|
$
|
1,622.9
|
|
|
Trademarks and brands
|
843.0
|
|
|
(303.8)
|
|
|
539.2
|
|
|
795.0
|
|
|
(266.9)
|
|
|
528.1
|
|
|
Other
|
3.1
|
|
|
(3.1)
|
|
|
—
|
|
|
3.1
|
|
|
(3.1)
|
|
|
—
|
|
|
|
3,187.8
|
|
|
(1,098.6)
|
|
|
2,089.2
|
|
|
3,102.9
|
|
|
(951.9)
|
|
|
2,151.0
|
|
|
Not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and brands
|
1,058.3
|
|
|
—
|
|
|
1,058.3
|
|
|
1,046.5
|
|
|
—
|
|
|
1,046.5
|
|
|
|
$
|
4,246.1
|
|
|
$
|
(1,098.6)
|
|
|
$
|
3,147.5
|
|
|
$
|
4,149.4
|
|
|
$
|
(951.9)
|
|
|
$
|
3,197.5
|
|
In December 2020, the Company finalized its plan to discontinue the Supreme Protein brand and related sales of Supreme Protein products, which are included in the BellRing Brands segment (see Note 22). In connection with the discontinuance, the Company updated the useful lives of the customer relationships and trademarks associated with the Supreme Protein brand to reflect the remaining period in which the Company continued to sell existing Supreme Protein product inventory. Accelerated amortization of $29.9 was recorded during the year ended September 30, 2021 resulting from the updated useful lives of the
customer relationships and trademarks associated with the Supreme Protein brand, which were fully amortized and written off as of September 30, 2021.
Recoverability of Assets — The Company continually evaluates whether events or circumstances have occurred which might impair the recoverability of the carrying value of its assets, including property, identifiable intangibles, goodwill and right-of-use (“ROU”) assets. Trademarks with indefinite lives are reviewed for impairment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate the trademark may be impaired. The trademark impairment tests require the Company to estimate the fair value of the trademark and compare it to its carrying value. The estimated fair value is determined using an income-based approach (the relief-from-royalty method), which requires significant assumptions for each brand, including estimates regarding future revenue growth, discount rates and royalty rates. Assumptions are determined after consideration of several factors for each brand, including profit levels, research of external royalty rates by third party experts and the relative importance of each brand to the Company. Revenue growth assumptions are based on historical trends and management’s expectations for future growth by brand. The discount rate is based on a weighted-average cost of capital utilizing industry market data of similar companies.
In addition, definite-lived assets are tested for recoverability when events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. The Company groups assets at the lowest level for which cash flows are separately identifiable. In general, an asset group is deemed impaired and written down to its fair value if estimated related undiscounted future cash flows are less than its carrying amount. See Note 8 for information about goodwill impairments.
For the years ended September 30, 2021 and 2020, the Company conducted impairment reviews and concluded there were no impairments of other intangible assets as of September 30, 2021 or 2020.
At September 30, 2019, the Company recorded a definite-lived intangible impairment charge of $14.6 for the All Whites trademark in the Refrigerated Retail segment to adjust its carrying value to zero. The impairment charge for the All Whites trademark was the result of a strategic decision made by new Refrigerated Retail management in the fourth quarter of fiscal 2019 to discontinue use of the brand name. All products previously sold under the All Whites brand name are now being marketed and sold under the Bob Evans Egg Whites brand name.
These fair value measurements fall within Level 3 of the fair value hierarchy as described in Note 15. The trademark impairment loss is reported in “Impairment of goodwill and other intangible assets” in the Consolidated Statement of Operations.
Deferred Compensation Investments — The Company funds a portion of its deferred compensation liability by investing in certain mutual funds in substantially the same amounts as selected by the participating employees. Because management’s intent is to invest in a manner that matches the deferral options chosen by the participants and those participants can elect to transfer amounts into or out of each of the designated deferral options at any time, these investments are stated at fair value in “Prepaid expenses and other current assets” and “Other assets” on the Consolidated Balance Sheets (see Note 15). Both realized and unrealized gains and losses on these assets are included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations and offset the related change in the deferred compensation liability.
Derivative Financial Instruments — In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and supplies, interest rate risks relating to variable rate debt and foreign currency exchange rate risks. The Company utilizes derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The Company does not hold or issue financial instruments for speculative or trading purposes.
The Company’s derivative programs include strategies that qualify and strategies that do not qualify for hedge accounting treatment. To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, is expected to be highly effective in achieving offsetting changes in the fair value of the hedged risk during the period that the hedge is designated. All derivatives are recognized on the balance sheet at fair value. For derivatives that qualify for hedge accounting, the derivative is designated as a hedge on the date in which the derivative contract is entered. A derivative could be designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or a hedge of a net investment in a foreign operation. Some derivatives may also be considered natural hedging instruments, where changes in their fair value act as economic offsets to changes in fair value of the underlying hedged item and are not designated for hedge accounting.
Gains and losses on cash flow hedges are recorded in other comprehensive income or loss (“OCI”) and are reclassified to the Consolidated Statements of Operations in conjunction with the recognition of the underlying hedged item. If a derivative is used as a hedge of a net investment in a foreign operation, its changes in fair value are recorded in OCI and subsequently recognized in earnings when the foreign operation is liquidated. Changes in the fair value of derivatives that are not designated for hedge accounting are recognized immediately in the Consolidated Statements of Operations. Cash flows from derivatives that are accounted for as hedges and cash flows on derivatives utilized as economic hedges are classified in the same category
on the Consolidated Statements of Cash Flows as the item being hedged or on a basis consistent with the nature of the instrument.
Leases — The Company leases office space, certain warehouses and equipment primarily through operating lease agreements. The Company has no material finance lease agreements. In conjunction with the adoption of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” on October 1, 2019, the policy for lease accounting was updated. For fiscal 2021 and 2020, a summary of the Company’s lease policy was as follows:
The Company determines if an arrangement is a lease at its inception. When the arrangements include lease and non-lease components, the Company accounts for them as a single lease component. Leases with an initial term of less than 12 months are not reported on the balance sheet, but rather are recognized as lease expense on a straight-line basis over the lease term. Arrangements may include options to extend or terminate the lease arrangement. These options are included in the lease term used to establish ROU assets and lease liabilities when it is reasonably certain they will be exercised. The Company will reassess expected lease terms based on changes in circumstances that indicate options may be more or less likely to be exercised.
The Company has certain lease arrangements that include variable rental payments. The future variability of these payments and adjustments are unknown and therefore are not included in minimum rental payments used to determine ROU assets and lease liabilities. The Company has lease arrangements where it makes separate payments to the lessor based on the lessor’s common area maintenance expenses, property and casualty insurance costs, property taxes assessed on the property and other variable expenses. As the Company has elected the practical expedient not to separate lease and non-lease components, these variable amounts are captured in operating lease expense in the period in which they are incurred. Variable rental payments are recognized in the period in which their associated obligation is incurred.
As most of the Company’s lease arrangements do not provide an implicit interest rate, an incremental borrowing rate (“IBR”) is applied in determining the present value of future payments. The Company’s IBR is selected based upon information available at the lease commencement date.
ROU assets are recorded as “Other assets” and lease liabilities are recorded as “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets. Operating lease expense is recognized on a straight-line basis over the lease term and is included in either “Cost of goods sold” or “Selling, general and administrative expenses” in the Consolidated Statements of Operations. Costs associated with finance leases and lease income do not have a material impact on the Company’s financial statements.
The Company utilized the cumulative effect adjustment method of adoption and, accordingly, recorded ROU assets and lease liabilities of $158.1 and $168.2, respectively, on the balance sheet at October 1, 2019. The Company elected the following practical expedients in accordance with Accounting Standards Codification (“ASC”) Topic 842, “Leases”:
•Reassessment elections — The Company elected the package of practical expedients and did not reassess whether any existing contracts are or contain a lease, provided a lease analysis was conducted under ASC Topic 840, “Leases.” To the extent leases were identified under ASC Topic 840, the Company did not reassess the classification of those leases. Additionally, to the extent initial direct costs were capitalized under ASC Topic 840 and are not amortized as a result of the implementation of ASC Topic 842, they were not reassessed.
•Short-term lease election — ASC Topic 842 allows lessees an option to not recognize ROU assets and lease liabilities arising from short-term leases. A short-term lease is defined as a lease with an initial term of 12 months or less. The Company elected to not recognize short-term leases as ROU assets and lease liabilities on the balance sheet. All short-term leases which are not included on the Company’s balance sheet will be recognized within lease expense. Leases that have an initial term of 12 months or less with an option for renewal will need to be assessed in order to determine if the lease qualifies for the short-term lease exception. If the option is reasonably certain to be exercised, the lease does not qualify as a short-term lease.
•Lease vs non-lease components — The Company elected to combine lease and non-lease components as a single component and the total consideration for the arrangements were accounted for as a lease.
Prior to the adoption of these ASUs, the Company accounted for leases in accordance with ASC Topic 840.
Revenue — The Company recognizes revenue when performance obligations have been satisfied by transferring control of the goods to customers. Control is generally transferred upon delivery of the goods to the customer. At the time of delivery, the customer is invoiced using previously agreed-upon credit terms. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed fulfillment activities and are accounted for as fulfillment costs. The Company’s contracts with customers generally contain one performance obligation.
Many of the Company’s contracts with customers include some form of variable consideration. The most common forms of variable consideration are trade promotions, rebates and discounts. Variable consideration is treated as a reduction of revenue at the time product revenue is recognized. Depending on the nature of the variable consideration, the Company uses either the “expected value” or the “most likely amount” method to determine variable consideration. The Company does not believe that there will be significant changes to its estimates of variable consideration when any uncertainties are resolved with customers. The Company reviews and updates estimates of variable consideration quarterly. Uncertainties related to the estimates of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration.
The Company’s products are sold with no right of return, except in the case of goods which do not meet product specifications or are damaged. No services beyond this assurance-type warranty are provided to customers. Customer remedies include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction of revenue based on historical sales return experience.
The following table summarizes the impact of the Company’s adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, on a modified retrospective basis in the Company’s Consolidated Statement of Operations for the year ended September 30, 2019, the year of adoption. As a result of the adoption, certain payments to customers totaling $26.1 in the year ended September 30, 2019 previously classified in “Selling, general, and administrative expenses” were classified as “Net Sales” in the Consolidated Statement of Operations. These payments to customers relate to trade advertisements that support the Company’s sales to customers. In accordance with ASU 2014-09, these payments were determined not to be distinct within the customer contracts and, as such, require classification within net sales. Additionally, in the year ended September 30, 2019, the Company recognized revenue of $1.2 that was deferred upon the adoption of ASU 2014-09 in accordance with the satisfaction of the related performance obligation. The recognition of unearned revenue is included in “Net Sales” in the Company’s Consolidated Statement of Operations for the year ended September 30, 2019. No material changes to the balance sheet were required by the adoption of ASU 2014-09.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2019
|
|
|
As Reported Under ASC Topic 606
|
|
As Reported Under Prior Guidance
|
|
Impact of Adoption
|
|
Net Sales
|
$
|
5,681.1
|
|
|
$
|
5,706.0
|
|
|
$
|
(24.9)
|
|
|
Cost of goods sold
|
3,889.0
|
|
|
3,889.0
|
|
|
—
|
|
|
Gross Profit
|
1,792.1
|
|
|
1,817.0
|
|
|
(24.9)
|
|
|
Selling, general and administrative expenses
|
911.6
|
|
|
937.7
|
|
|
(26.1)
|
|
|
Amortization of intangible assets
|
161.3
|
|
|
161.3
|
|
|
—
|
|
|
Gain on sale of business
|
(126.6)
|
|
|
(126.6)
|
|
|
—
|
|
|
Impairment of goodwill and other intangible assets
|
63.3
|
|
|
63.3
|
|
|
—
|
|
|
Other operating expenses, net
|
1.5
|
|
|
1.5
|
|
|
—
|
|
|
Operating Profit
|
$
|
781.0
|
|
|
$
|
779.8
|
|
|
$
|
1.2
|
|
Cost of Goods Sold — Cost of goods sold includes, among other things, inbound and outbound freight costs (including the Company-owned fleet) and depreciation expense related to assets used in production, while storage and other warehousing costs are included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations. Storage and other warehousing costs totaled $184.7, $177.8 and $170.1 in fiscal 2021, 2020 and 2019, respectively.
Advertising — Advertising costs are expensed as incurred except for costs of producing media advertising, such as television commercials or magazine and online advertisements, which are deferred until the first time the advertising takes place and amortized to the statement of operations over the time the advertising takes place. The amounts reported as assets on the Consolidated Balance Sheets as “Prepaid expenses and other current assets” were $1.1 and $1.3 as of September 30, 2021 and 2020, respectively.
Stock-based Compensation — The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards and the fair market value at each quarterly reporting date for liability awards. That cost is recognized over the period during which an employee is required to provide service in exchange for the award — the requisite service period (usually the vesting period). Any forfeitures of stock-based awards are recorded as they occur. See Note 20 for disclosures related to stock-based compensation.
Income Taxes — Income tax expense (benefit) is estimated based on income taxes in each jurisdiction and includes the effects of both current tax exposures and the temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities. A valuation allowance is
established against the related deferred tax assets to the extent that it is more likely than not that the future benefits will not be realized. Reserves are recorded for estimated exposures associated with the Company’s tax filing positions, which are subject to periodic audits by governmental taxing authorities. Interest incurred due to an underpayment of income taxes is classified as income taxes. The Company considers the undistributed earnings of its foreign subsidiaries to be permanently invested, so no United States (the “U.S.”) taxes have been provided in relation to the Company’s investment in its foreign subsidiaries. See Note 9 for disclosures related to income taxes.
NOTE 3 — RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
The Company has considered all new accounting pronouncements and has concluded there are no new pronouncements (other than the ones described below) that had or will have an impact on the Company’s results of operations, OCI, financial condition, cash flows, shareholders’ equity or related disclosures based on current information.
Recently Issued
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by this ASU do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and effective for all entities as of March 12, 2020, the date this ASU was issued. An entity may elect to apply the amendments for contract modifications provided by this ASU as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the impact of this ASU as it relates to its debt and hedging relationships.
Recently Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU provides guidance on the measurement of credit losses for most financial assets and certain other instruments. This ASU replaced the prior incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The Company adopted this ASU on October 1, 2020. In conjunction with the adoption of this ASU, the Company updated its methodology for calculating its allowance for doubtful accounts. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.
NOTE 4 — NONCONTROLLING INTERESTS, EQUITY INTERESTS AND RELATED PARTY TRANSACTIONS
Post Holdings Partnering Corporation
On May 28, 2021, the Company and Post Holdings Partnering Corporation, a newly formed special purpose acquisition company incorporated as a Delaware corporation (“PHPC”), consummated the initial public offering of 30.0 units of PHPC (the “PHPC Units”). On June 3, 2021, PHPC issued an additional 4.5 PHPC Units pursuant to the underwriters’ exercise in full of their over-allotment option. The term “PHPC IPO” as used herein generally refers to the consummation of the initial public offering on May 28, 2021 and the underwriters’ exercise in full of their over-allotment option on June 3, 2021. Each PHPC Unit consists of one share of Series A common stock of PHPC, $0.0001 par value per share (“PHPC Series A Common Stock”), and one-third of one redeemable warrant of PHPC, each whole warrant entitling the holder thereof to purchase one share of PHPC Series A Common Stock at an exercise price of $11.50 per share (the “PHPC Warrants”). The PHPC Units were sold at a price of $10.00 per PHPC Unit, generating gross proceeds to PHPC of $345.0. PHPC Sponsor, LLC, a wholly-owned subsidiary of the Company (“PHPC Sponsor”), purchased 4.0 of the 30.0 PHPC Units in the initial public offering on May 28, 2021 for $40.0. The PHPC Units began trading on the New York Stock Exchange (the “NYSE”) under the ticker symbol “PSPC.U” on May 26, 2021. As of July 16, 2021, holders of the PHPC Units could elect to separately trade their shares of PHPC Series A Common Stock and PHPC Warrants, with the shares of PHPC Series A Common Stock and the PHPC Warrants listed on the NYSE under the symbols “PSPC” and “PSPC WS”, respectively. Under the terms of the PHPC IPO, PHPC is required to consummate a partnering transaction within 24 months (or 27 months under certain circumstances) of the completion of the PHPC IPO.
Substantially concurrently with the closing of the initial public offering on May 28, 2021, PHPC completed the private sale of 1.0 units of PHPC (the “PHPC Private Placement Units”), at a purchase price of $10.00 per PHPC Private Placement Unit, to PHPC Sponsor, and in connection with the underwriters’ exercise in full of their option to purchase additional PHPC Units, PHPC Sponsor purchased an additional 0.1 PHPC Private Placement Units, generating proceeds to PHPC of $10.9 (the “PHPC
Private Placement”). The PHPC Private Placement Units sold in the PHPC Private Placement are identical to the PHPC Units sold in the PHPC IPO, except that, with respect to the warrants underlying the PHPC Private Placement Units (the “PHPC Private Placement Warrants”) that are held by PHPC Sponsor or its permitted transferees, such PHPC Private Placement Warrants (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption (except in certain circumstances when the PHPC Warrants are called for redemption and a certain price per share of PHPC Series A Common Stock threshold is met) and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of PHPC’s partnering transaction. If the PHPC Private Placement Warrants are held by holders other than PHPC Sponsor or its permitted transferees, the PHPC Private Placement Warrants will be redeemable by PHPC in all redemption scenarios and exercisable by holders on the same basis as the PHPC Warrants.
In addition, the Company, through PHPC Sponsor’s ownership of 8.6 shares of Series F common stock of PHPC, $0.0001 par value per share, has certain governance rights in PHPC relating to the election of PHPC directors and voting rights on amendments to PHPC’s certificate of incorporation.
In connection with the completion of the initial public offering on May 28, 2021, PHPC also entered into a forward purchase agreement with PHPC Sponsor (the “Forward Purchase Agreement”), providing for the purchase by PHPC Sponsor, at the election of PHPC, of up to 10.0 units of PHPC (the “PHPC Forward Purchase Units”), subject to the terms and conditions of the Forward Purchase Agreement, with each PHPC Forward Purchase Unit consisting of one share of PHPC’s Series B common stock, of $0.0001 par value per share, and one-third of one warrant to purchase one share of PHPC Series A Common Stock, for a purchase price of $10.00 per PHPC Forward Purchase Unit, in an aggregate amount of up to $100.0 in a private placement to occur concurrently with the closing of PHPC’s partnering transaction.
In determining the accounting treatment of the Company’s equity interest in PHPC, management concluded that PHPC is a variable interest entity (“VIE”) as defined by ASC Topic 810, “Consolidation.” A VIE is an entity in which equity investors at risk lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, the party who has both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, as well as the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity. PHPC Sponsor is the primary beneficiary of PHPC as it has, through its equity interest, the right to receive benefits or the obligation to absorb losses from PHPC, as well as the power to direct a majority of the activities that significantly impact PHPC’s economic performance, including target identification. As such, PHPC is fully consolidated into the Company’s financial statements.
Proceeds of $345.0 were deposited in a trust account established for the benefit of PHPC’s public stockholders consisting of certain proceeds from the PHPC IPO and certain proceeds from the PHPC Private Placement, net of underwriters’ discounts and commissions and other costs and expenses. A minimum balance of $345.0, representing the number of PHPC Units sold at the offering price of $10.00 per PHPC Unit, is required by the underwriting agreement to be maintained in the trust account. These proceeds will be invested only in U.S. treasury securities. In connection with the trust account, the Company reported “Investments held in trust” of $345.0 on the Consolidated Balance Sheet at September 30, 2021 and “Investment of subsidiary initial public offering proceeds into trust account” on the Consolidated Statement of Cash Flows for the year ended September 30, 2021.
The public stockholders’ ownership of PHPC equity represents a noncontrolling interest (“NCI”) to the Company, which is classified outside of permanent shareholders’ equity as the PHPC Series A Common Stock is redeemable at the option of the public stockholders in certain circumstances. The carrying amount of the redeemable NCI is equal to the greater of (i) the initial carrying amount, increased or decreased for the redeemable NCI’s share of PHPC’s net income or loss, OCI and distributions or (ii) the redemption value. The public stockholders of PHPC Series A Common Stock will be entitled in certain circumstances to redeem their shares of PHPC Series A Common Stock for a pro rata portion of the amount in the trust account at $10.00 per share of PHPC Series A Common Stock held, plus any pro rata interest earned on the funds held in the trust account and not previously released to PHPC to pay taxes. As of September 30, 2021, the carrying amount of the redeemable NCI was recorded at its redemption value of $305.0. Remeasurements to the redemption value of the redeemable NCI are recognized as a deemed dividend and are recorded to “Retained earnings” on the Consolidated Balance Sheet.
In connection with the PHPC IPO, PHPC incurred offering costs of $17.9, of which $16.9 was recorded to the redeemable NCI and $1.0 was reported in “Selling, general and administrative expenses” in the Consolidated Statement of Operations for the year ended September 30, 2021. Of the $17.9 offering costs incurred, $10.7 were deferred underwriting commissions that will become payable to the underwriters solely in the event that PHPC completes a partnering transaction and were included in “Other liabilities” on the Consolidated Balance Sheet at September 30, 2021. Additionally, the initial valuation of the PHPC Warrants of $16.9 was also recorded to redeemable NCI. For additional information on the financial statement impacts of the PHPC Warrants, see Notes 14 and 15.
As of September 30, 2021, the Company beneficially owned 31.0% of the equity of PHPC and the net income and net assets of PHPC were consolidated within the Company’s financial statements. The remaining 69.0% of the consolidated net income and net assets of PHPC, representing the percentage of economic interest in PHPC held by the public stockholders of PHPC through their ownership of PHPC equity, were allocated to redeemable NCI. All transactions between PHPC and PHPC Sponsor, as well as related financial statement impacts, eliminate in consolidation.
The following table summarizes the effects of changes in ownership of PHPC on the Company’s equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
PHPC IPO offering costs
|
$
|
(16.9)
|
|
|
|
|
|
|
Initial valuation of PHPC Warrants
|
(16.9)
|
|
|
|
|
|
|
Net earnings attributable to redeemable NCI
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PHPC deemed dividend
|
$
|
(28.0)
|
|
|
|
|
|
The following table summarizes the changes to the Company’s redeemable NCI. The period as of and for the year ended September 30, 2021 represents the period beginning May 28, 2021, the effective date of the PHPC IPO, and ending September 30, 2021.
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2021
|
|
Balance, beginning of year
|
$
|
—
|
|
|
Impact of PHPC IPO (a)
|
271.2
|
|
|
Net earnings
|
5.8
|
|
|
PHPC deemed dividend
|
28.0
|
|
|
Balance, end of year
|
$
|
305.0
|
|
(a)The impact of the PHPC IPO includes the value of PHPC Units owned by public stockholders of $305.0 less offering costs of $16.9 and the initial valuation of PHPC Warrants of $16.9.
BellRing
On October 21, 2019, BellRing Brands, Inc. (“BellRing”), a subsidiary of the Company, closed its initial public offering (the “BellRing IPO”) of 39.4 shares of its Class A common stock, $0.01 par value per share (the “BellRing Class A Common Stock”). BellRing received net proceeds from the BellRing IPO of $524.4, after deducting underwriting discounts and commissions. As a result of the BellRing IPO and certain other transactions completed in connection with the BellRing IPO (the “BellRing Formation Transactions”), BellRing became a publicly-traded company with the BellRing Class A Common Stock being traded on the NYSE under the ticker symbol “BRBR” and the holding company of BellRing Brands, LLC, a Delaware limited liability company (“BellRing LLC”), owning 28.8% of BellRing LLC’s non-voting membership; units (the “BellRing LLC units”), with Post owning 71.2% of the Belling LLC units and one share of BellRing’s Class B common stock, $0.01 par value per share (the “BellRing Class B Common Stock” and, collectively with the BellRing Class A Common Stock, the “BellRing Common Stock”). The BellRing Class B Common Stock has voting rights but no rights to dividends or other economic rights. For so long as the Company (other than BellRing and its subsidiaries) directly owns more than 50% of the BellRing LLC units, the BellRing Class B Common Stock represents 67% of the combined voting power of the BellRing Common Stock, which provides the Company control over BellRing’s board of directors and results in the full consolidation of BellRing and its subsidiaries into the Company’s financial statements. The remaining interest in BellRing’s consolidated net income and net assets are allocated to NCI. The BellRing LLC units held by the Company include a redemption feature that allows the Company to, at BellRing LLC’s option (as determined by its board of managers), redeem BellRing LLC units for either (i) BellRing Class A Common Stock or (ii) cash equal to the market value of the BellRing Class A Common Stock at the time of redemption. The Company incurred separation-related expenses of $1.8, $2.5 and $6.7 during the years ended September 30, 2021, 2020 and 2019, respectively. These expenses generally included third party costs for due diligence, advisory services and government filing fees and were recorded as “Selling, general and administrative expenses” in the Consolidated Statements of Operations. The term “BellRing” as used herein generally refers to BellRing Brands, Inc.; however, in discussions related to debt facilities and interest rate swaps, the term “BellRing” refers to BellRing Brands, LLC. BellRing LLC is the holding company for the Company’s historical active nutrition business, reported herein as the BellRing Brands segment and reported historically as the Active Nutrition segment.
In the event the Company (other than BellRing and its subsidiaries) holds 50% or less of the BellRing LLC units, the holder of the share of BellRing Class B Common Stock will be entitled to a number of votes equal to the number of BellRing LLC units held by all persons other than BellRing and its subsidiaries. In such situation, the Company, as the holder of the share of BellRing Class B Common Stock, will only be entitled to cast a number of votes equal to the number of BellRing LLC units held by the Company (other than BellRing and its subsidiaries). Also, in such situation, if any BellRing LLC units are held by persons other than the Company, then the Company, as the holder of the share of BellRing Class B Common Stock, will cast the remainder of votes to which the share of BellRing Class B Common Stock is entitled only in accordance with the instructions and directions from such other holders of the BellRing LLC units.
As of September 30, 2021 and 2020, the Company owned 71.2% of the BellRing LLC units and the net income and net assets of BellRing and its subsidiaries were consolidated within the Company’s financial statements, and the remaining 28.8% of the consolidated net income and net assets of BellRing and its subsidiaries, representing the percentage of economic interest in BellRing LLC held by BellRing (and therefore indirectly held by the public stockholders of BellRing through their ownership of the BellRing Class A Common Stock), were allocated to NCI.
The following table summarizes the effects of changes in ownership of BellRing on the Company’s equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in additional paid-in capital related to net proceeds from BellRing IPO
|
$
|
—
|
|
|
$
|
524.4
|
|
|
|
|
Increase in additional paid-in capital related to establishment of NCI
|
—
|
|
|
65.0
|
|
|
|
|
Decrease in additional paid-in capital related to tax effects of BellRing IPO
|
—
|
|
|
(133.8)
|
|
|
|
|
Net transfers from NCI
|
$
|
—
|
|
|
$
|
455.6
|
|
|
|
|
|
|
|
|
|
|
8th Avenue
On October 1, 2018, 8th Avenue was separately capitalized by Post and third parties through a series of transaction (the “8th Avenue Transactions”), and 8th Avenue became the holding company for Post’s historical private brands business. The Company has a 60.5% common equity retained interest in 8th Avenue that is accounted for using the equity method. In determining the accounting treatment of the retained interest, management concluded that 8th Avenue was not a variable interest entity as defined by ASC Topic 810, “Consolidation,” and as such, 8th Avenue was evaluated under the voting interest model. Based on the terms of 8th Avenue’s governing documents, management determined that the Company does not have a controlling voting interest in 8th Avenue due to substantive participating rights held by a third party associated with the governance of 8th Avenue. However, the Company does retain significant influence, and therefore, the use of the equity method of accounting is required.
The following table presents the calculation of the Company’s equity method loss attributable to 8th Avenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
8th Avenue’s net loss available to 8th Avenue’s common shareholders
|
$
|
(60.6)
|
|
|
$
|
(38.9)
|
|
|
$
|
(46.7)
|
|
|
|
60.5
|
%
|
|
60.5
|
%
|
|
60.5
|
%
|
|
Equity method loss available to Post
|
$
|
(36.7)
|
|
|
$
|
(23.5)
|
|
|
$
|
(28.3)
|
|
|
Less: Amortization of basis difference, net of tax (a)
|
6.8
|
|
|
6.9
|
|
|
8.8
|
|
|
Equity method loss, net of tax
|
$
|
(43.5)
|
|
|
$
|
(30.4)
|
|
|
$
|
(37.1)
|
|
(a)The Company adjusted the historical basis of 8th Avenue’s assets and liabilities to fair value and recognized a total basis difference of $70.3. The basis difference related to inventory of $2.0, net of tax, was included in equity method loss in the year ended September 30, 2019. The basis difference related to property, plant and equipment and other intangible assets is being amortized over the weighted average useful lives of the assets. At September 30, 2021 and 2020, the remaining basis difference to be amortized was $47.8 and $54.6, respectively.
Summarized financial information of 8th Avenue is presented in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net sales
|
$
|
900.8
|
|
|
$
|
924.2
|
|
|
$
|
838.5
|
|
|
Gross profit
|
$
|
132.3
|
|
|
$
|
160.0
|
|
|
$
|
139.6
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(24.3)
|
|
|
$
|
(6.4)
|
|
|
$
|
(17.6)
|
|
|
Less: Preferred stock dividend
|
36.3
|
|
|
32.5
|
|
|
29.1
|
|
|
Net Loss Available to 8th Avenue Common Shareholders
|
$
|
(60.6)
|
|
|
$
|
(38.9)
|
|
|
$
|
(46.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
2021
|
|
2020
|
|
Current assets
|
|
|
$
|
282.8
|
|
|
$
|
251.5
|
|
|
Other assets
|
|
|
903.0
|
|
|
830.1
|
|
|
Total Assets
|
|
|
$
|
1,185.8
|
|
|
$
|
1,081.6
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
$
|
6.5
|
|
|
$
|
5.2
|
|
|
Accounts payable and other current liabilities
|
|
|
131.7
|
|
|
113.3
|
|
|
Long-term debt
|
|
|
780.0
|
|
|
663.3
|
|
|
Other liabilities
|
|
|
63.0
|
|
|
71.6
|
|
|
Total Liabilities
|
|
|
981.2
|
|
|
853.4
|
|
|
Preferred stock
|
|
|
97.9
|
|
|
61.6
|
|
|
Other shareholders’ equity
|
|
|
106.7
|
|
|
166.6
|
|
|
Shareholders’ Equity
|
|
|
204.6
|
|
|
228.2
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
|
$
|
1,185.8
|
|
|
$
|
1,081.6
|
|
Prior to the 8th Avenue Transactions, Post’s historical private brands business used certain functions and services performed by the Company. These functions and services included information systems, sales and marketing, procurement, accounting shared services, legal, tax, human resources, payroll and cash management. After the completion of the 8th Avenue Transactions, the Company continues to provide many of these services to 8th Avenue under a master services agreement (the “MSA”). In addition, Post and a third party each provide certain advisory services to 8th Avenue for a fee. During the years ended September 30, 2021, 2020 and 2019, the Company recorded MSA and advisory income of $3.5, $3.9 and $4.1, respectively, which was recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations.
During the years ended September 30, 2021, 2020 and 2019, the Company had net sales to 8th Avenue of $6.7, $5.7 and $4.7, respectively, and purchases from and royalties paid to 8th Avenue of $54.1, $9.9 and $9.4 respectively. Sales and purchases between the Company and 8th Avenue were all made at arm’s-length. The investment in 8th Avenue was $66.6 and $110.1 at September 30, 2021 and 2020, respectively, and was included in “Equity method investments” on the Consolidated Balance Sheets. The Company had current receivables, current payables and a long-term liability with 8th Avenue of $4.6, $1.2 and $0.7, respectively, at September 30, 2021, and current receivables, current payables and a long-term liability of $3.2, $0.6 and $0.7, respectively, at September 30, 2020. The current receivables, current payables and long-term liability, which related to the separation of 8th Avenue from the Company, MSA fees, pass through charges owed by 8th Avenue to the Company and related party sales and purchases, were included in “Receivables, net,” “Accounts payable” and “Other liabilities,” respectively, on the Consolidated Balance Sheets.
Alpen and Weetabix East Africa
The Company holds an equity interest in two legal entities, Alpen Food Company South Africa (Pty) Limited (“Alpen”) and Weetabix East Africa Limited (“Weetabix East Africa”).
Alpen is a South African-based company that produces RTE cereal and muesli. The Company owns 50% of Alpen’s common stock with no other indicators of control and, accordingly, the Company accounts for its investment in Alpen using the equity method. The Company’s equity method (loss) earnings, net of tax attributable to Alpen was $(0.4), $(0.5) and $0.1 for the years ended September 30, 2021, 2020 and 2019, respectively, and was included in “Equity method loss, net of tax” in the
Consolidated Statements of Operations. The investment in Alpen was $4.1 and $4.0 at September 30, 2021 and 2020, respectively, and was included in “Equity method investments” on the Consolidated Balance Sheets. The Company had a note receivable balance with Alpen of $0.5 at both September 30, 2021 and 2020, which was included in “Other assets” on the Consolidated Balance Sheets.
Weetabix East Africa is a Kenyan-based company that produces RTE cereal and muesli. The Company owns 50.1% of Weetabix East Africa and holds a controlling voting and financial interest through its appointment of management and representation on Weetabix East Africa’s board of directors. Accordingly, Weetabix East Africa is fully consolidated into the Company’s financial statements and its assets and results from operations are reported in the Weetabix segment (see Note 22).
NOTE 5 — BUSINESS COMBINATIONS
The Company accounts for business combinations using the acquisition method of accounting, whereby the results of operations are included in the financial statements from the date of acquisition. The purchase price is allocated to acquired assets and assumed liabilities based on their estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Any excess of the estimated fair values of the identifiable net assets over the purchase price is recorded as a gain on bargain purchase. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies, the expansion of the business into new or growing segments of the industry and the addition of new employees.
Fiscal 2021
On June 1, 2021, the Company completed its acquisition of the private label RTE cereal business from TreeHouse Foods, Inc. (the “PL RTE Cereal Business”) for $85.0, subject to inventory and other adjustments, resulting in a payment at closing of $88.0. The acquisition was completed using cash on hand. The PL RTE Cereal Business is reported in the Post Consumer Brands segment (see Note 22). Based on the preliminary purchase price allocation, the Company identified and recorded $99.5 of net assets, which exceeded the purchase price paid for the PL RTE Cereal Business. As a result, the Company recorded a gain of $11.5, which was reported as “Other operating (income) expenses, net” in the Consolidated Statement of Operations for the year ended September 30, 2021. Net sales and operating loss included in the Consolidated Statement of Operations attributable to the PL RTE Cereal Business was $63.1 and $7.9, respectively, for the year ended September 30, 2021.
On May 27, 2021, the Company completed its acquisition of Egg Beaters from Conagra Brands, Inc. for $50.0, subject to working capital and other adjustments, resulting in a payment at closing of $50.6. The acquisition was completed using cash on hand. Egg Beaters is a retail liquid egg brand and is reported in the Refrigerated Retail segment (see Note 22). At September 30, 2021, the Company had recorded a working capital payable of $0.1, which was included in “Other current liabilities” on the Consolidated Balance Sheet. Based on the preliminary purchase price allocation, the Company has recorded customer relationships and trademarks and brands of $28.5 and $10.0, respectively, which will be amortized over weighted-average periods of 15 years and 16 years, respectively. Net sales and operating profit included in the Consolidated Statement of Operations attributable to Egg Beaters was $14.0 and $1.0, respectively, for the year ended September 30, 2021.
On February 1, 2021, the Company completed its acquisition of the Almark Foods business and related assets (“Almark”) for $52.0, subject to working capital and other adjustments, resulting in a payment at closing of $51.3. The acquisition was completed using cash on hand. Almark is a provider of hard-cooked and deviled egg products, offering conventional, organic and cage-free products, and distributes its products to foodservice distributors, as well as across retail outlets, including in the perimeter-of-the-store and the deli counter. Almark is reported in the Foodservice and Refrigerated Retail segments (see Note 22). At September 30, 2021, the Company had recorded an estimated working capital receivable of $3.0, which was included in “Receivables, net” on the Consolidated Balance Sheet. Based upon the preliminary purchase price allocation, the Company has recorded $19.5 of customer relationships to be amortized over a weighted-average period of 10 years. Net sales and operating loss included in the Consolidated Statement of Operations attributable to Almark was $61.3 and $6.4, respectively, for the year ended September 30, 2021.
On January 25, 2021, the Company completed its acquisition of Peter Pan from Conagra Brands, Inc. for $102.0, subject to working capital and other adjustments, resulting in a payment at closing of $103.4. The acquisition was completed using cash on hand. Peter Pan is a nationally recognized brand with a diversified customer base across key channels and is reported in the Post Consumer Brands segment (see Note 22). All Peter Pan nut butter products are currently co-manufactured by 8th Avenue, in which the Company has a 60.5% common equity interest (see Note 4). In April 2021, the Company reached a final settlement of net working capital, resulting in an amount received by the Company of $2.0. Based upon the preliminary purchase price allocation, the Company has recorded customer relationships and trademarks and brands of $12.0 and $55.0, respectively, both of which will be amortized over a weighted-average period of 20 years. Net sales and operating profit included in the Consolidated Statement of Operations attributable to Peter Pan was $58.7 and $4.9, respectively, for the year ended September 30, 2021.
Preliminary values of the fiscal 2021 acquisitions are not yet finalized pending the final purchase price allocations and are subject to change once additional information is obtained. The Company expects portions of the final fair values of goodwill related to the acquisitions of Peter Pan and Egg Beaters and the final fair value of goodwill related to the acquisition of Almark to be deductible for U.S. income tax purposes.
The following table provides the preliminary purchase price allocation related to the fiscal 2021 acquisitions based upon the fair values of assets and liabilities assumed, including the provisional amounts recognized related to the acquisitions, as of September 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PL RTE Cereal Business
|
|
Egg Beaters
|
|
Almark
|
|
Peter Pan
|
|
Receivables
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
|
$
|
—
|
|
|
Inventories
|
36.0
|
|
|
3.1
|
|
|
4.0
|
|
|
4.6
|
|
|
Prepaid expenses and other current assets
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Property
|
67.7
|
|
|
7.0
|
|
|
9.8
|
|
|
—
|
|
|
Goodwill
|
—
|
|
|
14.3
|
|
|
19.4
|
|
|
55.1
|
|
|
Other intangible assets
|
—
|
|
|
38.5
|
|
|
19.5
|
|
|
67.0
|
|
|
Deferred tax asset
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
Other assets
|
0.2
|
|
|
—
|
|
|
27.7
|
|
|
—
|
|
|
Accounts payable
|
—
|
|
|
(10.1)
|
|
|
(6.4)
|
|
|
(11.7)
|
|
|
Other current liabilities
|
—
|
|
|
—
|
|
|
(1.2)
|
|
|
—
|
|
|
Deferred tax liability
|
(3.7)
|
|
|
(2.1)
|
|
|
—
|
|
|
(13.6)
|
|
|
Other liabilities
|
(0.7)
|
|
|
—
|
|
|
(31.8)
|
|
|
—
|
|
|
Total acquisition cost
|
99.5
|
|
|
50.7
|
|
|
48.3
|
|
|
101.4
|
|
Fiscal 2020
On July 1, 2020, the Company completed its acquisition of Henningsen Foods, Inc. (“Henningsen”) from a subsidiary of Kewpie Corporation for $20.0, subject to working capital and other adjustments, resulting in a payment at closing of $22.7. The acquisition was completed using cash on hand. Henningsen is a producer of egg and meat products and is reported in the Foodservice segment (see Note 22). Based upon the purchase price allocation at September 30, 2020, the Company identified and recorded $32.6 of net assets, including cash of $2.8, which exceeded the purchase price paid for Henningsen. As a result, the Company recorded a gain of $11.7, which was included in “Other operating (income) expenses, net” in the Consolidated Statement of Operations for the year ended September 30, 2020. At September 30, 2020, the Company had recorded an estimated working capital settlement receivable of $1.8, which was included in “Receivables, net” on the Consolidated Balance Sheet. In the year ended September 30, 2021, the Company recorded measurement period adjustments related to inventory and deferred income taxes of $0.7 and reached a final settlement of net working capital, resulting in an amount received by the Company of $1.0. As a result of these adjustments, the Company recorded a loss of $0.1, which was included in “Other operating (income) expenses, net” in the Consolidated Statement of Operations for the year ended September 30, 2021.
Acquisition-Related Expenses
The Company incurs transaction-related expenses in conjunction with both completed and contemplated acquisitions. These expenses generally include third party costs for due diligence, advisory services and transaction success fees. During the years ended September 30, 2021, 2020 and 2019, the Company incurred transaction-related expenses of $6.4, $3.8 and $8.9, respectively, which were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations.
Unaudited Pro Forma Information
The following unaudited pro forma information presents a summary of the combined results of operations of the Company and the results of the fiscal 2021 acquisitions for the periods presented as if these acquisitions had occurred on October 1, 2019, along with certain pro forma adjustments. These pro forma adjustments give effect to the amortization of certain definite-lived intangible assets, adjusted depreciation based upon fair value of assets acquired, inventory revaluation adjustments on acquired businesses, interest expense, transaction costs, gain on bargain purchase and related income taxes. The following unaudited pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Pro forma net sales
|
$
|
6,430.3
|
|
|
$
|
6,169.7
|
|
|
$
|
5,681.1
|
|
|
Pro forma net earnings available to common shareholders
|
$
|
158.7
|
|
|
$
|
15.1
|
|
|
$
|
121.7
|
|
|
Pro forma basic earnings per share
|
$
|
2.30
|
|
|
$
|
0.22
|
|
|
$
|
1.72
|
|
|
Pro forma diluted earnings per share
|
$
|
2.26
|
|
|
$
|
0.22
|
|
|
$
|
1.66
|
|
NOTE 6 — RESTRUCTURING
In October 2020, BellRing announced its plan to strategically realign its business, resulting in the closing of its Dallas, Texas office and the downsizing of its Munich, Germany location (the “BellRing Restructuring”). These actions were completed as of September 30, 2021.
In February 2018, the Company announced its plan to close its Post Consumer Brands RTE cereal manufacturing facility in Clinton, Massachusetts (the “Clinton Facility”). The transfer of production capabilities to other Post Consumer Brands facilities and the closure of the Clinton Facility was completed at September 30, 2019. Final cash payments for employee-related costs were made in the first quarter of fiscal 2020 and no additional restructuring costs related to the closure of the Clinton Facility were incurred. For additional information on assets held for sale related to the closure of the Clinton Facility, see Note 7.
Amounts related to the restructuring events are shown in the following table. All costs are recognized in “Selling, general and administrative expenses” in the Consolidated Statements of Operations with the exception of accelerated depreciation expense, which is included in “Cost of goods sold.” Expenses related to the BellRing Restructuring are included in the measure of segment performance for BellRing Brands. Expenses related to the closure of the Clinton Facility are not included in the measure of segment performance for Post Consumer Brands. For additional information on segment performance, see Note 22.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-Related Costs
|
|
|
|
Accelerated Depreciation
|
|
Total
|
|
Balance, September 30, 2018
|
$
|
2.7
|
|
|
|
|
$
|
—
|
|
|
$
|
2.7
|
|
|
Charge to expense
|
2.2
|
|
|
|
|
7.4
|
|
|
9.6
|
|
|
Cash payments
|
(4.8)
|
|
|
|
|
—
|
|
|
(4.8)
|
|
|
Non-cash charges
|
—
|
|
|
|
|
(7.4)
|
|
|
(7.4)
|
|
|
Balance, September 30, 2019
|
$
|
0.1
|
|
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
|
(0.1)
|
|
|
|
|
—
|
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Charge to expense
|
4.7
|
|
|
|
|
—
|
|
|
4.7
|
|
|
Cash payments
|
(4.7)
|
|
|
|
|
—
|
|
|
(4.7)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total expected restructuring charge
|
$
|
9.6
|
|
|
|
|
$
|
9.9
|
|
|
$
|
19.5
|
|
|
Cumulative incurred to date
|
9.6
|
|
|
|
|
9.9
|
|
|
19.5
|
|
|
Remaining expected restructuring charge
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 7 — DIVESTITURES AND AMOUNTS HELD FOR SALE
Divestiture
On October 1, 2018, 8th Avenue was separately capitalized by Post and third parties through the 8th Avenue Transactions, and 8th Avenue became the holding company for Post’s historical private brands business. Post received gross proceeds of $875.0 from the 8th Avenue Transactions, as well as $16.8 related to final working capital adjustments, retaining shares of common stock equal to 60.5% of the common equity in 8th Avenue. Post’s gross proceeds consisted of (i) $250.0 from a third party and (ii) $625.0 from a committed senior increasing rate bridge loan (the “2018 Bridge Loan”), which was funded in fiscal 2018 prior to the closing of the 8th Avenue Transactions (see Note 17). A third party received 2.5 shares of 8th Avenue preferred stock with an 11% cumulative, quarterly compounding dividend and a $100.00 per share liquidation value and shares of common stock equal to 39.5% of the common equity in 8th Avenue. During the year ended September 30, 2019, the Company recorded a gain of $126.6 related to the 8th Avenue Transactions, which was reported as “Gain on sale of business” in the Consolidated Statement of Operations. The gain included foreign exchange losses previously recorded in accumulated
OCI of $42.1. Effective October 1, 2018, 8th Avenue was no longer consolidated in the Company’s financial statements and the 60.5% common equity retained interest in 8th Avenue is accounted for using the equity method. For additional information regarding the Company’s equity method investment in 8th Avenue, refer to Note 4. The Company incurred third party costs attributable to the 8th Avenue Transactions of $9.9 in the year ended September 30, 2019 which was included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations. No third party costs attributable to the 8th Avenue Transactions were incurred by the Company during the years ended September 30, 2021 or 2020.
In order to calculate the total recorded gain related to the 8th Avenue Transactions of $126.6, management was required to estimate the fair value of the Company’s equity method investment in 8th Avenue. In making this estimate, management used an approach combining the estimated implied value from the 8th Avenue Transactions, an income approach and a market approach, in which the greatest value was placed on the implied value from the 8th Avenue Transactions. In order to calculate the fair value implied by the 8th Avenue Transactions, management was required to estimate the value of the 8th Avenue equity. In making this estimate, management used a lattice model, which required significant assumptions, including estimates for the term, credit spread, yield volatility and risk-free rates associated with 8th Avenue’s preferred stock. The income approach was based on discounted future cash flows and required significant assumptions, including estimates regarding future revenue, profitability and capital requirements. The market approach was based on a market multiple (revenue and EBITDA, which stands for earnings before interest, income taxes, depreciation and amortization) and required an estimate of appropriate multiples based on the market data.
Amounts Held For Sale
At September 30, 2020, the Company had a Post Consumer Brands RTE cereal manufacturing plant (the “Clinton Plant”) with a fair value of $3.4 classified as held for sale, land and a building at its Post Consumer Brands RTE cereal manufacturing facility in Asheboro, North Carolina (the “Asheboro Facility”) with a combined fair value of $1.4 classified as held for sale and land and a building at one of its Weetabix manufacturing facilities in Corby, United Kingdom (the “Corby Facility”) with a combined fair value of $2.5 classified as held for sale. In accordance with ASC Topic 360, “Property, Plant and Equipment,” these assets were classified as current and were reported as “Prepaid expenses and other current assets” on the Consolidated Balance Sheet. The Company sold the Clinton Plant, the Asheboro Facility and the Corby Facility in fiscal 2021.
In the year ended September 30, 2021, a net gain on assets held for sale of $0.5 was recorded consisting of (i) a gain of $0.7 related to the sale of the Corby Facility, (ii) a loss of $0.1 related to the sale of the Asheboro Facility and (iii) a loss of $0.1 related to the sale of the Clinton Plant. These held for sale adjustments were included in “Other operating (income) expenses, net” in the Consolidated Statement of Operations for the year ended September 30, 2021.
In the year ended September 30, 2020, a loss on assets held for sale of $2.7 was recorded consisting of losses of $2.6 and $0.1 related to the Clinton Plant and Asheboro Facility, respectively, and was included in “Other operating (income) expenses, net” in the Consolidated Statement of Operations.
In the year ended September 30, 2019, a held for sale net gain of $124.6 was recorded consisting of (i) a gain of $126.6, which was reported as “Gain on sale of business,” and a loss of $2.6, which was included in “Loss on extinguishment of debt, net,” in the Consolidated Statement of Operations related to the 8th Avenue Transactions and (ii) a gain of $0.6, which was recorded related to the sale of the Company’s cereal warehouse at its Clinton Facility and was included in “Other operating (income) expenses, net” in the Consolidated Statement of Operations.
NOTE 8 — GOODWILL
The changes in the carrying amount of goodwill by segment are noted in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Consumer Brands
|
|
Weetabix
|
|
Foodservice
|
|
Refrigerated Retail
|
|
BellRing Brands
|
|
Total
|
|
Balance, September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (gross)
|
$
|
2,011.8
|
|
|
$
|
850.7
|
|
|
$
|
1,335.6
|
|
|
$
|
793.6
|
|
|
$
|
180.7
|
|
|
$
|
5,172.4
|
|
|
Accumulated impairment losses
|
(609.1)
|
|
|
—
|
|
|
—
|
|
|
(48.7)
|
|
|
(114.8)
|
|
|
(772.6)
|
|
|
Goodwill (net)
|
$
|
1,402.7
|
|
|
$
|
850.7
|
|
|
$
|
1,335.6
|
|
|
$
|
744.9
|
|
|
$
|
65.9
|
|
|
$
|
4,399.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
—
|
|
|
38.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38.8
|
|
|
Balance, September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (gross)
|
$
|
2,011.8
|
|
|
$
|
889.5
|
|
|
$
|
1,335.6
|
|
|
$
|
793.6
|
|
|
$
|
180.7
|
|
|
$
|
5,211.2
|
|
|
Accumulated impairment losses
|
(609.1)
|
|
|
—
|
|
|
—
|
|
|
(48.7)
|
|
|
(114.8)
|
|
|
(772.6)
|
|
|
Goodwill (net)
|
$
|
1,402.7
|
|
|
$
|
889.5
|
|
|
$
|
1,335.6
|
|
|
$
|
744.9
|
|
|
$
|
65.9
|
|
|
$
|
4,438.6
|
|
|
Goodwill acquired
|
55.1
|
|
|
—
|
|
|
19.4
|
|
|
14.3
|
|
|
—
|
|
|
88.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
0.2
|
|
|
39.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40.1
|
|
|
Balance, September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (gross)
|
$
|
2,067.1
|
|
|
$
|
929.4
|
|
|
$
|
1,355.0
|
|
|
$
|
807.9
|
|
|
$
|
180.7
|
|
|
$
|
5,340.1
|
|
|
Accumulated impairment losses
|
(609.1)
|
|
|
—
|
|
|
—
|
|
|
(48.7)
|
|
|
(114.8)
|
|
|
(772.6)
|
|
|
Goodwill (net)
|
$
|
1,458.0
|
|
|
$
|
929.4
|
|
|
$
|
1,355.0
|
|
|
$
|
759.2
|
|
|
$
|
65.9
|
|
|
$
|
4,567.5
|
|
Goodwill represents the excess of the purchase price of acquired businesses over the fair market value of their identifiable net assets. The Company conducts a goodwill impairment assessment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate that goodwill may be impaired. The goodwill impairment assessment performed may be either qualitative or quantitative; however, if adverse qualitative trends are identified that could negatively impact the fair value of the business, a quantitative goodwill impairment test is performed. In fiscal 2021 and 2020, the Company elected not to perform a qualitative assessment and instead performed a quantitative impairment test for all reporting units, except for BellRing Brands. The Company performed a qualitative test for the BellRing Brands reporting unit, and determined there were no adverse trends that could negatively impact the fair value of the business. In fiscal 2019, the Company elected not to perform a qualitative assessment and instead performed a quantitative impairment test for all reporting units.
The estimated fair value is determined using a combined income and market approach with a greater weighting on the income approach. The income approach is based on discounted future cash flows and requires significant assumptions, including estimates regarding future revenue, profitability, capital requirements and discount rates. The market approach is based on a market multiple (revenue and EBITDA) and requires an estimate of appropriate multiples based on market data.
The Company did not record a goodwill impairment charge at September 30, 2021, as all reporting units subjected to the quantitative test passed. At September 30, 2021, the estimated fair values of all such reporting units exceeded their carrying values by at least 11% (the lowest of which was Foodservice; all others exceeded their carrying values by at least 15%). Variances between the actual performance of the businesses and the assumptions that were used in developing the estimates of fair value could result in impairment charges in future periods. Factors that could create variances in the estimated fair value of the reporting units include but are not limited to (i) fluctuations in forecasted sales volumes, which can be driven by external factors affecting demand such as changes in consumer preferences, including changes related to the COVID-19 pandemic, and consumer responses to marketing and pricing strategy, (ii) changes in product costs, including commodities, (iii) interest rate fluctuations and (iv) currency fluctuations.
The Company did not record a goodwill impairment charge at September 30, 2020, as all reporting units subjected to the quantitative test passed. At September 30, 2020, the estimated fair values of all such reporting units exceeded their carrying values by at least 4% (the lowest of which was Foodservice, all others exceeded their carrying values by at least 13%).
For the year ended September 30, 2019, the Company recorded a charge of $48.7 for the impairment of goodwill. The impairment charge related to the Refrigerated Retail segment and was primarily related to lost distribution with customers and a shift in supplier and consumer preferences to private label cheese products and away from branded cheese products. This fair value measurement fell within Level 3 of the fair value hierarchy (see Note 15). The goodwill impairment loss was aggregated with the trademark impairment loss in “Impairment of goodwill and other intangible assets” in the Consolidated Statement of Operations.
NOTE 9 — INCOME TAXES
The components of “Earnings before Income Taxes and Equity Method Loss” on the Consolidated Statements of Operations and other summary information is presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Domestic
|
$
|
231.0
|
|
|
$
|
(36.4)
|
|
|
$
|
80.4
|
|
|
Foreign
|
106.2
|
|
|
99.8
|
|
|
78.7
|
|
|
Earnings before Income Taxes and Equity Method Loss
|
$
|
337.2
|
|
|
$
|
63.4
|
|
|
$
|
159.1
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
$
|
86.6
|
|
|
$
|
3.5
|
|
|
$
|
(3.9)
|
|
|
Effective income tax rate
|
25.7
|
%
|
|
5.5
|
%
|
|
(2.5)
|
%
|
The expense (benefit) for income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
10.8
|
|
|
$
|
31.3
|
|
|
$
|
61.5
|
|
|
State
|
6.7
|
|
|
7.1
|
|
|
2.6
|
|
|
Foreign
|
9.9
|
|
|
8.7
|
|
|
12.3
|
|
|
|
27.4
|
|
|
47.1
|
|
|
76.4
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
15.3
|
|
|
(45.6)
|
|
|
(61.8)
|
|
|
State
|
1.7
|
|
|
(14.5)
|
|
|
(15.2)
|
|
|
Foreign
|
42.2
|
|
|
16.5
|
|
|
(3.3)
|
|
|
|
59.2
|
|
|
(43.6)
|
|
|
(80.3)
|
|
|
Income tax expense (benefit)
|
$
|
86.6
|
|
|
$
|
3.5
|
|
|
$
|
(3.9)
|
|
A reconciliation of income tax expense (benefit) with amounts computed at the statutory federal rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Computed tax (21%)
|
$
|
70.8
|
|
|
$
|
13.3
|
|
|
$
|
33.4
|
|
|
Enacted tax law and changes in deferred tax rates
|
40.0
|
|
|
9.6
|
|
|
(9.4)
|
|
|
Non-deductible goodwill impairment loss
|
—
|
|
|
—
|
|
|
6.9
|
|
|
Non-deductible compensation
|
5.4
|
|
|
4.5
|
|
|
2.7
|
|
|
Transaction costs
|
0.1
|
|
|
(1.1)
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
State income tax benefit, net of effect on federal tax
|
6.3
|
|
|
(4.3)
|
|
|
(0.7)
|
|
|
|
|
|
|
|
|
|
Valuation allowances
|
1.6
|
|
|
5.0
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
Uncertain tax positions
|
(1.5)
|
|
|
1.2
|
|
|
(7.9)
|
|
|
Net losses and basis difference attributable to equity method investment
|
(9.2)
|
|
|
(6.5)
|
|
|
4.4
|
|
|
Income tax credits
|
(1.7)
|
|
|
(2.6)
|
|
|
(3.0)
|
|
|
Rate differential on foreign income
|
(11.2)
|
|
|
(10.8)
|
|
|
(7.7)
|
|
|
Excess tax benefits for share-based payments
|
(6.2)
|
|
|
(1.4)
|
|
|
(33.4)
|
|
|
Gain on bargain purchase
|
(2.4)
|
|
|
(2.5)
|
|
|
—
|
|
|
Enhanced deduction for food donation
|
(0.9)
|
|
|
(1.5)
|
|
|
(0.6)
|
|
|
Return-to-provision and changes in prior year accruals
|
(2.8)
|
|
|
(1.5)
|
|
|
0.6
|
|
|
Other, net (none in excess of 5% of statutory tax)
|
(1.7)
|
|
|
2.1
|
|
|
2.0
|
|
|
Income tax expense (benefit)
|
$
|
86.6
|
|
|
$
|
3.5
|
|
|
$
|
(3.9)
|
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Non-current deferred tax assets (liabilities) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
|
Assets
|
|
Liabilities
|
|
Net
|
|
Assets
|
|
Liabilities
|
|
Net
|
|
Derivative mark-to-market adjustments
|
$
|
100.0
|
|
|
$
|
—
|
|
|
$
|
100.0
|
|
|
$
|
133.8
|
|
|
$
|
—
|
|
|
$
|
133.8
|
|
|
Disallowed interest carryforwards
|
34.2
|
|
|
—
|
|
|
34.2
|
|
|
36.0
|
|
|
—
|
|
|
36.0
|
|
|
Lease liabilities
|
31.9
|
|
|
—
|
|
|
31.9
|
|
|
26.2
|
|
|
—
|
|
|
26.2
|
|
|
Net operating loss and credit carryforwards
|
29.1
|
|
|
—
|
|
|
29.1
|
|
|
33.7
|
|
|
—
|
|
|
33.7
|
|
|
Stock-based and deferred compensation
|
17.6
|
|
|
—
|
|
|
17.6
|
|
|
18.4
|
|
|
—
|
|
|
18.4
|
|
|
Accrued liabilities
|
9.4
|
|
|
—
|
|
|
9.4
|
|
|
9.0
|
|
|
—
|
|
|
9.0
|
|
|
Accrued vacation, incentive and severance
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|
8.3
|
|
|
—
|
|
|
8.3
|
|
|
Inventory
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
3.2
|
|
|
—
|
|
|
3.2
|
|
|
Intangible assets
|
—
|
|
|
(642.5)
|
|
|
(642.5)
|
|
|
—
|
|
|
(619.9)
|
|
|
(619.9)
|
|
|
Property
|
—
|
|
|
(218.7)
|
|
|
(218.7)
|
|
|
—
|
|
|
(192.3)
|
|
|
(192.3)
|
|
|
Investment in partnership (a)
|
—
|
|
|
(135.9)
|
|
|
(135.9)
|
|
|
—
|
|
|
(144.6)
|
|
|
(144.6)
|
|
|
ROU assets
|
—
|
|
|
(30.0)
|
|
|
(30.0)
|
|
|
—
|
|
|
(25.5)
|
|
|
(25.5)
|
|
|
Pension and other postretirement benefits
|
|
|
(21.7)
|
|
|
(21.7)
|
|
|
—
|
|
|
(10.1)
|
|
|
(10.1)
|
|
|
Basis difference attributable to equity method investment
|
—
|
|
|
(11.8)
|
|
|
(11.8)
|
|
|
—
|
|
|
(22.5)
|
|
|
(22.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
5.7
|
|
|
(1.9)
|
|
|
3.8
|
|
|
4.6
|
|
|
(1.7)
|
|
|
2.9
|
|
|
Total gross deferred income taxes
|
240.2
|
|
|
(1,062.5)
|
|
|
(822.3)
|
|
|
273.2
|
|
|
(1,016.6)
|
|
|
(743.4)
|
|
|
Valuation allowance
|
(41.6)
|
|
|
—
|
|
|
(41.6)
|
|
|
(41.1)
|
|
|
—
|
|
|
(41.1)
|
|
|
Total deferred taxes
|
$
|
198.6
|
|
|
$
|
(1,062.5)
|
|
|
$
|
(863.9)
|
|
|
$
|
232.1
|
|
|
$
|
(1,016.6)
|
|
|
$
|
(784.5)
|
|
(a)The Company’s deferred tax liability for investment in partnership relates to excess financial reporting outside basis over tax outside basis in BellRing entities treated as partnerships for U.S. federal income tax purposes.
As of September 30, 2021, the Company had U.S. federal net operating loss (“NOL”) carryforwards totaling approximately $41.4, which have expiration dates ranging from fiscal 2022 to extending indefinitely without expiration, as well as state NOL carryforwards totaling approximately $511.2, which have expiration dates beginning in fiscal 2022 and extending through fiscal 2041. As of September 30, 2021, the Company had NOL carryforwards in foreign jurisdictions of $14.6.
As certain of these NOLs and carryforwards were acquired through acquisitions, the deductibility of the NOLs is subject to limitation under section 382 of the Internal Revenue Code (“IRC”) and similar limitations under state tax law. Giving consideration to IRC section 382 and state limitations, the Company believes it will generate sufficient taxable income to fully utilize the U.S. federal and certain state NOLs before they expire. As of September 30, 2021, approximately $19.1 of the $19.3 deferred tax asset related to the state NOLs has been offset by a valuation allowance based on management’s judgment that it is more likely than not that the benefits of those deferred tax assets will not be realized in the future.
No provision has been made for income taxes on undistributed earnings of consolidated foreign subsidiaries of $64.5 at September 30, 2021, as it is the Company’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings.
CARES Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impacted the Company’s accounting for income taxes, such as modifications to the limitation of business interest expense deductibility for tax years beginning in 2019 and 2020.
U.K. Tax Law Changes
In fiscal 2021, the effective income tax rate was impacted by enacted tax law changes in the U.K., which included a provision to increase the U.K.’s corporate income tax rate from 19% to 25%, effective April 1, 2023. During the year ended September 30, 2021, the Company remeasured its existing deferred tax assets and liabilities considering the 25% U.K. corporate income tax rate for future periods and recorded tax expense of $40.0. Other changes made to the U.K.’s tax laws did not have a material impact on the Company’s financial statements during the year ended September 30, 2021. Additionally, in fiscal 2020, the effective income tax rate was impacted by enacted tax law changes in the U.K., which included a provision to increase the U.K.’s corporate income tax rate from 17% to 19%. During the year ended September 30, 2020, the Company remeasured its existing deferred tax assets and liabilities considering the 19% U.K. corporate income tax rate for future periods and recorded tax expense of $13.0.
Unrecognized Tax Benefits
The Company recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent the Company’s assessment of such tax positions changes, the change in estimate will be recorded in the period in which the determination is made.
Unrecognized tax benefits activity for the years ended September 30, 2021, 2020 and 2019 is presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Balance, beginning of year
|
$
|
9.8
|
|
|
$
|
8.6
|
|
|
$
|
9.9
|
|
|
Additions for tax positions taken in current year and acquisitions
|
0.3
|
|
|
1.7
|
|
|
0.1
|
|
|
Additions for tax positions taken in prior years
|
5.2
|
|
|
—
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
Settlements with tax authorities/statute expirations
|
(1.3)
|
|
|
(0.5)
|
|
|
(7.1)
|
|
|
Balance, end of year
|
$
|
14.0
|
|
|
$
|
9.8
|
|
|
$
|
8.6
|
|
The amount of the net unrecognized tax benefits that, if recognized, would directly affect the effective income tax rate was $8.6 at September 30, 2021. The Company believes that, due to expiring statutes of limitations and settlements with tax authorities, it is reasonably possible that the total unrecognized tax benefits may decrease up to approximately $0.9 within twelve months of the reporting date.
The Company computes tax-related interest and penalties as the difference between the tax position recognized for financial reporting purposes and the amount previously taken on the Company’s tax returns and classifies these amounts as components of income tax (benefit) expense. The Company recorded (benefit) expense of $(0.5), zero and $(2.5) related to interest and penalties in the years ended September 30, 2021, 2020 and 2019, respectively. The Company had accrued interest and penalties of $0.5 and $1.0 at September 30, 2021 and 2020, respectively. The accrued interest and penalties are not included in the table above.
U.S. federal, U.S. state and foreign jurisdiction income tax returns for the tax years ended September 30, 2018 through September 30, 2020 are generally open and subject to examination by the tax authorities in each respective jurisdiction. During the year ended September 30, 2021, the Internal Revenue Service completed its examination of the Company’s 2015, 2016 and 2017 U.S. federal income tax returns. The examination did not have a material impact on the Company’s consolidated financial statements.
NOTE 10 — EARNINGS PER SHARE
Basic earnings per share is based on the average number of shares of common stock outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, stock appreciation rights and restricted stock units using the “treasury stock” method. The impact of potentially dilutive convertible preferred stock is calculated using the “if-converted” method. Remeasurements to the redemption value of the redeemable NCI are recognized as a deemed dividend (see Note 4). As allowed for within ASC Topic 480, “Distinguishing Liabilities from Equity,” the Company has made an election to treat the portion of the deemed dividend that exceeds fair value as a reduction of income available to common shareholders for basic and diluted (loss) earnings per share. In addition, “Net earnings for diluted earnings per share” in the table below has been adjusted for the Company’s share of BellRing’s consolidated net earnings for diluted earnings per share, to the extent it is dilutive.
In the second quarter of fiscal 2019, the Company completed the redemption of its 2.5% Series C Cumulative Perpetual Convertible Preferred Stock (“Series C Preferred”). Substantially all of the 3.2 shares of Series C Preferred outstanding as of January 10, 2019, the date the Series C Preferred redemption was announced, were converted into 5.9 shares of the Company’s common stock pursuant to the conversion rights applicable to the Series C Preferred, and the remaining shares of Series C Preferred were redeemed.
The following table sets forth the computation of basic and diluted earnings per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net earnings available to common shareholders
|
$
|
166.7
|
|
|
$
|
0.8
|
|
|
$
|
121.7
|
|
|
Accretion of redeemable NCI
|
11.0
|
|
|
—
|
|
|
—
|
|
|
Net earnings for basic earnings per share
|
$
|
155.7
|
|
|
$
|
0.8
|
|
|
$
|
121.7
|
|
|
Dilutive impact of BellRing net earnings
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
Dilutive preferred stock dividends
|
—
|
|
|
—
|
|
|
3.0
|
|
|
Net earnings for diluted earnings per share
|
$
|
155.6
|
|
|
$
|
0.8
|
|
|
$
|
124.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares for basic earnings per share
|
64.2
|
|
|
68.9
|
|
|
70.8
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
Stock options
|
0.6
|
|
|
0.6
|
|
|
1.6
|
|
|
Stock appreciation rights
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
Restricted stock units
|
0.3
|
|
|
0.4
|
|
|
0.5
|
|
|
Performance-based restricted stock units
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
Preferred shares conversion to common
|
—
|
|
|
—
|
|
|
2.1
|
|
|
Total dilutive securities
|
1.1
|
|
|
1.2
|
|
|
4.3
|
|
|
Weighted-average shares for diluted earnings per share
|
65.3
|
|
|
70.1
|
|
|
75.1
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
2.42
|
|
|
$
|
0.01
|
|
|
$
|
1.72
|
|
|
Diluted earnings per common share
|
$
|
2.38
|
|
|
$
|
0.01
|
|
|
$
|
1.66
|
|
The following table details the securities that have been excluded from the calculation of weighted-average shares for diluted earnings per share as they were anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Stock options
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based restricted stock units
|
—
|
|
|
0.1
|
|
|
—
|
|
NOTE 11 — SUPPLEMENTAL OPERATIONS STATEMENT AND CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Advertising and promotion expenses (a)
|
$
|
151.4
|
|
|
$
|
146.0
|
|
|
$
|
122.3
|
|
|
Repair and maintenance expenses
|
135.6
|
|
|
140.0
|
|
|
156.9
|
|
|
Research and development expenses
|
33.0
|
|
|
28.5
|
|
|
25.0
|
|
|
|
|
|
|
|
|
|
Interest income
|
(0.6)
|
|
|
(6.3)
|
|
|
(7.9)
|
|
|
Interest paid
|
383.9
|
|
|
348.8
|
|
|
344.4
|
|
|
Income taxes paid
|
57.6
|
|
|
54.4
|
|
|
65.0
|
|
|
Accrued additions to property
|
38.3
|
|
|
29.8
|
|
|
24.7
|
|
(a)As a result of the adoption of ASU 2014-09, certain payments to customers totaling $23.7 in the year ended September 30, 2019 previously classified as advertising and promotion expenses were classified as net sales. For additional information, see Note 2.
NOTE 12 — SUPPLEMENTAL BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
Receivables, net
|
|
|
|
|
Trade
|
$
|
471.9
|
|
|
$
|
395.4
|
|
|
Income tax receivable
|
60.6
|
|
|
26.6
|
|
|
Related party
|
4.6
|
|
|
3.2
|
|
|
Other
|
19.2
|
|
|
19.8
|
|
|
|
556.3
|
|
|
445.0
|
|
|
Allowance for doubtful accounts
|
(2.4)
|
|
|
(3.4)
|
|
|
|
$
|
553.9
|
|
|
$
|
441.6
|
|
|
Inventories
|
|
|
|
|
Raw materials and supplies
|
$
|
133.6
|
|
|
$
|
118.1
|
|
|
Work in process
|
19.3
|
|
|
17.8
|
|
|
Finished products
|
402.5
|
|
|
429.4
|
|
|
Flocks
|
39.1
|
|
|
34.1
|
|
|
|
$
|
594.5
|
|
|
$
|
599.4
|
|
|
Other Assets
|
|
|
|
|
Pension asset
|
$
|
153.4
|
|
|
$
|
159.0
|
|
|
Operating ROU Assets
|
125.2
|
|
|
116.3
|
|
|
Other investments
|
22.9
|
|
|
27.9
|
|
|
Hedging assets - non-current
|
29.1
|
|
|
1.0
|
|
|
Other
|
27.9
|
|
|
24.8
|
|
|
|
$
|
358.5
|
|
|
$
|
329.0
|
|
|
Accounts Payable
|
|
|
|
|
Trade
|
$
|
458.1
|
|
|
$
|
357.1
|
|
|
Book cash overdrafts
|
1.5
|
|
|
0.7
|
|
|
Related party
|
1.1
|
|
|
0.6
|
|
|
Other
|
13.0
|
|
|
9.5
|
|
|
|
$
|
473.7
|
|
|
$
|
367.9
|
|
|
Other Current Liabilities
|
|
|
|
|
Advertising and promotion
|
$
|
44.0
|
|
|
$
|
44.9
|
|
|
Accrued interest
|
68.2
|
|
|
85.9
|
|
|
Accrued compensation
|
56.0
|
|
|
98.5
|
|
|
Hedging liabilities
|
132.4
|
|
|
187.9
|
|
|
Operating lease liabilities - current
|
25.8
|
|
|
23.6
|
|
|
Accrued legal settlements
|
12.3
|
|
|
13.2
|
|
|
Accrued freight
|
26.5
|
|
|
12.2
|
|
|
Other accrued taxes
|
22.2
|
|
|
7.7
|
|
|
Other
|
70.7
|
|
|
67.7
|
|
|
|
$
|
458.1
|
|
|
$
|
541.6
|
|
|
Other Liabilities
|
|
|
|
|
Pension and other postretirement benefit obligations
|
$
|
64.2
|
|
|
$
|
77.7
|
|
|
Hedging liabilities - non-current
|
257.1
|
|
|
355.2
|
|
|
Accrued compensation - non-current
|
36.2
|
|
|
30.2
|
|
|
Operating lease liabilities - non-current
|
113.8
|
|
|
103.0
|
|
|
Other
|
48.3
|
|
|
33.7
|
|
|
|
$
|
519.6
|
|
|
$
|
599.8
|
|
NOTE 13 — ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Balance, beginning of year
|
$
|
3.4
|
|
|
$
|
2.0
|
|
|
$
|
2.3
|
|
|
Provision charged to expense
|
1.2
|
|
|
3.3
|
|
|
0.1
|
|
|
Write-offs, less recoveries
|
(2.2)
|
|
|
(1.9)
|
|
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
$
|
2.4
|
|
|
$
|
3.4
|
|
|
$
|
2.0
|
|
NOTE 14 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and supplies, interest rate risks relating to floating rate debt and foreign currency exchange rate risks. The Company utilizes derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The Company does not hold or issue financial instruments for speculative or trading purposes.
At September 30, 2021, the Company’s derivative instruments, none of which were designated as hedging instruments under ASC Topic 815, “Derivatives and Hedging,” consisted of:
•commodity and energy futures, swaps and option contracts which relate to inputs that generally will be utilized within the next two years;
•interest rate swaps that have the effect of hedging interest payments on debt expected to be issued but not yet priced, including:
•a pay-fixed, receive-variable interest rate swap maturing in May 2024 that requires monthly settlements; and
•rate-lock interest rate swaps that require lump sum settlements with the first settlement occurring in July 2022 and the last in July 2026;
•pay-fixed, receive-variable interest rate swaps maturing in December 2022 that require monthly settlements and have the effect of hedging forecasted interest payments on BellRing’s variable rate debt; and
•the PHPC Warrants (see Note 4).
Interest rate swaps
In fiscal 2021, the Company restructured four of its rate-lock interest rate swap contracts, which contain non-cash, off-market financing elements. There were no cash settlements paid or received in connection with these restructurings.
As of April 1, 2020, the Company changed the designation of its interest rate swap contracts that are used as hedges of forecasted interest payments on BellRing’s variable rate debt from cash flow hedges to non-designated hedging instruments as the swaps were no longer effective (as defined by ASC Topic 815). In connection with the de-designation, the Company started reclassifying losses previously recorded in accumulated OCI to “Interest expense, net” in the Consolidated Statements of Operations on a straight-line basis over the term of BellRing’s variable rate debt. Mark-to-market adjustments related to these swaps also will be included in “Interest expense, net” in the Consolidated Statements of Operations. At September 30, 2021 and 2020, the remaining net loss before taxes to be amortized was $7.1 and $9.4, respectively.
In the first quarter of fiscal 2020, contemporaneously with the repayment of its term loan, the Company changed the designation of one of its interest rate swap contracts from a cash flow hedge to a non-designated hedging instrument. In connection with the de-designation, the Company reclassified losses previously recorded in accumulated OCI of $7.2 to “Interest expense, net” in the Consolidated Statement of Operations for the year ended September 30, 2020.
In the first quarter of fiscal 2019, the Company terminated $800.0 notional value of its interest rate swap contracts that were designated as hedging instruments. In connection with the interest rate swap terminations, the Company received cash proceeds of $29.8, and reclassified previously recorded gains from accumulated OCI to “Interest expense, net” in the Consolidated Statement of Operations for the year ended September 30, 2019.
Cross-currency swaps
The Company terminated $448.7 and $214.2 notional value of its cross-currency swap contracts that were designated as hedging instruments during the second quarter of fiscal 2020 and the first quarter of fiscal 2019, respectively. In connection with these terminations, the Company received cash proceeds of $50.3 during the year ended September 30, 2020 and $26.2 during the year ended September 30, 2019, both of which were recorded to accumulated OCI. Reclassification of amounts recorded in accumulated OCI into earnings will only occur in the event U.K.-based operations are substantially liquidated.
The following table shows the notional amounts of derivative instruments held.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
September 30,
2020
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
59.8
|
|
|
$
|
24.7
|
|
|
Energy contracts
|
|
45.9
|
|
|
87.1
|
|
|
Foreign exchange contracts - Forward contracts
|
|
—
|
|
|
28.9
|
|
|
Interest rate swap
|
|
550.0
|
|
|
621.7
|
|
|
Interest rate swaps - Rate-lock swaps
|
|
1,549.3
|
|
|
1,666.0
|
|
|
Interest rate swaps - Options
|
|
—
|
|
|
433.3
|
|
|
PHPC Warrants
|
|
16.9
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the balance sheet location and fair value of the Company’s derivative instruments, along with the portion designated as hedging instruments under ASC Topic 815. The Company does not offset derivative assets and liabilities within the Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
September 30,
2021
|
|
September 30,
2020
|
|
|
|
|
|
Asset Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Prepaid expenses and other current assets
|
|
$
|
16.6
|
|
|
$
|
5.0
|
|
|
|
|
|
|
Energy contracts
|
|
Prepaid expenses and other current assets
|
|
20.1
|
|
|
1.8
|
|
|
|
|
|
|
Commodity contracts
|
|
Other assets
|
|
2.9
|
|
|
0.1
|
|
|
|
|
|
|
Energy contracts
|
|
Other assets
|
|
2.0
|
|
|
0.9
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
6.8
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other assets
|
|
24.2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
65.8
|
|
|
$
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Other current liabilities
|
|
$
|
2.8
|
|
|
$
|
1.4
|
|
|
|
|
|
|
Energy contracts
|
|
Other current liabilities
|
|
—
|
|
|
10.1
|
|
|
|
|
|
|
Energy contracts
|
|
Other liabilities
|
|
—
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other current liabilities
|
|
129.6
|
|
|
176.4
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other liabilities
|
|
247.9
|
|
|
351.3
|
|
|
|
|
|
|
PHPC Warrants
|
|
Other liabilities
|
|
9.2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
389.5
|
|
|
$
|
543.1
|
|
|
|
|
|
The following tables present the effects of the Company’s derivative instruments on the Company’s Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Statement of Operations Location
|
|
Loss (Gain) Recognized in Statement of Operations
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Commodity contracts
|
|
Cost of goods sold
|
|
$
|
(11.5)
|
|
|
$
|
3.8
|
|
|
$
|
2.8
|
|
|
Energy contracts
|
|
Cost of goods sold
|
|
(43.1)
|
|
|
21.6
|
|
|
5.0
|
|
|
Foreign exchange contracts
|
|
Selling, general and administrative expenses
|
|
0.1
|
|
|
(0.1)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Interest expense, net
|
|
2.5
|
|
|
3.0
|
|
|
—
|
|
|
Interest rate swaps
|
|
(Income) expense on swaps, net
|
|
(122.8)
|
|
|
187.1
|
|
|
306.6
|
|
|
PHPC Warrants
|
|
Other income, net
|
|
(7.7)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Hedging Instruments
|
|
Loss (Gain) Recognized in OCI including NCI
|
|
Loss (Gain) Reclassified from Accumulated OCI including NCI into Earnings (a)
|
|
Statement of Operations Location
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
—
|
|
|
9.7
|
|
|
13.8
|
|
|
2.3
|
|
|
8.2
|
|
|
(31.0)
|
|
|
Interest expense, net
|
|
Cross-currency swaps
|
|
—
|
|
|
(32.2)
|
|
|
(54.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Expense (income) on swaps, net
|
(a)For the year ended September 30, 2021, this amount includes the amortization of previously unrealized losses on BellRing’s interest rate swaps that were de-designated as hedging instruments as of April 1, 2020. For the year ended September 30, 2020, this amount includes the amortization of previously unrealized losses on interest rate swaps that were de-designated as hedging instruments in the first quarter of fiscal 2020, as well as the amortization of previously unrealized losses on BellRing’s interest rate swaps that were de-designated as hedging instruments as of April 1, 2020.
The following table presents the components of the Company’s net hedging losses (gains) on interest rate swaps, as well as cash settlements paid (received) during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
September 30,
|
|
Statement of Operations Location
|
|
Mark-to-Market Loss (Gain), net
|
|
Net Loss Reclassified from Accumulated OCI including NCI (a)
|
|
Total Net Hedging Loss (Gain)
|
|
Cash Settlements Paid (Received), Net
|
|
|
|
Interest expense, net
|
|
$
|
0.2
|
|
|
$
|
2.3
|
|
|
$
|
2.5
|
|
|
$
|
4.8
|
|
|
|
|
Expense on swaps, net
|
|
(122.8)
|
|
|
—
|
|
|
(122.8)
|
|
|
40.1
|
|
|
2021
|
|
Total
|
|
$
|
(122.6)
|
|
|
$
|
2.3
|
|
|
$
|
(120.3)
|
|
|
$
|
44.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
$
|
1.6
|
|
|
$
|
8.4
|
|
|
$
|
10.0
|
|
|
$
|
1.8
|
|
|
|
|
Expense on swaps, net
|
|
187.1
|
|
|
—
|
|
|
187.1
|
|
|
69.7
|
|
|
2020
|
|
Total
|
|
$
|
188.7
|
|
|
$
|
8.4
|
|
|
$
|
197.1
|
|
|
$
|
71.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
$
|
(31.0)
|
|
|
$
|
—
|
|
|
$
|
(31.0)
|
|
|
$
|
(31.0)
|
|
|
|
|
Expense on swaps, net
|
|
306.6
|
|
|
—
|
|
|
306.6
|
|
|
13.5
|
|
|
2019
|
|
Total
|
|
$
|
275.6
|
|
|
$
|
—
|
|
|
$
|
275.6
|
|
|
$
|
(17.5)
|
|
(a)For the year ended September 30, 2021, this amount includes the amortization of previously unrealized losses on BellRing’s interest rate swaps that were de-designated as hedging instruments as of April 1, 2020. For the year ended September 30, 2020, this amount includes the amortization of previously unrealized losses on interest rate swaps that were de-designated as hedging instruments in the first quarter of fiscal 2020, as well as the amortization of previously unrealized losses on BellRing’s interest rate swaps that were de-designated as hedging instruments as of April 1, 2020.
Accumulated OCI, including amounts reported as NCI, included a $92.5 net gain on hedging instruments before taxes ($69.6 after taxes) at September 30, 2021, compared to a $90.2 net gain before taxes ($67.9 after taxes) at September 30, 2020. Approximately $2.3 of the net hedging losses reported in accumulated OCI at September 30, 2021 are expected to be reclassified into earnings within the next 12 months. Accumulated OCI included settlements of and previously unrealized gains on cross-currency swaps of $99.5 at both September 30, 2021 and 2020, respectively. In connection with the settlements and terminations of cross-currency swaps during fiscal 2020 and 2019, the Company recognized gains in accumulated OCI of $63.0 and $31.7 during the years ended September 30, 2020 and 2019, respectively. Reclassification of these amounts recorded in accumulated OCI into earnings will only occur in the event all U.K.-based operations are substantially liquidated.
At September 30, 2021 and 2020, the Company had pledged collateral of $6.4 and $4.9, respectively, related to its commodity and energy contracts. These amounts were classified as “Restricted cash” on the Consolidated Balance Sheets.
NOTE 15 — FAIR VALUE MEASUREMENTS
The following table presents the assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820, “Fair Value Measurement.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation investment
|
$
|
15.5
|
|
|
$
|
15.5
|
|
|
$
|
—
|
|
|
$
|
12.8
|
|
|
$
|
12.8
|
|
|
$
|
—
|
|
|
Derivative assets
|
65.8
|
|
|
—
|
|
|
65.8
|
|
|
14.7
|
|
|
—
|
|
|
14.7
|
|
|
Equity securities
|
28.9
|
|
|
28.9
|
|
|
—
|
|
|
27.9
|
|
|
27.9
|
|
|
—
|
|
|
|
$
|
110.2
|
|
|
$
|
44.4
|
|
|
$
|
65.8
|
|
|
$
|
55.4
|
|
|
$
|
40.7
|
|
|
$
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation liabilities
|
$
|
36.0
|
|
|
$
|
—
|
|
|
$
|
36.0
|
|
|
$
|
29.7
|
|
|
$
|
—
|
|
|
$
|
29.7
|
|
|
Derivative liabilities
|
389.5
|
|
|
9.2
|
|
|
380.3
|
|
|
543.1
|
|
|
—
|
|
|
543.1
|
|
|
|
$
|
425.5
|
|
|
$
|
9.2
|
|
|
$
|
416.3
|
|
|
$
|
572.8
|
|
|
$
|
—
|
|
|
$
|
572.8
|
|
The deferred compensation investments are primarily invested in mutual funds, and the fair value is measured using the market approach. These investments are in the same funds, or funds that employ a similar investment strategy, and are purchased in substantially the same amounts, as the participants’ selected investment options (excluding Post common stock equivalents), which represent the underlying liabilities to participants in the Company’s deferred compensation plans. Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants’ selected investment options (excluding certain Post common stock equivalents to be distributed in shares) using the market approach.
The Company utilizes the income approach to measure fair value for its commodity and energy derivatives. The income approach uses pricing models that rely on market observable inputs such as yield curves and forward prices. Foreign exchange contracts are valued using the spot rate less the forward rate multiplied by the notional amount. The Company’s calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve. Refer to Note 14 for the classification of changes in fair value of derivative assets and liabilities measured at fair value on a recurring basis within the Consolidated Statements of Operations.
Investments held in trust are invested in a fund consisting entirely of U.S. treasury securities (see Note 4). The fund is valued at net asset per share (“NAV”), and as such, in accordance with ASC Topic 820, the investments have not been classified in the fair value hierarchy. Investments held in trust are reported at fair value on the Consolidated Balance Sheet (see Note 4).
To calculate the fair value of the PHPC Warrants, the PHPC Warrants were initially valued using the Monte Carlo Option Pricing Method. The initial fair value measurement was categorized as Level 3, as the fair values utilized significant unobservable inputs. However, as of September 30, 2021, the PHPC Warrants were valued using the market approach based on quoted prices as the PHPC Warrants became actively traded on the NYSE during the fourth quarter of fiscal 2021 and are now categorized as Level 1. For additional information on the PHPC Warrants, see Notes 4 and 14.
The initial fair value of each PHPC Warrant was estimated on the date of grant using the Monte Carlo Option Pricing Method. Inherent in the Monte Carlo Option Pricing Method are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. PHPC estimated the volatility of the PHPC Warrants based on implied volatility from historical volatility of select peer companies’ common stock that matches the expected remaining life of the PHPC Warrants. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield curve for a maturity similar to the expected remaining life of the PHPC Warrants. The expected life of the PHPC Warrants was assumed to be equivalent to their remaining contractual term. PHPC anticipates the dividend rate will remain at zero.
The following table presents the assumptions used for the initial measurement of the PHPC Warrants on May 28, 2021.
|
|
|
|
|
|
|
|
|
|
|
May 28, 2021
|
|
|
|
Expected term (in years)
|
5.0
|
|
|
|
Exercise price
|
$11.50
|
|
|
|
Stock price
|
$9.45
|
|
|
|
Expected stock price volatility
|
27.0%
|
|
|
|
Risk-free interest rate
|
1.21%
|
|
|
|
Expected dividends
|
0%
|
|
|
|
Fair value (per PHPC Warrant)
|
$1.66
|
|
|
The Company uses the market approach to measure the fair value of its equity securities.
The Company’s financial assets and liabilities also include cash and cash equivalents, receivables and accounts payable for which the carrying value approximates fair value due to their short maturities (less than 12 months). The Company does not record its current portion of long-term debt and long-term debt at fair value on the Consolidated Balance Sheets. The fair value of the outstanding borrowings under the municipal bond and BellRing’s Revolving Credit Facility (as defined in Note 17) as of September 30, 2021 approximated its carrying value. Based on current market rates, the fair value of the Company’s debt, excluding outstanding borrowings under the municipal bond and BellRing’s Revolving Credit Facility (both of which are categorized as Level 2), was $7,210.5 and $7,277.8 as of September 30, 2021 and 2020, respectively.
Certain assets and liabilities, including property, goodwill, other intangible assets and assets held for sale, are measured at fair value on a non-recurring basis.
In the years ended September 30, 2021 and 2020, no impairment charge was recorded for goodwill or definite-lived or indefinite-lived intangibles. In the year ended September 30, 2019, the Company recorded goodwill and definite-lived intangible asset impairment charges of $63.3. These losses were recorded as “Impairment of goodwill and other intangible assets” in the Consolidated Statement of Operations. For additional information on other intangible assets and goodwill, see Note 2 and Note 8, respectively. There were no other fair value measurement losses recognized during the years ended September 30, 2021, 2020 or 2019.
At September 30, 2020, the Company had land and buildings classified as assets held for sale related to the closures of the Clinton Plant, the Asheboro Facility and the Corby Facility. The Company sold the Asheboro Facility, the Corby Facility and the Clinton Plant in fiscal 2021. The Clinton Plant and the Asheboro Facility were both reported in the Post Consumer Brands segment, and the Corby Facility was reported in the Weetabix segment. For additional information on assets held for sale, see Note 7. The fair value of assets held for sale was measured on a non-recurring basis based on the lower of book value or third party valuations. When applicable, the fair value is adjusted to reflect an offer to purchase the assets. The fair value measurement was categorized as Level 3, as the fair values utilize significant unobservable inputs. The following table summarizes the Level 3 activity.
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
$
|
9.9
|
|
|
|
|
|
Losses related to assets held for sale
|
(2.7)
|
|
|
Proceeds from the sale of assets held for sale
|
(2.4)
|
|
|
|
|
|
|
|
|
Transfers of assets into held for sale
|
2.5
|
|
|
Balance, September 30, 2020
|
$
|
7.3
|
|
|
|
|
|
|
|
|
|
|
|
Net gain related to assets held for sale
|
0.5
|
|
|
Proceeds from the sale of assets held for sale
|
(7.9)
|
|
|
|
|
|
Currency translation adjustment
|
0.1
|
|
|
|
|
|
Balance, September 30, 2021
|
$
|
—
|
|
NOTE 16 — LEASES
The Company leases office space, certain warehouses, manufacturing facilities and equipment primarily through operating lease agreements. The Company has no material finance lease agreements. Leases have remaining terms which range from 1 to 55 years and most leases provide the Company with the option to exercise one or more renewal terms. The weighted average remaining lease term of the Company’s operating leases was approximately 9 years and 7 years as of September 30, 2021 and 2020, respectively, and the weighted average IBR was 4.67% and 4.44% as of September 30, 2021 and 2020, respectively.
ROU assets are recorded as “Other assets” and lease liabilities are recorded as “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets. Operating lease expense is recognized on a straight-line basis over the lease term and is included in either “Cost of goods sold” or “Selling, general and administrative expenses” in the Consolidated Statements of Operations. Costs associated with finance leases and lease income do not have a material impact on the Company’s financial statements.
The following table presents the balance sheet location of the Company’s operating leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
ROU assets:
|
|
|
|
|
Other assets
|
$
|
125.2
|
|
|
$
|
116.3
|
|
|
|
|
|
|
|
Lease liabilities:
|
|
|
|
|
Other current liabilities
|
$
|
25.8
|
|
|
$
|
23.6
|
|
|
Other liabilities
|
113.8
|
|
|
103.0
|
|
|
Total lease liabilities
|
$
|
139.6
|
|
|
$
|
126.6
|
|
The following table presents maturities of the Company’s operating lease liabilities.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
Fiscal 2022
|
$
|
31.7
|
|
|
|
|
Fiscal 2023
|
28.1
|
|
|
|
|
Fiscal 2024
|
21.4
|
|
|
|
|
Fiscal 2025
|
15.3
|
|
|
|
|
Fiscal 2026
|
13.9
|
|
|
|
|
Thereafter
|
65.7
|
|
|
|
|
Total future minimum payments
|
$
|
176.1
|
|
|
|
|
Less: Implied interest
|
36.5
|
|
|
|
|
Total lease liabilities
|
$
|
139.6
|
|
|
|
The following table presents supplemental operations statement information related to the Company’s operating leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019 (a)
|
|
Operating lease expense
|
$
|
43.8
|
|
|
$
|
42.0
|
|
|
$
|
40.1
|
|
|
Variable lease expense
|
5.5
|
|
|
5.1
|
|
n/a
|
|
Short-term lease expense
|
7.5
|
|
|
7.5
|
|
n/a
|
(a)Rent expense as reported under ASC Topic 840, “Leases.”
Operating cash flows for amounts included in the measurement of the Company’s operating lease liabilities for the years ended September 30, 2021 and 2020 were $31.4 and $29.6, respectively. ROU assets obtained in exchange for operating lease liabilities during the years ended September 30, 2021 and 2020 were $33.9 and $5.6, respectively. Of the $33.9 ROU assets obtained in exchange for operating lease liabilities during the year ended September 30, 2021, $27.7 related to the acquisition of Almark (see Note 5).
NOTE 17 — LONG-TERM DEBT
Long-term debt as of the dates indicated consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
4.50% Senior Notes maturing September 2031
|
$
|
1,800.0
|
|
|
$
|
—
|
|
|
4.625% Senior Notes maturing April 2030
|
1,650.0
|
|
|
1,650.0
|
|
|
5.50% Senior Notes maturing December 2029
|
750.0
|
|
|
750.0
|
|
|
5.625% Senior Notes maturing January 2028
|
940.9
|
|
|
940.9
|
|
|
|
|
|
|
|
5.75% Senior Notes maturing March 2027
|
1,299.3
|
|
|
1,299.3
|
|
|
5.00% Senior Notes maturing August 2026
|
—
|
|
|
1,697.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BellRing Term B Facility
|
609.9
|
|
|
673.7
|
|
|
BellRing Revolving Credit Facility
|
—
|
|
|
30.0
|
|
|
Municipal bond
|
7.5
|
|
|
8.5
|
|
|
|
|
|
|
|
|
$
|
7,057.6
|
|
|
$
|
7,049.7
|
|
|
Less: Current portion of long-term debt
|
117.4
|
|
|
64.9
|
|
|
Debt issuance costs, net
|
51.9
|
|
|
62.6
|
|
|
Plus: Unamortized premium and discount, net
|
34.5
|
|
|
36.8
|
|
|
Total long-term debt
|
$
|
6,922.8
|
|
|
$
|
6,959.0
|
|
Senior Notes
On August 3, 2016, the Company issued $1,750.0 principal value of 5.00% senior notes maturing in August 2026. The 5.00% senior notes were issued at par, and the Company received $1,725.7 after paying related fees of $24.3, which were deferred and were being amortized to interest expense over the term of the notes. On February 8, 2019, the Company received consents (the “Requisite Consents”) from holders of a majority of the aggregate principal amount of the then outstanding 5.00% senior notes to approve amendments to the indenture relating to the 5.00% senior notes (the “Indenture”). Following receipt of the Requisite Consents, the Company, its subsidiary guarantors and the trustee for the Indenture executed a supplemental indenture to give effect to the amendments. The supplemental indenture more closely aligned certain provisions of the Indenture with the comparable provisions included in the indentures for the Company’s other senior notes, specifically to (i) add an exception to the restricted payments covenant in the Indenture and (ii) revise the “Permitted Investments” definition in the Indenture to add an additional category of Permitted Investments under the Indenture. In connection with the required consents, the Company incurred $8.4 of debt modification costs during the year ended September 30, 2019, which were deferred and were being amortized to interest expense over the term of the 5.00% senior notes, and recorded expense of $1.3 in the year ended September 30, 2019, which was included in “Selling, general and administrative expenses” in the Consolidated Statement of Operations.
On February 14, 2017, the Company issued $750.0 principal value of 5.75% senior notes maturing in March 2027. The 5.75% senior notes were issued at par, and the Company received $739.5 after paying related fees of $10.5, which were deferred and are being amortized to interest expense over the term of the notes. On August 10, 2017, the Company issued an additional $750.0 principal value of 5.75% senior notes maturing in March 2027. The additional 5.75% senior notes were issued at 105.5% of par value, and the Company received $784.0 after paying related fees of $7.2, which were deferred and are being amortized to interest expense over the term of the 5.75% senior notes. The premium related to the 5.75% senior notes was recorded as an unamortized premium, and is being amortized as a reduction to interest expense over the term of the notes. Interest payments on the 5.75% senior notes are due semi-annually each March 1 and September 1.
On December 1, 2017, the Company issued $1,000.0 principal value of 5.625% senior notes maturing in January 2028. The 5.625% senior notes were issued at par, and the Company received $990.6 after paying related fees of $9.4, which were deferred and are being amortized to interest expense over the term of the notes. Interest payments on the 5.625% senior notes are due semi-annually each January 15 and July 15.
On July 3, 2019, the Company issued $750.0 principal value of 5.50% senior notes maturing in December 2029. The 5.50% senior notes maturing in December 2029 were issued at par, and the Company received $743.0 after incurring investment banking and other fees and expenses of $7.0, which were deferred and are being amortized to interest expense over the term of the notes. Interest payments on the 5.50% senior notes maturing in December 2029 are due semi-annually each June 15 and December 15.
On February 26, 2020, the Company issued $1,250.0 principal value of 4.625% senior notes maturing in April 2030. The 4.625% senior notes were issued at par, and the Company received $1,241.0 after incurring investment banking and other fees and expenses of $9.0, which were deferred and are being amortized to interest expense over the term of the notes. Interest payments on the 4.625% senior notes are due semi-annually each April 15 and October 15, and began on October 15, 2020. On August 14, 2020, the Company issued an additional $400.0 principal value of 4.625% senior notes maturing in April 2030. The additional 4.625% senior notes were issued at a price of 105.5% of the par value and the Company received $417.5 after incurring investment banking and other fees and expenses of $4.5 which were deferred and are being amortized to interest expense over the term of the notes. The premium related to the 4.625% senior notes was recorded as an unamortized premium, and is being amortized as a reduction of interest expense over the term of the notes.
On March 10, 2021, the Company issued $1,800.0 principal value of 4.50% senior notes maturing in September 2031. The 4.50% senior notes were issued at par, and the Company received $1,783.2 after incurring investment banking and other fees and expenses of $16.8, which were deferred and are being amortized to interest expense over the term of the notes. Interest payments are due semi-annually each March 15 and September 15, and began on September 15, 2021. With the net proceeds received from the issuance, the Company redeemed the outstanding principal balance of the 5.00% senior notes. For additional information, see “Repayments of Long-Term Debt” below.
All of the Company’s senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of the Company’s existing and future domestic subsidiaries, other than immaterial subsidiaries, receivables finance subsidiaries and subsidiaries the Company designated as unrestricted subsidiaries, which such unrestricted subsidiaries includes 8th Avenue and its subsidiaries, BellRing Brands, Inc. and its subsidiaries, PHPC and PHPC Sponsor. These guarantees are subject to release in certain circumstances.
Credit Agreement
On March 18, 2020, the Company entered into a second amended and restated credit agreement (as amended, restated or amended and restated, the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $750.0 (the “Revolving Credit Facility”), with the commitments thereunder to be made available to the Company in U.S. Dollars, Canadian Dollars, Euros and Pounds Sterling. Letters of credit are available under the Credit Agreement in an aggregate amount of up to $75.0. The Company incurred $3.6 of issuance costs during the year ended September 30, 2020 in connection with entering into the Credit Agreement, which were deferred and are being amortized to interest expense over the term of the Credit Agreement. Additionally, the Company recorded write-offs of debt issuance costs of $0.8 in the year ended September 30, 2020, which were included in “Loss on extinguishment of debt, net” in the Consolidated Statement of Operations.
The Revolving Credit Facility has outstanding letters of credit of $19.2, which reduced the available borrowing capacity under the Revolving Credit Facility to $730.8 at September 30, 2021. Any outstanding amounts under the Revolving Credit Facility must be repaid on or before March 18, 2025.
The Credit Agreement provides for potential incremental revolving and term facilities at the request of the Company and at the discretion of the lenders or other persons providing such incremental facilities, in each case on terms to be determined, and also permits the Company to incur other secured or unsecured debt, in all cases subject to conditions and limitations on the amount as specified in the Credit Agreement.
The Credit Agreement permits the Company to designate certain of its subsidiaries as unrestricted subsidiaries and once so designated, permits the disposition of (and authorizes the release of liens on) the assets of, and the equity interests in, such unrestricted subsidiaries and permits the release of such unrestricted subsidiaries as guarantors under the Credit Agreement. The Company’s obligations under the Credit Agreement are unconditionally guaranteed by its existing and subsequently acquired or organized domestic subsidiaries (other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries the Company designates as unrestricted subsidiaries, which include 8th Avenue and its subsidiaries, BellRing Brands, Inc. and its subsidiaries, PHPC and PHPC Sponsor) and are secured by security interests in substantially all of the Company’s assets and the assets of its subsidiary guarantors, but excluding, in each case, real property.
Borrowings under the Revolving Credit Facility bear interest, at the option of the Company, at an annual rate equal to either (a) the Eurodollar rate or (b) the base rate determined by reference to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month Eurodollar rate plus 1.00% per annum, in each case plus an applicable margin, which initially were 1.50% for Eurodollar rate-based loans and 0.50% for base rate-based loans, and thereafter, will be determined by reference to the secured net leverage ratio (as defined in the Credit Agreement), with the applicable margin for Eurodollar rate loans and base rate loans being (i) 2.00% and 1.00%, respectively, if the secured net leverage ratio is greater than or equal to 3.00:1.00, (ii) 1.75% and 0.75%, respectively, if the secured net leverage ratio is less than 3.00:1.00 and greater than or equal to 1.50:1.00 or (iii) 1.50% and 0.50%, respectively, if the secured net leverage ratio is less than 1.50:1.00. Commitment fees on the daily unused amount of commitments under the Revolving Credit Facility initially accrued at the rate
of 0.25%, and thereafter, will accrue at a rate of 0.375% if the Company’s secured net leverage ratio is greater than 3.00:1.00, and will accrue at a rate of 0.25% if the Company’s secured net leverage ratio is less than or equal to 3.00:1.00.
On September 3, 2021, the Company entered into an amendment to the Credit Agreement to change the reference interest rate applicable to revolving loan borrowings in Pounds Sterling from a Eurodollar rate-based rate to a rate based on the Sterling Overnight Index Average.
The Credit Agreement provides for customary events of default, including material breach of representations and warranties, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or default under certain other indebtedness in excess of $100.0, certain events of bankruptcy and insolvency, inability to pay debts, the occurrence of one or more unstayed or undischarged judgments in excess of $100.0, attachments issued against all or any material part of the Company’s property, certain events under the Employee Retirement Income Security Act of 1974 (“ERISA”), a change of control (as defined in the Credit Agreement), the invalidity of any loan document and the failure of the collateral documents to create a valid and perfected first priority lien (subject to certain permitted liens). Upon the occurrence and during the continuance of an event of default, the maturity of the loans under the Credit Agreement may accelerate and the agent and lenders under the Credit Agreement may exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees of the Company’s obligations under the Credit Agreement.
2020 Bridge Loan
On October 11, 2019, in connection with the BellRing IPO and the formation transactions, the Company entered into a $1,225.0 bridge facility agreement (the “2020 Bridge Loan Facility”) and borrowed $1,225.0 under the 2020 Bridge Loan Facility (the “2020 Bridge Loan”). On October 21, 2019, BellRing entered into a borrower assignment and assumption agreement with the Company and the administrative agent under the 2020 Bridge Loan Facility, under which BellRing became the borrower under the 2020 Bridge Loan and assumed all interest of $2.2 thereunder, and the Company and its subsidiary guarantors (other than BellRing and its domestic subsidiaries) were released from all material obligations thereunder. The Company retained the net cash proceeds of the 2020 Bridge Loan, and following the assumption by BellRing of the 2020 Bridge Loan Facility, used the cash proceeds of the 2020 Bridge Loan to repay a portion of the $1,309.5 principal balance of its previously outstanding Term Loan (as defined below). The domestic subsidiaries of BellRing continued to guarantee the 2020 Bridge Loan, and BellRing’s obligations under the 2020 Bridge Loan became secured by a first priority security interest in substantially all of the assets (other than real property) of BellRing and in substantially all of the assets of its subsidiary guarantors. On October 21, 2019, the 2020 Bridge Loan was repaid in full by BellRing. In connection with the 2020 Bridge Loan Facility, the Company incurred issuance costs of $19.1, of which $15.3 were refunded to the Company at the closing of the BellRing IPO on October 21, 2019, and the remaining $3.8 of issuance costs were written off and included in “Loss on extinguishment of debt, net” in the Consolidated Statement of Operations for the year ended September 30, 2020.
Municipal Bond
In connection with the ongoing construction of a filtration system at the Company’s potato plant in Chaska, Minnesota, the Company incurred debt that guarantees the repayment of certain industrial revenue bonds used to finance the construction of the project. Principal payments are due annually on March 1, and interest payments are due semi-annually each March 1 and September 1. The debt matures on March 1, 2028.
BellRing’s Credit Agreement and Senior Debt Facilities
On October 21, 2019, BellRing entered into a credit agreement (as amended, restated or amended and restated, the “BellRing Credit Agreement”), which provides for a term B loan facility in an aggregate principal amount of $700.0 (the “BellRing Term B Facility”) and a revolving credit facility in an aggregate principal amount of $200.0 (the “BellRing Revolving Credit Facility”), with the commitments under the BellRing Revolving Credit Facility to be made available to BellRing in U.S. Dollars, Euros and Pounds Sterling. Letters of credit are available under the BellRing Credit Agreement in an aggregate amount of up to $20.0. Any outstanding amounts under the BellRing Revolving Credit Facility and BellRing Term B Facility must be repaid on or before October 21, 2024.
On October 21, 2019, BellRing borrowed the full amount under the BellRing Term B Facility and $100.0 under the BellRing Revolving Credit Facility. The BellRing Term B Facility was issued at 98.0% of par and BellRing received $776.4 from the BellRing Term B Facility and BellRing Revolving Credit Facility after accounting for the original issue discount of $14.0 and paying investment banking and other fees of $9.6, which were deferred and are being amortized to interest expense over the terms of the loans. BellRing used the proceeds, together with the net proceeds of the BellRing IPO that were contributed to it by BellRing Brands, Inc., (i) to repay in full the $1,225.0 of borrowings under the 2020 Bridge Loan and all interest thereunder and related costs and expenses, (ii) to pay directly, or reimburse the Company for, as applicable, all fees and expenses incurred by BellRing Brands, Inc., BellRing or the Company in connection with the BellRing IPO and the formation transactions, (iii) to reimburse the Company for the amount of cash on BellRing’s balance sheet immediately prior to
the completion of the BellRing IPO and (iv) for general corporate and working capital purposes, as well as to repay $20.0 of outstanding borrowings under the BellRing Revolving Credit Facility.
On February 26, 2021, BellRing entered into a second amendment to the BellRing Credit Agreement (the “BellRing Amendment”). The BellRing Amendment provided for the refinancing of the BellRing Term B Facility on substantially the same terms as in effect prior to the BellRing Amendment, except that it (i) reduced the interest rate margin by 100 basis points, resulting in (A) for Eurodollar rate loans, an interest rate of the Eurodollar rate plus a margin of 4.00% and (B) for base rate loans, an interest rate of the base rate plus a margin of 3.00%, (ii) reduced the floor for the Eurodollar rate to 0.75%, (iii) modified the BellRing Credit Agreement to address the anticipated unavailability of LIBOR (used to determine the interest rate for Eurodollar rate loans) as a reference interest rate and (iv) provided that if on or before August 26, 2021 BellRing repaid the BellRing Term B Facility in whole or in part with the proceeds of new or replacement debt at a lower effective interest rate, or further amended the BellRing Credit Agreement to reduce the effective interest rate applicable to the BellRing Term B Facility, BellRing would have paid a 1.00% premium on the amount repaid or subject to the interest rate reduction. BellRing did not repay the BellRing Term B Facility or further amend the BellRing Credit Agreement on or before August 26, 2021. In connection with the BellRing Amendment, BellRing paid debt refinancing fees of $1.6 in the year ended September 30, 2021 which were included in “Loss on extinguishment and refinancing of debt, net” in the Consolidated Statement of Operations.
Prior to the BellRing Amendment, borrowings under the BellRing Term B Facility bore interest, at the option of BellRing, at an annual rate equal to either (a) the Eurodollar rate (with a floor of 1.00%) or (b) the base rate determined by reference to the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.50% per annum and (iii) the one-month Eurodollar rate plus 1.00% per annum, in ease cash plus an applicable margin of 5.00% for Eurodollar rate-based loans and 4.00% for base rate-based loans. Subsequent to the BellRing Amendment, borrowings under the BellRing Term B Facility bear interest, at the option of BellRing, at an annual rate equal to either (a) the Eurodollar rate or (b) the base rate determined by reference to the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.50% per annum and (iii) the one-month Eurodollar rate plus 1.00% per annum, in each case plus an applicable margin of 4.00% for Eurodollar rate-based loans and 3.00% for base rate-based loans.
The BellRing Term B Facility requires quarterly scheduled amortization payments of $8.75, which began on March 31, 2020, with the balance to be paid at maturity on October 21, 2024. Interest was paid on each Interest Payment Date (as defined in the BellRing Credit Agreement) during the years ended September 30, 2021 and 2020. The BellRing Term B Facility contains customary mandatory prepayment provisions, including provisions for mandatory prepayment (a) from the net cash proceeds of certain asset sales and (b) of 75% of consolidated excess cash flow (as defined in the BellRing Credit Agreement) (which percentage will be reduced to 50% if the secured net leverage ratio (as defined in the BellRing Credit Agreement) is less than or equal to 3.35:1.00 as of a fiscal year end). During the year ended September 30, 2021, BellRing repaid $28.8 on the BellRing Term B Facility as a mandatory prepayment from fiscal 2020 excess cash flow, which was in addition to the scheduled amortization payments. The Company classified $81.3 related to the estimated mandatory prepayment of fiscal 2021 excess cash flow in “Current portion of long-term debt” on the Consolidated Balance Sheet at September 30, 2021. BellRing may prepay the BellRing Term B Facility at its option without penalty or premium. The interest rate on the BellRing Term B Facility was 4.75% and 6.00% at September 30, 2021 and 2020, respectively.
Borrowings under the BellRing Revolving Credit Facility bear interest, at the option of BellRing, at an annual rate equal to either the Eurodollar rate or the base rate (determined as described above) plus a margin, which initially was 4.25% for Eurodollar rate-based loans and 3.25% for base rate-based loans, and thereafter, will be determined by reference to the secured net leverage ratio, with the applicable margin for Eurodollar rate-based loans and base rate-based loans being (i) 4.25% and 3.25%, respectively, if the secured net leverage ratio is greater than or equal to 3.50:1.00, (ii) 4.00% and 3.00%, respectively, if the secured net leverage ratio is less than 3.50:1.00 and greater than or equal to 2.50:1.00 or (iii) 3.75% and 2.75%, respectively, if the secured net leverage ratio is less than 2.50:1.00. Facility fees on the daily unused amount of commitments under the BellRing Revolving Credit Facility initially accrued at the rate of 0.50% per annum and thereafter, depending on BellRing’s secured net leverage ratio, will accrue at rates ranging from 0.25% to 0.50% per annum. There were no amounts drawn under the BellRing Revolving Credit Facility as of September 30, 2021. The interest rate on the drawn portion of the BellRing Revolving Credit Facility was 5.25% at September 30, 2020.
During the years ended September 30, 2021 and 2020, BellRing borrowed $20.0 and $195.0, respectively, under the BellRing Revolving Credit Facility and repaid $50.0 and $165.0, respectively, under the BellRing Revolving Credit Facility. The available borrowing capacity under the BellRing Revolving Credit Facility was $200.0 and $170.0 as of September 30, 2021 and 2020, respectively. There were no outstanding letters of credit as of September 30, 2021 or 2020.
The BellRing Credit Agreement provides for incremental revolving and term facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the BellRing Credit Agreement.
The BellRing Credit Agreement provides for customary events of default, including material breach of representations and warranties, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or default under certain other material indebtedness, certain events of bankruptcy and insolvency, inability to pay debts, the occurrence of one or more unstayed or undischarged judgments in excess of $65.0, certain events under ERISA, the invalidity of any loan document, a change in control and the failure of the collateral documents to create a valid and perfected first priority lien. Upon the occurrence and during the continuance of an event of default, the maturity of the loans under the BellRing Credit Agreement may accelerate and the agent and lenders under the BellRing Credit Agreement may exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees of BellRing’s obligations under the BellRing Credit Agreement.
Obligations under the BellRing Credit Agreement are guaranteed by the existing and subsequently acquired or organized domestic subsidiaries of BellRing (other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries of BellRing it designates as unrestricted subsidiaries) and are secured by security interests in substantially all of the assets of BellRing and the assets of its subsidiary guarantors (other than real estate), subject to limited exceptions. The Company and its subsidiaries (other than BellRing and certain of its subsidiaries) are not obligors or guarantors under the BellRing debt facilities.
As of September 30, 2021, expected principal payments on the Company’s debt, including debt attributable to BellRing, for the next five fiscal years are shown in the following table.
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Fiscal 2022
|
$
|
117.4
|
|
|
Fiscal 2023
|
36.1
|
|
|
Fiscal 2024
|
36.1
|
|
|
Fiscal 2025
|
424.8
|
|
|
Fiscal 2026
|
1.2
|
|
Estimated future interest payments on the Company’s and BellRing’s debt through fiscal 2026 are expected to be $1,712.3 (with $354.8 expected in fiscal 2022) based on the interest rates at September 30, 2021, scheduled amortization payments and estimated mandatory prepayment by BellRing of BellRing fiscal 2022 excess cash flow.
Repayments of Long-Term Debt
The following table shows the Company’s repayments of long-term debt and associated gain or loss included in “Loss on extinguishment and refinancing of debt, net” in the Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of Long-Term Debt
|
|
Loss on Extinguishment and Refinancing of Debt, net
|
Year Ended
September 30,
|
|
Issuance
|
|
Principal Amount Repaid
|
|
Debt Repurchased at a Discount
|
|
Premium and Debt Refinancing Fees Paid
|
|
Write-off of Debt Issuance Costs
|
|
Write-off of Unamortized Premium
|
|
|
|
5.00% Senior Notes
|
|
$
|
1,697.3
|
|
|
$
|
—
|
|
|
$
|
74.3
|
|
|
$
|
18.9
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BellRing Revolving Credit Facility
|
|
50.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BellRing Term B Facility
|
|
63.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Municipal bond
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
BellRing Credit Agreement
|
|
—
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
2021
|
|
Total
|
|
$
|
1,812.1
|
|
|
$
|
—
|
|
|
$
|
75.9
|
|
|
$
|
18.9
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
$
|
1,309.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.1
|
|
|
$
|
—
|
|
|
|
|
2020 Bridge Loan
|
|
1,225.0
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
|
|
5.50% Senior Notes maturing in March 2025
|
|
1,000.0
|
|
|
—
|
|
|
41.3
|
|
|
8.7
|
|
|
—
|
|
|
|
|
Revolving Credit Facility
|
|
500.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
BellRing Revolving Credit Facility
|
|
165.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
8.00% Senior Notes
|
|
122.2
|
|
|
—
|
|
|
8.5
|
|
|
0.7
|
|
|
—
|
|
|
|
|
BellRing Term B Facility
|
|
26.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Municipal bond
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Agreement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
2020
|
|
Total
|
|
$
|
4,349.1
|
|
|
$
|
—
|
|
|
$
|
49.8
|
|
|
$
|
23.1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
$
|
863.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.6
|
|
|
$
|
—
|
|
|
|
|
5.75% Senior Notes
|
|
27.0
|
|
|
(1.5)
|
|
|
—
|
|
|
0.3
|
|
|
(0.7)
|
|
|
|
|
5.625% Senior Notes
|
|
20.0
|
|
|
(1.3)
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
|
|
5.00% Senior Notes
|
|
13.0
|
|
|
(1.2)
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Bridge Loan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
2019
|
|
Total
|
|
$
|
923.1
|
|
|
$
|
(4.0)
|
|
|
$
|
—
|
|
|
$
|
10.8
|
|
|
$
|
(0.7)
|
|
Debt Covenants
Credit Agreement
Under the terms of the Credit Agreement, the Company is required to comply with a financial covenant consisting of a secured net leverage ratio (as defined in the Credit Agreement) not to exceed 4.25 to 1.00, measured as of the last day of any fiscal quarter, if, as of the last day of such fiscal quarter, the aggregate outstanding amount of all revolving credit loans, swing line loans and letter of credit obligations (subject to certain exceptions specified in the Credit Agreement) exceeds 30% of the Company’s revolving credit commitments. As of September 30, 2021, the Company was not required to comply with such financial covenant as the aggregate amount of the aforementioned obligations did not exceed 30% of the Company’s revolving credit commitments.
The Credit Agreement provides for incremental revolving and term loan facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the Credit Agreement.
BellRing Credit Agreement
Under the terms of the BellRing Credit Agreement, BellRing is required to comply with a financial covenant requiring BellRing to maintain a total net leverage ratio (as defined in the BellRing Credit Agreement) not to exceed 6.00 to 1.00, measured as of the last day of each fiscal quarter. The total net leverage ratio of BellRing did not exceed this threshold as of September 30, 2021.
The BellRing Credit Agreement provides for incremental revolving and term facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the BellRing Credit Agreement.
NOTE 18 — COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Antitrust Claims
In late 2008 and early 2009, approximately 22 class action lawsuits were filed in various federal courts against Michael Foods, Inc. (“MFI”), a wholly-owned subsidiary of the Company, and approximately 20 other defendants (producers of shell eggs and egg products and egg industry organizations), alleging violations of federal and state antitrust laws in connection with the production and sale of shell eggs and egg products, and seeking unspecified damages. All cases were transferred to the Eastern District of Pennsylvania for coordinated and/or consolidated pretrial proceedings.
The cases involved three plaintiff groups: (i) a nationwide class of direct purchasers of shell eggs (the “direct purchaser class”); (ii) individual companies (primarily large grocery chains and food companies that purchase considerable quantities of eggs) that opted out of various settlements and filed their own complaints related to their purchases of shell eggs and egg products (the “opt-out plaintiffs”); and (iii) indirect purchasers of shell eggs (the “indirect purchaser plaintiffs”).
Resolution of claims: To date, MFI has resolved the following claims, including all class claims: (i) in December 2016, MFI settled all claims asserted against it by the direct purchaser class for a payment of $75.0, which was approved by the district court in December 2017; (ii) in January 2017, MFI settled all claims asserted against it by opt-out plaintiffs related to shell egg purchases on confidential terms; (iii) in June 2018, MFI settled all claims asserted against it by indirect purchaser plaintiffs on confidential terms; and (iv) between June 2019 and September 2019, MFI individually settled on confidential terms egg product opt-out claims asserted against it by four separate opt-out plaintiffs. MFI has at all times denied liability in this matter, and no settlement contains any admission of liability by MFI.
Remaining portion of the cases: MFI remains a defendant only with respect to claims that seek damages based on purchases of egg products by three opt-out plaintiffs. The district court had granted summary judgment precluding any claims for egg products purchases by such opt-out plaintiffs, but the Third Circuit Court of Appeals reversed and remanded these claims for further pre-trial proceedings. Defendants filed a second motion for summary judgment seeking dismissal of the claims, which was denied in June 2019. The remaining opt-out plaintiffs have not yet been assigned trial dates.
Although the likelihood of a material adverse outcome in the egg antitrust litigation has been significantly reduced as a result of the MFI settlements described above, the remaining portion of the cases could still result in a material adverse outcome. At both September 30, 2021 and 2020, the Company had accrued $3.5 for this matter, which was included in “Other current liabilities” on the Consolidated Balance Sheets. The Company records reserves for litigation losses in accordance with ASC Topic 450, “Contingencies.” Under ASC Topic 450, a loss contingency is recorded if a loss is probable and can be reasonably estimated. The Company records probable loss contingencies based on the best estimate of the loss. If a range of loss can be reasonably estimated, but no single amount within the range appears to be a better estimate than any other amount within the range, the minimum amount in the range is accrued. These estimates are often initially developed earlier than when the ultimate loss is known, and the estimates are adjusted if additional information becomes known. Although the Company believes its accruals for this matter are appropriate, the final amounts required to resolve such matters could differ materially from recorded estimates and the Company’s consolidated financial condition, results of operations and cash flows could be materially affected.
During the year ended September 30, 2019, the Company expensed $5.0 related to these settlements, which was included in “Selling, general and administrative expenses” in the Consolidated Statement of Operations. No expense was recorded in the years ended September 30, 2021 and 2020 related to these matters. Under current law, any settlement paid, including the settlements with the direct purchaser plaintiffs, the opt-out plaintiffs and the indirect purchaser plaintiffs, is deductible for federal income tax purposes.
Bob Evans Appraisal Proceedings
Prior to completion of the Company’s acquisition of Bob Evans on January 12, 2018, Bob Evans received demands from certain stockholders demanding appraisal of their shares of Bob Evans common stock. After the completion of the acquisition, several such former stockholders filed petitions in the Delaware Court of Chancery (Arbitrage Fund v. Bob Evans Farms, Inc. filed on January 23, 2018; Blue Mountain Credit Alternatives Master Fund L.P., et al. v. Bob Evans Farms, Inc. filed on April 30, 2018; and 2017 Clarendon LLC, et al. v. Bob Evans Farms, Inc. filed on April 30, 2018) seeking appraisal of their shares of Bob Evans common stock pursuant to Section 262 of the Delaware General Corporation Law (“Section 262”). The lawsuits sought appraisal for such shares, plus statutory interest, as well as the costs of the proceedings and such other relief as appropriate. Under Section 262, persons who were stockholders at the time of the closing were entitled to have their shares appraised by the Delaware Court of Chancery and receive payment of the “fair value” of such shares (plus statutory interest) as determined by the Delaware Court of Chancery. In May 2018, the court consolidated the lawsuits into one action.
In December 2018, the Company settled with one petitioner, Arbitrage Fund, and Arbitrage Fund was dismissed with prejudice from the consolidated action. In addition, in December 2018, the Company pre-paid the $77.00 per share merger consideration to the Blue Mountain and 2017 Clarendon petitioners, effectively stopping the continued accrual of statutory interest on that amount. The Company made total payments of $257.6, inclusive of the aforementioned prepayment of $77.00 per share merger consideration, related to these matters in fiscal 2019. In September 2019, the Company reached settlement terms on a confidential basis with the remaining petitioners regarding their outstanding appraisal claims. The settlement was finalized and the remaining portion of the case was dismissed in October 2019. All former Bob Evans stockholders who demanded appraisal of their shares were paid for their shares of Bob Evans common stock.
All cash payments related to these matters that were not made prior to fiscal 2020 were made in October 2019 and there was no accrual reported on the Consolidated Balance Sheet at September 30, 2020. During the year ended September 30, 2019, the Company expensed $9.7 related to these matters. The expense was included in “Selling, general and administrative expenses” and “Interest expense, net” in the Consolidated Statement of Operations for the year ended September 30, 2019. No expense was recorded in the years ended September 30, 2021 and 2020 related to these matters.
Other
The Company is subject to various other legal proceedings and actions arising in the normal course of business. In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from such pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accruals for estimated liabilities (if any), are not expected to be material individually or in the aggregate to the consolidated financial condition, results of operations or cash flows of the Company. In addition, although it is difficult to estimate the potential financial impact of actions regarding expenditures for compliance with regulatory matters, in the opinion of management, based upon the information currently available, the ultimate liability arising from such compliance matters is not expected to be material to the consolidated financial condition, results of operations or cash flows of the Company.
Bob Evans Lease Guarantees
Historically, Bob Evans guaranteed certain payment and performance obligations associated with the leases for 143 properties (the “Guarantees”) leased by the restaurant business formerly owned by Bob Evans (the “Bob Evans Restaurant Business”). The Guarantees remained in effect following the Company’s acquisition of Bob Evans, but have subsequently been reduced to 129 properties. In the event the Bob Evans Restaurant Business fails to meet its payment and performance obligations under these leases, subject in certain cases to certain early termination allowances, the Company may be required to make rent and other payments to the landlord under the requirements of the Guarantees. Should the Company, as guarantor of the lease obligations, be required to make all lease payments due for the remaining term of the leases subsequent to September 30, 2021, the maximum amount the Company may be required to pay is equal to the annual rent amount for the remainder of the lease terms. The current annual rent on these leases is $12.8 and will increase up to 1.5% annually based on indexed inflation. The lease terms for the majority of the leases extend for approximately 16 years from September 30, 2021, and the Guarantees would remain in effect in the event the leases are extended for a renewal period. In the event the Company is obligated to make payments under any of the Guarantees, the Company believes its exposure is limited due to protections and recourse available in the leases associated with the leased properties, including a requirement of the landlord to mitigate damages by re-letting the properties in default. While the COVID-19 pandemic has impacted the restaurants industry generally, including the Bob Evans Restaurant Business, the Bob Evans Restaurant Business was able to amend certain of its leases during fiscal 2020 in order to ensure that it continues to meet its obligations under these leases, and there is no indication that the obligations will not continue to be met. As such, the Company believes the fair value of the Guarantees is immaterial as of September 30, 2021.
NOTE 19 — PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company maintains qualified defined benefit plans in the U.S., the U.K. and Canada for certain employees primarily within its Post Consumer Brands and Weetabix segments. Certain of the Company’s employees are eligible to participate in the Company’s postretirement benefit plans (partially subsidized retiree health and life insurance). The following disclosures reflect amounts related to the Company’s employees based on separate actuarial valuations, projections and certain allocations. Amounts for the Canadian plans are included in the North America disclosures and are not disclosed separately because they do not constitute a significant portion of the combined amounts. With respect to defined benefits for Canadian Post Consumer Brands employees, eligibility is frozen to new entrants and benefit accrual is frozen for salaried employees. With respect to defined benefits for U.S. Post Consumer Brands employees, the eligibility is frozen to new employees and the benefit accrual is frozen for all administrative employees and certain production employees. The benefit accrual is frozen for salaried Weetabix North America employees in the U.S. With respect to Weetabix employees in the U.K. participating in the executive and group schemes of the defined benefit pension plans, the plans are closed to new entrants and the benefit accrual is frozen with respect to existing participants.
Defined Benefit Pension Plans
The following table provides a reconciliation of the changes in the pension plans’ benefit obligations and fair value of assets over the two year period ended September 30, 2021 and a statement of the funded status and amounts recognized on the Consolidated Balance Sheets as of September 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Other International
|
|
|
Year Ended
September 30,
|
|
Year Ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Change in benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
$
|
131.1
|
|
|
$
|
121.5
|
|
|
$
|
834.4
|
|
|
$
|
780.5
|
|
|
Service cost
|
3.9
|
|
|
4.3
|
|
|
—
|
|
|
—
|
|
|
Interest cost
|
3.2
|
|
|
3.7
|
|
|
15.2
|
|
|
14.7
|
|
|
Plan participants’ contributions
|
0.4
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
Prior service cost (a)
|
0.5
|
|
|
—
|
|
|
—
|
|
|
11.4
|
|
|
Actuarial (gain) loss
|
(1.4)
|
|
|
6.6
|
|
|
(32.7)
|
|
|
17.6
|
|
|
Business combinations
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(5.8)
|
|
|
(5.4)
|
|
|
(34.7)
|
|
|
(25.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
0.9
|
|
|
(0.1)
|
|
|
39.1
|
|
|
36.1
|
|
|
Benefit obligation at end of period
|
$
|
133.3
|
|
|
$
|
131.1
|
|
|
$
|
821.3
|
|
|
$
|
834.4
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
$
|
121.5
|
|
|
$
|
119.7
|
|
|
$
|
993.2
|
|
|
$
|
946.9
|
|
|
Actual return on plan assets
|
19.5
|
|
|
6.4
|
|
|
(34.1)
|
|
|
28.1
|
|
|
Employer contributions
|
0.2
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Plan participants’ contributions
|
0.4
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(5.8)
|
|
|
(5.4)
|
|
|
(34.7)
|
|
|
(25.9)
|
|
|
Currency translation
|
0.8
|
|
|
(0.1)
|
|
|
46.7
|
|
|
44.1
|
|
|
Other
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
—
|
|
|
Fair value of plan assets at end of period
|
136.6
|
|
|
121.5
|
|
|
970.9
|
|
|
993.2
|
|
|
Funded status
|
$
|
3.3
|
|
|
$
|
(9.6)
|
|
|
$
|
149.6
|
|
|
$
|
158.8
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in assets or liabilities
|
|
|
|
|
|
|
|
|
Other assets
|
$
|
3.8
|
|
|
$
|
0.2
|
|
|
$
|
149.6
|
|
|
$
|
158.8
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
(0.5)
|
|
|
(9.8)
|
|
|
—
|
|
|
—
|
|
|
Net amount recognized
|
$
|
3.3
|
|
|
$
|
(9.6)
|
|
|
$
|
149.6
|
|
|
$
|
158.8
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
$
|
11.3
|
|
|
$
|
28.2
|
|
|
$
|
(6.0)
|
|
|
$
|
(32.3)
|
|
|
Prior service cost
|
0.7
|
|
|
0.3
|
|
|
11.1
|
|
|
11.5
|
|
|
Total
|
$
|
12.0
|
|
|
$
|
28.5
|
|
|
$
|
5.1
|
|
|
$
|
(20.8)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit obligation
|
|
|
|
|
|
|
|
|
Discount rate — U.S. plans
|
3.05
|
%
|
|
3.01
|
%
|
|
n/a
|
|
n/a
|
|
Discount rate — Canadian plans
|
3.32
|
%
|
|
2.71
|
%
|
|
n/a
|
|
n/a
|
|
Discount rate — Other international plans
|
n/a
|
|
n/a
|
|
2.05
|
%
|
|
1.73
|
%
|
|
Rate of compensation increase — U.S. plans
|
3.00
|
%
|
|
3.00
|
%
|
|
n/a
|
|
n/a
|
|
Rate of compensation increase — Canadian plans
|
2.75
|
%
|
|
2.75
|
%
|
|
n/a
|
|
n/a
|
|
Rate of compensation increase — Other international plans
|
n/a
|
|
n/a
|
|
3.45
|
%
|
|
2.65
|
%
|
(a)Amounts reported for the year ended September 30, 2021 represent the impact of fiscal 2020 union negotiations that were ratified subsequent to September 30, 2020. During the year ended September 30, 2020, the Company recognized prior service cost as a result of an amendment to the benefit plan for Weetabix employees in the U.K. participating in the group scheme.
The fair value of plan assets for the North American pension plans exceeded the accumulated benefit obligation at September 30, 2021, whereas the accumulated benefit obligation exceeded the fair value of plan assets for the North American pension plans at September 30, 2020. The fair value of plan assets for the other international pension plans exceeded the accumulated benefit obligation at September 30, 2021 and 2020. The aggregate accumulated benefit obligation for the North American pension plans was $130.8 and $129.3 at September 30, 2021 and 2020, respectively. The aggregate accumulated benefit obligation for the other international pension plans was $817.8 and $831.1 at September 30, 2021 and 2020, respectively.
The following tables provide the components of net periodic benefit cost for the pension plans including amounts recognized in OCI. For the years ended September 30, 2021, 2020 and 2019, service cost was reported in “Cost of goods sold” and “Selling, general and administrative expenses” and all other components of net periodic benefit cost were reported in “Other income, net” in the Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
Service cost
|
$
|
3.9
|
|
|
$
|
4.3
|
|
|
$
|
3.7
|
|
|
Interest cost
|
3.2
|
|
|
3.7
|
|
|
4.1
|
|
|
Expected return on plan assets
|
(6.4)
|
|
|
(6.4)
|
|
|
(6.4)
|
|
|
Recognized net actuarial loss
|
2.4
|
|
|
1.8
|
|
|
—
|
|
|
Recognized prior service cost
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
$
|
3.2
|
|
|
$
|
3.5
|
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net benefit cost
|
|
|
|
|
|
|
Discount rate — U.S. plans
|
3.01
|
%
|
|
3.32
|
%
|
|
4.30
|
%
|
|
Discount rate — Canadian plans
|
2.71
|
%
|
|
2.84
|
%
|
|
3.53
|
%
|
|
Rate of compensation increase — U.S. plans
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
|
Rate of compensation increase — Canadian plans
|
2.75
|
%
|
|
2.75
|
%
|
|
2.75
|
%
|
|
Expected return on plan assets — U.S. plans
|
5.40
|
%
|
|
5.53
|
%
|
|
5.74
|
%
|
|
Expected return on plan assets — Canadian plans
|
5.25
|
%
|
|
5.75
|
%
|
|
5.75
|
%
|
|
|
|
|
|
|
|
|
Changes in plan assets and benefit obligation recognized in Total Comprehensive Income
|
|
|
|
|
|
|
Net loss (gain)
|
$
|
(14.5)
|
|
|
$
|
6.6
|
|
|
$
|
13.9
|
|
|
Recognized loss
|
(2.4)
|
|
|
(1.8)
|
|
|
—
|
|
|
Prior service cost (a)
|
0.5
|
|
|
—
|
|
|
—
|
|
|
Recognized prior service cost
|
(0.1)
|
|
|
(0.1)
|
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income (before tax effects)
|
$
|
(16.5)
|
|
|
$
|
4.7
|
|
|
$
|
13.8
|
|
(a)Amounts reported for the year ended September 30, 2021 represent the impact of fiscal 2020 union negotiations that were ratified subsequent to September 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other International
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.6
|
|
|
Interest cost
|
15.2
|
|
|
14.7
|
|
|
18.9
|
|
|
Expected return on plan assets
|
(24.9)
|
|
|
(24.6)
|
|
|
(28.8)
|
|
|
|
|
|
|
|
|
|
Recognized prior service cost
|
0.5
|
|
|
—
|
|
|
—
|
|
|
Recognized curtailment (a)
|
—
|
|
|
—
|
|
|
1.5
|
|
|
Net periodic benefit income
|
$
|
(9.2)
|
|
|
$
|
(9.9)
|
|
|
$
|
(2.8)
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net benefit cost
|
|
|
|
|
|
|
Discount rate
|
1.73
|
%
|
|
1.84
|
%
|
|
2.81
|
%
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
2.65
|
%
|
|
2.55
|
%
|
|
2.75
|
%
|
|
Expected return on plan assets
|
2.38
|
%
|
|
2.53
|
%
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
Changes in plan assets and benefit obligation recognized in Total Comprehensive Income
|
|
|
|
|
|
|
Net loss (gain)
|
$
|
26.4
|
|
|
$
|
14.2
|
|
|
$
|
(14.4)
|
|
|
|
|
|
|
|
|
|
Prior service cost (b)
|
—
|
|
|
11.4
|
|
|
1.5
|
|
|
Recognized prior service cost
|
(0.5)
|
|
|
—
|
|
|
—
|
|
|
Recognized curtailment (a)
|
—
|
|
|
—
|
|
|
(1.5)
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income (before tax effects)
|
$
|
25.9
|
|
|
$
|
25.6
|
|
|
$
|
(14.4)
|
|
(a)In September 2019, the Company signed an amendment to the pension deed to close the defined benefit plan for Weetabix employees in the U.K. participating in the group scheme. Eligibility is frozen to new entrants, and the benefit accrual is frozen with respect to current participants. Due to the closure of the group scheme plan, the prior service cost recognized in accumulated OCI in connection with the GMP high court rulings was reclassified to earnings during the year ended September 30, 2019.
(b)During the year ended September 30, 2020, the Company recognized prior service cost as a result of an amendment to the benefit plan for Weetabix employees in the U.K. participating in the group scheme. During the year ended September 30, 2019, the Company recognized prior service cost as a result of U.K. high court rulings made in connection with the GMP.
The Company expects to make contributions of $0.4 and zero to its defined benefit North American and other international pension plans, respectively, during fiscal 2022.
The expected return on North American pension plan assets was determined based on historical and expected future returns of the various asset classes, using the target allocation. The broad target allocations are 57.1% equity securities, 38.5% fixed income and bonds, 3.4% real assets and 1.0% cash and cash equivalents. At September 30, 2021, equity securities were 61.4%, fixed income and bonds were 34.4%, real assets were 1.8% and cash and cash equivalents were 2.4% of the fair value of total plan assets, 97.8% of which was invested in passive index funds. At September 30, 2020, equity securities were 58.3%, fixed income and bonds were 40.6%, real assets were 0.1% and cash and cash equivalents were 1.0% of the fair value of total plan assets, 99.5% of which was invested in passive index funds. The allocation guidelines were established based on management’s determination of the appropriate risk posture and long-term objectives.
The expected return on other international pension plan assets was determined based on historical and expected future returns of the various asset classes, using the target allocation. The broad target allocations are 60.3% fixed income and bonds, 37.0% liability driven investments, 2.5% real assets and 0.2% cash and cash equivalents. At September 30, 2021, fixed income and bonds were 72.6%, liability driven investments were 24.3%, real assets were 1.0% and cash and cash equivalents were 2.1% of the fair value of total plan assets, 31.3% of which was invested in passive index funds. At September 30, 2020, fixed income and bonds were 69.6%, liability driven investments were 27.2%, real assets were 1.3% and cash and cash equivalents were 1.9% of the fair value of total plan assets, 34.4% of which was invested in passive index funds. The allocation guidelines were established by the trustees of the plan based on their determination of the appropriate risk posture and long-term objectives after consulting with management.
The following tables present the North American and other international pension plans’ assets measured at fair value on a recurring basis and the basis for that measurement. The fair value of funds is based on quoted net asset values of the shares held by the plans at year end. Certain prior year amounts have been reclassified to conform with fiscal 2021 presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Equities
|
$
|
13.8
|
|
|
$
|
—
|
|
|
$
|
13.8
|
|
|
$
|
10.5
|
|
|
$
|
—
|
|
|
$
|
10.5
|
|
|
Fixed income and bonds
|
5.7
|
|
|
—
|
|
|
5.7
|
|
|
5.5
|
|
|
—
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
3.4
|
|
|
3.4
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|
—
|
|
|
Fair value of plan assets in the fair value hierarchy
|
22.9
|
|
|
3.4
|
|
|
19.5
|
|
|
17.3
|
|
|
1.3
|
|
|
16.0
|
|
|
Equities
|
70.1
|
|
|
—
|
|
|
—
|
|
|
60.3
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income and bonds
|
41.2
|
|
|
—
|
|
|
—
|
|
|
43.8
|
|
|
—
|
|
|
—
|
|
|
Real assets
|
2.4
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
Investments measured at net asset value (a)
|
113.7
|
|
|
—
|
|
|
—
|
|
|
104.2
|
|
|
—
|
|
|
—
|
|
|
Total plan assets
|
$
|
136.6
|
|
|
$
|
3.4
|
|
|
$
|
19.5
|
|
|
$
|
121.5
|
|
|
$
|
1.3
|
|
|
$
|
16.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other International
|
|
|
September 30, 2021
|
|
September 30, 2020
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Fixed income and bonds
|
$
|
649.3
|
|
|
$
|
649.3
|
|
|
$
|
—
|
|
|
$
|
642.1
|
|
|
$
|
642.1
|
|
|
$
|
—
|
|
|
Liability driven instruments
|
206.4
|
|
|
206.4
|
|
|
—
|
|
|
241.6
|
|
|
241.6
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
17.8
|
|
|
17.8
|
|
|
—
|
|
|
16.1
|
|
|
16.1
|
|
|
—
|
|
|
Fair value of plan assets in the fair value hierarchy
|
873.5
|
|
|
873.5
|
|
|
—
|
|
|
899.8
|
|
|
899.8
|
|
|
—
|
|
|
Fixed income and bonds
|
56.1
|
|
|
—
|
|
|
—
|
|
|
49.2
|
|
|
—
|
|
|
—
|
|
|
Liability driven instruments
|
29.3
|
|
|
—
|
|
|
—
|
|
|
28.6
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real assets
|
9.5
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
|
—
|
|
|
Cash and cash equivalents
|
2.5
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
Investments measured at net asset value (a)
|
97.4
|
|
|
—
|
|
|
—
|
|
|
93.4
|
|
|
—
|
|
|
—
|
|
|
Total plan assets
|
$
|
970.9
|
|
|
$
|
873.5
|
|
|
$
|
—
|
|
|
$
|
993.2
|
|
|
$
|
899.8
|
|
|
$
|
—
|
|
(a)In accordance with ASC Topic 820 “Fair Value Measurement,” certain investments were measured at NAV. In cases where the fair value was measured at NAV using the practical expedient provided for in ASC Topic 820, the investments have not been classified in the fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the tables above.
Other Postretirement Benefits
The following table provides a reconciliation of the changes in the North American other postretirement benefit obligations over the two year period ended September 30, 2021. Besides the North American plans, the Company does not maintain any other postretirement benefit plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
September 30,
|
|
|
2021
|
|
2020
|
|
Change in benefit obligation
|
|
|
|
|
Benefit obligation at beginning of period
|
$
|
70.7
|
|
|
$
|
66.4
|
|
|
Service cost
|
0.5
|
|
|
0.6
|
|
|
Interest cost
|
1.5
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
(4.3)
|
|
|
4.6
|
|
|
|
|
|
|
|
Benefits paid
|
(2.4)
|
|
|
(2.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
0.5
|
|
|
(0.1)
|
|
|
Benefit obligation at end of period
|
$
|
66.5
|
|
|
$
|
70.7
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
2.4
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
(2.4)
|
|
|
(2.7)
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
—
|
|
|
—
|
|
|
Funded status
|
$
|
(66.5)
|
|
|
$
|
(70.7)
|
|
|
|
|
|
|
|
Amounts recognized in assets or liabilities
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
(2.8)
|
|
|
(2.8)
|
|
|
Other liabilities
|
(63.7)
|
|
|
(67.9)
|
|
|
Net amount recognized
|
$
|
(66.5)
|
|
|
$
|
(70.7)
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
|
|
|
Net actuarial loss
|
$
|
8.9
|
|
|
$
|
14.3
|
|
|
Prior service credit
|
(10.0)
|
|
|
(14.7)
|
|
|
Total
|
$
|
(1.1)
|
|
|
$
|
(0.4)
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit obligation
|
|
|
|
|
Discount rate — U.S. plans
|
2.89
|
%
|
|
2.79
|
%
|
|
Discount rate — Canadian plans
|
3.45
|
%
|
|
2.78
|
%
|
|
|
|
|
|
|
Rate of compensation increase — Canadian plans
|
2.75
|
%
|
|
2.75
|
%
|
The following table provides the components of net periodic benefit cost for the other postretirement benefit plans including amounts recognized in OCI. For the years ended September 30, 2021, 2020 and 2019, service cost was reported in “Cost of goods sold” and “Selling, general and administrative expenses” and all other components of net periodic benefit cost were reported in “Other income, net” in the Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
Service cost
|
$
|
0.5
|
|
|
$
|
0.6
|
|
|
$
|
0.4
|
|
|
Interest cost
|
1.5
|
|
|
1.9
|
|
|
2.1
|
|
|
Recognized net actuarial loss
|
1.1
|
|
|
0.6
|
|
|
—
|
|
|
Recognized prior service credit
|
(4.7)
|
|
|
(4.7)
|
|
|
(4.7)
|
|
|
Net periodic benefit cost
|
$
|
(1.6)
|
|
|
$
|
(1.6)
|
|
|
$
|
(2.2)
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate — U.S. plans
|
2.79
|
%
|
|
3.20
|
%
|
|
4.27
|
%
|
|
Discount rate — Canadian plans
|
2.78
|
%
|
|
2.86
|
%
|
|
3.54
|
%
|
|
|
|
|
|
|
|
|
Rate of compensation increase — Canadian plans
|
2.75
|
%
|
|
2.75
|
%
|
|
2.75
|
%
|
|
|
|
|
|
|
|
|
Changes in benefit obligation recognized in Total Comprehensive Income
|
|
|
|
|
|
|
Net (gain) loss
|
$
|
(4.3)
|
|
|
$
|
4.6
|
|
|
$
|
11.5
|
|
|
Recognized net actuarial loss
|
(1.1)
|
|
|
(0.6)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Recognized prior service credit
|
4.7
|
|
|
4.7
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income (before tax effects)
|
$
|
(0.7)
|
|
|
$
|
8.7
|
|
|
$
|
16.2
|
|
For September 30, 2021 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to domestic plans for 2022 was 5.9% for participants both under the age of 65 and over the age of 65, declining gradually to an ultimate rate of 5.0% for 2026 and beyond. For September 30, 2020 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to domestic plans for 2021 was 6.1% for participants both under the age of 65 and over the age of 65, declining gradually to an ultimate rate of 5.0% for 2025 and beyond. For September 30, 2021 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to Canadian plans for the following fiscal year was 4.5%, and will remain at this rate for 2022 and beyond. For September 30, 2020 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to Canadian plans for the following fiscal year was 5.0%, declining gradually to an ultimate rate of 4.5% for 2021 and beyond.
Additional Information
As of September 30, 2021, expected future benefit payments and related federal subsidy receipts (Medicare Part D) in the next ten fiscal years were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027- 2031
|
|
Pension benefits
|
$
|
27.6
|
|
|
$
|
28.4
|
|
|
$
|
29.6
|
|
|
$
|
31.1
|
|
|
$
|
32.5
|
|
|
$
|
184.2
|
|
|
Other benefits
|
2.9
|
|
|
3.3
|
|
|
3.4
|
|
|
3.4
|
|
|
3.5
|
|
|
17.9
|
|
|
Subsidy receipts
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
1.0
|
|
In addition to the defined benefit plans described above, the Company sponsors a defined contribution 401(k) plan under which it makes matching contributions. The Company expensed $19.9, $18.4 and $17.9 for the years ended September 30, 2021, 2020 and 2019, respectively.
NOTE 20 — STOCK-BASED COMPENSATION
Post Long-Term Incentive Plans
The Company’s employees, including BellRing employees, participate in various Company long-term incentive plans (the “Post Long-Term Incentive Plans”). Awards issued under the Post Long-Term Incentive Plans have a maximum term of 10 years, provided, however, that the Corporate Governance and Compensation Committee of the Company’s Board of Directors may, in its discretion, grant awards with a longer term to participants who are located outside of the U.S. At September 30, 2021, there were 0.2 shares remaining to be issued for stock-based compensation awards under the Post Holdings, Inc. 2019 Long-Term Incentive Plan.
The following disclosures reflect the details of the Post Long-Term Incentive Plans, which includes BellRing employees who participate in such plans.
Total compensation cost for Post’s cash and non-cash stock-based compensation awards recognized in the years ended September 30, 2021, 2020 and 2019 was $52.3, $47.1 and $39.7, respectively, and the related recognized deferred tax benefit for each of those periods was approximately $6.5, $7.0 and $6.6, respectively. As of September 30, 2021, the total compensation cost related to Post’s non-vested awards not yet recognized was $69.8, which is expected to be recognized over a weighted-average period of 1.6 years.
Post Stock Appreciation Rights (“Post SSARs”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in millions, except Post SSARs or where otherwise indicated
|
Post SSARs
|
|
Weighted-
Average
Exercise
Price Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term in Years
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at September 30, 2020
|
135,000
|
|
|
$
|
42.12
|
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
(40,000)
|
|
|
31.50
|
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding at September 30, 2021
|
95,000
|
|
|
46.59
|
|
|
2.24
|
|
$
|
6.0
|
|
|
Vested and expected to vest as of September 30, 2021
|
95,000
|
|
|
46.59
|
|
|
2.24
|
|
6.0
|
|
|
Exercisable at September 30, 2021
|
95,000
|
|
|
46.59
|
|
|
2.24
|
|
6.0
|
|
Upon exercise of each Post SSAR, the holder will receive the number of shares of Post common stock equal in value to the difference between the exercise price and the fair market value at the date of exercise, less all applicable taxes. The total intrinsic value of Post SSARs exercised was $3.2 and $0.1 during the years ended September 30, 2021 and 2020, respectively. There were no Post SSARs exercised during the year ended September 30, 2019. There were no Post SSARs granted during the years ended September 30, 2021, 2020 or 2019.
Post Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in millions, except Post stock options or where otherwise indicated
|
Post Stock Options
|
|
Weighted-
Average
Exercise
Price Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term in Years
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at September 30, 2020
|
1,699,280
|
|
|
$
|
59.63
|
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
(810,184)
|
|
|
53.00
|
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding at September 30, 2021
|
889,096
|
|
|
65.67
|
|
|
4.94
|
|
$
|
39.6
|
|
|
Vested and expected to vest as of September 30, 2021
|
889,096
|
|
|
65.67
|
|
|
4.94
|
|
39.6
|
|
|
Exercisable at September 30, 2021
|
830,363
|
|
|
63.45
|
|
|
4.76
|
|
38.8
|
|
The fair value of each Post stock option was estimated on the date of grant using the Black-Scholes Model. The Company uses the simplified method for estimating a Post stock option term as it does not have sufficient historical stock options exercise experience upon which to estimate an expected term. The expected term is estimated based on the award’s vesting period and contractual term. Expected volatilities are based on historical volatility trends and other factors. The risk-free rate is the
interpolated U.S. Treasury rate for a term equal to the expected term. The weighted-average assumptions and fair values for Post stock options granted are summarized in the table below. There were no Post stock options granted during the year ended September 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Expected term (in years)
|
|
|
6.5
|
|
6.5
|
|
Expected stock price volatility
|
|
|
29.2%
|
|
29.7%
|
|
Risk-free interest rate
|
|
|
1.8%
|
|
3.1%
|
|
Expected dividends
|
|
|
0%
|
|
0%
|
|
Fair value (per Post stock option)
|
|
|
$35.32
|
|
$33.82
|
The total intrinsic value of Post stock options exercised was $46.4, $5.5 and $148.2 in the years ended September 30, 2021, 2020 and 2019, respectively. The Company received proceeds from the exercise of Post stock options of $7.6, $3.9 and $112.6 during the years ended September 30, 2021, 2020 and 2019, respectively.
Post Restricted Stock Units (“Post RSUs”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post RSUs
|
|
Weighted-
Average
Grant Date Fair Value Per Share
|
|
Nonvested at September 30, 2020
|
929,933
|
|
|
$
|
89.14
|
|
|
Granted
|
450,027
|
|
|
96.50
|
|
|
Vested
|
(508,533)
|
|
|
81.81
|
|
|
Forfeited
|
(41,789)
|
|
|
97.03
|
|
|
Nonvested at September 30, 2021
|
829,638
|
|
|
97.23
|
|
The grant date fair value of each Post RSU award was determined based upon the closing price of the Company’s common stock on the date of grant. The weighted-average grant date fair value of nonvested Post RSUs was $97.23, $89.14 and $81.27 at September 30, 2021, 2020 and 2019, respectively. The total vest date fair value of Post RSUs that vested during fiscal 2021, 2020 and 2019 was $49.8, $42.1 and $24.9, respectively.
Post Cash Settled Restricted Stock Units (“Post Cash RSUs”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Cash RSUs
|
|
Weighted-
Average
Grant Date Fair Value Per Share
|
|
Nonvested at September 30, 2020
|
39,200
|
|
|
$
|
51.43
|
|
|
Granted
|
—
|
|
|
—
|
|
|
Vested
|
(9,800)
|
|
|
51.43
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Nonvested at September 30, 2021
|
29,400
|
|
|
51.43
|
|
At September 30, 2021, the 29,400 nonvested Post Cash RSUs were valued at the greater of the closing stock price or the grant price of $51.43. Cash used by the Company to settle Post Cash RSUs was $1.1, $0.9 and $1.1 for the years ended September 30, 2021, 2020 and 2019, respectively.
Post Performance-Based Restricted Stock Units (“Post PRSUs”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post PRSUs
|
|
Weighted-
Average
Grant Date Fair Value Per Share
|
|
Nonvested at September 30, 2020
|
173,707
|
|
|
$
|
126.00
|
|
|
Granted
|
143,935
|
|
|
152.58
|
|
|
Adjustment for performance achievement (a)
|
10,499
|
|
|
97.74
|
|
|
Vested
|
(42,806)
|
|
|
97.74
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Nonvested at September 30, 2021
|
285,335
|
|
|
142.61
|
|
(a)Represents the adjustment to previously granted Post PRSUs for performance achievement.
During the years ended September 30, 2021, 2020 and 2019, the Company granted Post PRSUs to certain employees. These awards will be earned by comparing Post’s total shareholder return (“TSR”) during a three year period to the respective TSRs of companies in a performance peer group. Based upon Post’s ranking in its performance peer group when comparing TSRs, a recipient of the Post PRSU grant may earn a total award ranging from 0% to 200% (for Post PRSUs granted in fiscal 2019 and 2020) and from 0% to 260% (for Post PRSUs granted in fiscal 2021) of the target award. The fair value of each Post PRSU was estimated on the grant date using a Monte Carlo simulation. The assumptions for Post PRSUs granted during the years ended September 30, 2021, 2020 and 2019 are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Expected term (in years)
|
3.0
|
|
3.0
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected stock price volatility
|
28.3%
|
|
22.2%
|
|
24.2%
|
|
Risk-free interest rate
|
0.2%
|
|
1.6%
|
|
2.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value (per Post PRSU)
|
$152.58
|
|
$138.10
|
|
$122.34
|
BellRing Long-Term Incentive Plan
Subsequent to the BellRing IPO, BellRing employees began participating in BellRing’s 2019 Long-Term Incentive Plan (the “BellRing Long-Term Incentive Plan”). On October 22, 2019, BellRing registered shares of its Class A Common Stock on a Form S-8 filed with the SEC, for issuance under the BellRing Long-Term Incentive Plan. Awards issued under the BellRing Long-Term Incentive Plan have a maximum term of 10 years, provided, however, that the corporate governance and compensation committee of BellRing’s board of directors may, in its discretion, grant awards with a longer term to participants who are located outside of the U.S. At September 30, 2021 there were 1.9 shares remaining to be issued for stock-based compensation awards under the BellRing Long-Term Incentive Plan.
During the years ended September 30, 2021 and 2020, total compensation cost for BellRing’s non-cash stock-based compensation awards was $4.6 and $2.5, respectively, and the related recognized deferred tax benefit was $0.3 and $0.2, respectively. As of September 30, 2021, the total compensation cost related to BellRing’s non-vested awards not yet recognized was $6.9, which is expected to be recognized over a weighted-average period of 1.6 years.
BellRing Stock Options
Information about BellRing stock options is summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in millions, except BellRing stock options or where otherwise indicated
|
BellRing Stock Options
|
|
Weighted-
Average
Exercise
Price Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term in Years
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at September 30, 2020
|
96,000
|
|
|
$
|
19.31
|
|
|
|
|
|
|
Granted
|
162,969
|
|
|
20.05
|
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding at September 30, 2021
|
258,969
|
|
|
19.78
|
|
|
8.76
|
|
$
|
2.8
|
|
|
Vested and expected to vest as of September 30, 2021
|
258,969
|
|
|
19.78
|
|
|
8.76
|
|
2.8
|
|
|
Exercisable at September 30, 2021
|
32,000
|
|
|
19.31
|
|
|
8.15
|
|
0.4
|
|
The fair value of each BellRing stock option was estimated on the date of grant using the Black-Scholes Model. BellRing uses the simplified method for estimating a BellRing stock option term as it does not have sufficient historical stock options exercise experience upon which to estimate an expected term. The expected term is estimated based on the award’s vesting period and contractual term. Expected volatilities are based on historical volatility trends and other factors. The risk-free rate is the interpolated U.S. Treasury rate for a term equal to the expected term. The weighted-average assumptions and fair values for BellRing stock options granted during the year ended September 30, 2021 and 2020 are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Expected term (in years)
|
6.5
|
|
6.5
|
|
|
|
Expected stock price volatility
|
38.5%
|
|
38.5%
|
|
|
|
Risk-free interest rate
|
0.6%
|
|
1.6%
|
|
|
|
Expected dividends
|
0%
|
|
0%
|
|
|
|
Fair value (per BellRing option)
|
$7.79
|
|
$7.92
|
|
|
BellRing Restricted Stock Units (“BellRing RSUs”)
Information about BellRing’s RSUs is summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BellRing RSUs
|
|
Weighted-
Average
Grant Date Fair Value Per Share
|
|
Nonvested at September 30, 2020
|
385,232
|
|
|
$
|
19.39
|
|
|
Granted
|
261,808
|
|
|
20.34
|
|
|
Vested
|
(138,122)
|
|
|
19.61
|
|
|
Forfeited
|
(41,255)
|
|
|
19.47
|
|
|
Nonvested at September 30, 2021
|
467,663
|
|
|
19.85
|
|
The grant date fair value of each BellRing RSU was determined based upon the closing price of BellRing’s Class A Common Stock on the date of grant. The weighted-average grant date fair value of nonvested BellRing RSUs was $19.85 and $19.39 at September 30, 2021 and 2020, respectively. The total vest date fair value of BellRing RSUs that vested during fiscal 2021 was $3.0. No BellRing RSU vested during fiscal 2020.
Deferred Compensation
Post provides deferred compensation plans for directors and key employees through which eligible participants may elect to defer payment of all or a portion of their compensation, or with respect to key employee participants, all or a portion of their eligible annual bonus, until a later date based on the participant’s elections. Participant deferrals for employee participants may be notionally invested in Post common stock equivalents (the “Equity Option”) or into a number of funds operated by The Vanguard Group Inc. with a variety of investment strategies and objectives (the “Vanguard Funds”). In order to receive a 33.3% matching contribution, deferrals for director participants must be made into Post common stock equivalents. Deferrals into the Equity Option are generally distributed in Post stock for employees and cash for directors, while deferrals into the Vanguard Funds are distributed in cash. There are no significant costs related to the administration of the deferred compensation plans. Post funds its deferred compensation liability (potential cash distributions) by investing in the Vanguard Funds in substantially
the same amounts as selected by the participating employees. Both realized and unrealized gains and losses on these investments are included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations and offset the related change in the deferred compensation liability. For additional information, refer to Note 15.
NOTE 21 — SHAREHOLDERS’ EQUITY
The following table summarizes the Company’s repurchases of its common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Shares repurchased
|
4.0
|
|
|
6.1
|
|
|
3.3
|
|
|
Average share price
|
$
|
98.39
|
|
|
$
|
97.67
|
|
|
$
|
98.78
|
|
|
Total cost including broker’s commissions (a)
|
$
|
393.7
|
|
|
$
|
587.8
|
|
|
$
|
330.8
|
|
(a)Of the $393.7 total cost recorded during the year ended September 30, 2021, $4.0 was not settled until October 2021 and was included in “Other current liabilities” on the Consolidated Balance Sheet at September 30, 2021. Of the $587.8 total cost recorded during the year ended September 30, 2020, $7.4 was not settled until October 2020 and was included in “Other current liabilities” on the Consolidated Balance Sheet at September 30, 2020.
The Company may, from time to time, enter into common stock structured repurchase arrangements with financial institutions using general corporate funds. Under such arrangements, the Company pays a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a predetermined amount of cash or Post common stock. Upon expiration of each agreement, if the closing market price of Post’s common stock is above the predetermined price, the Company will have the initial investment returned with a premium in cash. If the closing market price of Post’s common stock is at or below the predetermined price, the Company will receive the number of shares specified in the agreement. During the year ended September 30, 2020, the Company entered into a structured share repurchase arrangement which required cash payments totaling $46.4, which were recorded as “Additional paid-in capital” on the Consolidated Balance Sheet at September 30, 2020 and as “Cash paid for stock repurchase contracts” in the Consolidated Statement of Cash Flows for the year ended September 30, 2020. This arrangement settled during the year ended September 30, 2021, and the Company received cash payments of $47.5 which were recorded as “Additional paid-in-capital” on the Consolidated Balance Sheet at September 30, 2021 and as “Cash received from share repurchase contracts” in the Consolidated Statement of Cash Flows for the year ended September 30, 2021.
NOTE 22 — SEGMENTS
At September 30, 2021, the Company’s reportable segments were as follows:
•Post Consumer Brands: North American RTE cereal and Peter Pan nut butters;
•Weetabix: primarily U.K. RTE cereal and muesli;
•Foodservice: primarily egg and potato products;
•Refrigerated Retail: primarily side dish, egg, cheese and sausage products; and
•BellRing Brands: RTD protein shakes, other RTD beverages, powders and nutrition bars.
Due to the level of integration between the Foodservice and Refrigerated Retail segments, it is impracticable to present additions to property and intangibles and total assets separately for each segment. An allocation has been made between the two segments for depreciation based on inventory costing.
Amounts reported for Corporate in the table below include any amounts attributable to PHPC.
Management evaluates each segment’s performance based on its segment profit, which for all segments excluding BellRing Brands is its earnings/loss before income taxes and equity method earnings/loss before impairment of property, goodwill and other intangible assets, facility closure related costs, restructuring expenses, gain/loss on assets and liabilities held for sale, gain/loss on sales of businesses and facilities, gain on/adjustment to bargain purchase, interest expense and other unallocated corporate income and expenses. Segment profit for BellRing Brands, as it is a publicly-traded company, is its operating profit.
In fiscal 2021, 2020 and 2019, Post’s external revenues were primarily generated by sales within the U.S.; foreign (primarily located in the U.K. and Canada) sales were 13.7%, 13.9% and 12.8% of total net sales, respectively. Sales are attributed to individual countries based on the address to which the product is shipped.
As of September 30, 2021 and 2020, the majority of Post’s tangible long-lived assets were located in the U.S.; the remainder were located primarily in the U.K. and Canada which combined have a net carrying value of approximately $306.8 and $294.2, respectively.
In the years ended September 30, 2021, 2020 and 2019, one customer, including its affiliates, accounted for 19.0%, 20.9% and 20.9%, respectively, of total net sales. All segments, except Foodservice, sold products to this major customer or its affiliates.
The following tables present information about the Company’s reportable segments. In addition, the tables present net sales by product. Note that additions to property and intangibles exclude additions through business acquisitions (see Note 5).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net Sales
|
|
|
|
|
|
|
|
Post Consumer Brands
|
$
|
1,915.3
|
|
|
$
|
1,949.1
|
|
|
$
|
1,875.9
|
|
|
|
Weetabix
|
477.5
|
|
|
440.4
|
|
|
418.2
|
|
|
|
Foodservice
|
1,615.6
|
|
|
1,361.8
|
|
|
1,627.4
|
|
|
|
Refrigerated Retail
|
974.5
|
|
|
961.2
|
|
|
907.3
|
|
|
|
BellRing Brands
|
1,247.1
|
|
|
988.3
|
|
|
854.4
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations
|
(3.3)
|
|
|
(2.1)
|
|
|
(2.1)
|
|
|
|
Total
|
$
|
6,226.7
|
|
|
$
|
5,698.7
|
|
|
$
|
5,681.1
|
|
|
Segment Profit
|
|
|
|
|
|
|
|
Post Consumer Brands
|
$
|
316.6
|
|
|
$
|
393.5
|
|
|
$
|
337.1
|
|
|
|
Weetabix
|
115.4
|
|
|
112.3
|
|
|
94.8
|
|
|
|
Foodservice
|
61.7
|
|
|
25.6
|
|
|
198.4
|
|
|
|
Refrigerated Retail
|
75.9
|
|
|
125.6
|
|
|
95.1
|
|
|
|
BellRing Brands
|
168.0
|
|
|
164.0
|
|
|
175.1
|
|
|
|
|
|
|
|
|
|
|
|
Total segment profit
|
737.6
|
|
|
821.0
|
|
|
900.5
|
|
|
General corporate expenses and other
|
52.6
|
|
|
109.0
|
|
|
169.6
|
|
|
Gain on sale of business
|
—
|
|
|
—
|
|
|
(126.6)
|
|
|
Impairment of goodwill and other intangibles
|
—
|
|
|
—
|
|
|
63.3
|
|
|
Interest expense, net
|
375.8
|
|
|
388.6
|
|
|
322.4
|
|
|
Loss on extinguishment and refinancing of debt, net
|
94.8
|
|
|
72.9
|
|
|
6.1
|
|
|
(Income) expense on swaps, net
|
(122.8)
|
|
|
187.1
|
|
|
306.6
|
|
|
Earnings before income taxes and equity method loss
|
$
|
337.2
|
|
|
$
|
63.4
|
|
|
$
|
159.1
|
|
|
Net sales by product
|
|
|
|
|
|
|
|
Cereal and granola
|
$
|
2,333.3
|
|
|
$
|
2,388.7
|
|
|
$
|
2,293.3
|
|
|
|
Nut butters
|
58.7
|
|
|
—
|
|
|
—
|
|
|
|
Eggs and egg products
|
1,556.1
|
|
|
1,307.8
|
|
|
1,578.4
|
|
|
|
Side dishes (including potato products)
|
575.0
|
|
|
536.6
|
|
|
519.6
|
|
|
|
Cheese and dairy
|
223.0
|
|
|
253.2
|
|
|
234.6
|
|
|
|
Sausage
|
165.9
|
|
|
168.1
|
|
|
149.6
|
|
|
|
Protein-based products and supplements
|
1,247.5
|
|
|
988.7
|
|
|
854.7
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
70.1
|
|
|
57.3
|
|
|
52.5
|
|
|
|
Eliminations
|
(2.9)
|
|
|
(1.7)
|
|
|
(1.6)
|
|
|
|
Total
|
$
|
6,226.7
|
|
|
$
|
5,698.7
|
|
|
$
|
5,681.1
|
|
|
Additions to property and intangibles
|
|
|
|
|
|
|
|
Post Consumer Brands
|
$
|
81.2
|
|
|
$
|
67.4
|
|
|
$
|
62.1
|
|
|
|
Weetabix
|
19.6
|
|
|
24.6
|
|
|
37.7
|
|
|
|
Foodservice and Refrigerated Retail
|
89.7
|
|
|
139.5
|
|
|
162.3
|
|
|
|
BellRing Brands
|
1.6
|
|
|
2.1
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
0.4
|
|
|
1.0
|
|
|
8.6
|
|
|
|
Total
|
$
|
192.5
|
|
|
$
|
234.6
|
|
|
$
|
273.9
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Consumer Brands
|
$
|
122.0
|
|
|
$
|
112.4
|
|
|
$
|
117.4
|
|
|
|
Weetabix
|
39.0
|
|
|
35.9
|
|
|
35.0
|
|
|
|
Foodservice
|
126.0
|
|
|
119.6
|
|
|
111.8
|
|
|
|
Refrigerated Retail
|
75.5
|
|
|
73.1
|
|
|
74.1
|
|
|
|
BellRing Brands
|
53.7
|
|
|
25.3
|
|
|
25.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation and amortization
|
416.2
|
|
|
366.3
|
|
|
363.6
|
|
|
|
Corporate and accelerated depreciation
|
4.0
|
|
|
4.0
|
|
|
16.0
|
|
|
|
Total
|
$
|
420.2
|
|
|
$
|
370.3
|
|
|
$
|
379.6
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2019
|
|
Assets, end of year
|
|
|
|
|
|
|
|
Post Consumer Brands
|
$
|
3,467.8
|
|
|
$
|
3,291.7
|
|
|
$
|
3,296.3
|
|
|
|
Weetabix
|
1,930.4
|
|
|
1,864.5
|
|
|
1,779.1
|
|
|
|
Foodservice and Refrigerated Retail
|
5,074.2
|
|
|
5,022.0
|
|
|
5,033.8
|
|
|
|
BellRing Brands
|
696.4
|
|
|
653.5
|
|
|
594.0
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
1,245.9
|
|
|
1,315.0
|
|
|
1,248.4
|
|
|
|
Total
|
$
|
12,414.7
|
|
|
$
|
12,146.7
|
|
|
$
|
11,951.6
|
|
NOTE 23 — SUBSEQUENT EVENTS
In October 2021, Post entered into a Transaction Agreement and Plan of Merger (the “Transaction Agreement”) providing for the distribution of a significant portion of its ownership interest in BellRing to Post’s shareholders. Pursuant to the Transaction Agreement, Post will contribute its share of BellRing Class B Common Stock, all of its BellRing Brands, LLC units and cash to BellRing Distribution, LLC, a newly-formed wholly-owned subsidiary of Post (“New BellRing”), in exchange for all of the then-outstanding equity of New BellRing and New BellRing indebtedness (the “BellRing Separation”). New BellRing will convert into a Delaware corporation, and Post will then distribute at least 80.1% of its shares of New BellRing common stock to Post shareholders in a pro-rata distribution, an exchange offer or a combination of both, depending on market conditions. Upon completion of the distribution of New BellRing common stock to Post shareholders (the “BellRing Distribution”), BellRing Merger Sub Corporation, a wholly-owned subsidiary of New BellRing, will merge with and into BellRing (the “BellRing Merger”), with BellRing as the surviving corporation and a wholly-owned subsidiary of New BellRing. Pursuant to the BellRing Merger, each outstanding share of BellRing Class A Common Stock will be converted into one share of New BellRing common stock plus a to-be-determined amount of cash per share. The exact amount of cash consideration will be determined in accordance with the Transaction Agreement based upon several factors, including the amount of New BellRing indebtedness to be issued. Immediately following the BellRing Distribution and the BellRing Merger, it is expected that Post will own no more than 14.2% of the New BellRing common stock and Post shareholders will own at least 57.0% of the New BellRing common stock. Legacy holders of BellRing Class A Common Stock will own approximately 28.8% of the New BellRing common stock, maintaining their current effective ownership in the BellRing business. Post expects to use the New BellRing indebtedness and shares of New BellRing common stock to repay creditors of Post. Completion of the BellRing Separation, the BellRing Distribution and the BellRing Merger is anticipated to occur in the first calendar quarter of 2022, the second quarter of fiscal 2022, subject to certain customary closing conditions, although there can be no assurance that these transactions will occur within the expected timeframe or at all.