NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share information or where indicated otherwise)
NOTE 1 — BACKGROUND
Post is a consumer packaged goods holding company operating in the center-of-the-store, refrigerated, foodservice and food ingredient food categories. 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, 2022, Post operates in four reportable segments: Post Consumer Brands, Weetabix, Foodservice and Refrigerated Retail. 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, muesli and protein-based ready-to-drink (“RTD”) shake businesses; the Foodservice segment includes primarily egg and potato products; and the Refrigerated Retail segment includes primarily side dish, egg, cheese and sausage products.
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.
On March 10, 2022, the Company completed its previously announced distribution of 80.1% of its ownership interest in BellRing Brands, Inc. (formerly known as BellRing Distribution, LLC) (“BellRing”) to Post’s shareholders (the “BellRing Distribution”, and such transaction, as well as the BellRing Contribution, the BellRing Merger (as such terms are defined in Note 4), the Debt-for-Debt Exchange (as such term is defined in Note 16) and the related transactions described in Note 4, the “BellRing Spin-off”). The BellRing Spin-off represented a strategic shift that had a major effect on the Company’s operations and consolidated financial results. Accordingly, the historical results of BellRing Intermediate Holdings, Inc. (formerly known as BellRing Brands, Inc.) (“Old BellRing”) and BellRing Distribution, LLC prior to the BellRing Spin-off have been presented as discontinued operations in the Company’s Consolidated Statements of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash Flows. The Notes to Consolidated Financial Statements reflect continuing operations only, unless otherwise indicated. See Note 4 for additional information regarding the BellRing Spin-off and discontinued operations.
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 were immaterial, results of these entities were not adjusted to conform with Post’s fiscal calendar in fiscal 2021.
Certain reclassifications have been made to previously reported financial information to conform to our current period presentation.
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, allowance for trade promotions, business combinations, pension and benefit plan assumptions, valuation assumptions of goodwill and other intangible assets 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 acquired 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 net of 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, 2022 and 2021, the Company did not have off-balance sheet credit exposure related to its customers. The Weetabix segment sells certain receivables to a third party institution without recourse. Receivables sold during the years ended September 30, 2022 and 2021 were $111.7 and $140.2, 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. 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. 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.
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 $232.9, $222.2 and $206.7 in fiscal 2022, 2021 and 2020, respectively. Any gains and losses incurred on the sale or disposal of assets are included in “Other operating expense (income), 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, |
| 2022 | | 2021 |
| Land and land improvements | $ | 92.2 | | | $ | 106.2 | |
| Buildings and leasehold improvements | 932.7 | | | 939.4 | |
| Machinery and equipment | 1,951.1 | | | 1,949.6 | |
| Software | 110.6 | | | 111.4 | |
| Construction in progress | 182.7 | | | 111.3 | |
| 3,269.3 | | | 3,217.9 | |
| Accumulated depreciation | (1,517.4) | | | (1,387.4) | |
| $ | 1,751.9 | | | $ | 1,830.5 | |
Goodwill — 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 2022, 2021 and 2020, the Company 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 for comparable peers.
See Note 8 for additional information on goodwill and the annual goodwill impairment assessments for the years ended September 30, 2022, 2021 and 2020. These fair value measurements fall within Level 3 of the fair value hierarchy as described in Note 14.
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 $146.0, $143.2 and $138.1 in fiscal 2022, 2021 and 2020, respectively. For the definite-lived intangible assets recorded as of September 30, 2022, amortization expense of $145.0, $143.9, $142.6, $142.6 and $142.6 is expected for fiscal 2023, 2024, 2025, 2026 and 2027, respectively. Other intangible assets consisted of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | September 30, 2021 |
| Carrying
Amount | | Accum.
Amort. | | Net
Amount | | Carrying
Amount | | Accum.
Amort. | | Net
Amount |
| Subject to amortization: | | | | | | | | | | | |
Customer relationships | $ | 2,129.7 | | | $ | (816.4) | | | $ | 1,313.3 | | | $ | 2,163.1 | | | $ | (716.4) | | | $ | 1,446.7 | |
Trademarks and brands | 647.7 | | | (260.4) | | | 387.3 | | | 647.9 | | | (228.5) | | | 419.4 | |
| | | | | | | | | | | |
| 2,777.4 | | | (1,076.8) | | | 1,700.6 | | | 2,811.0 | | | (944.9) | | | 1,866.1 | |
| Not subject to amortization: | | | | | | | | | | | |
Trademarks and brands | 1,011.6 | | | — | | | 1,011.6 | | | 1,058.3 | | | — | | | 1,058.3 | |
| $ | 3,789.0 | | | $ | (1,076.8) | | | $ | 2,712.2 | | | $ | 3,869.3 | | | $ | (944.9) | | | $ | 2,924.4 | |
In December 2021, the Company sold the Willamette Egg Farms business (the “WEF Transaction”). As a result, the Company recorded a write-off of $8.8 and $1.7 relating to customer relationships, net and trademarks, net, respectively. For additional information on the WEF Transaction, see Note 7.
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 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 test performed may either be qualitative or quantitative; however, if adverse qualitative trends are identified that could negatively impact the fair value of the trademark, a quantitative impairment test is performed. In fiscal 2022, 2021 and 2020, the Company performed a quantitative impairment test.
The quantitative trademark impairment tests require the Company to compare the calculated fair value of the trademark to its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The fair value is determined using an income-based approach, 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. The Company conducted impairment reviews and concluded there were no impairments of any indefinite-lived assets during the years ended September 30, 2022, 2021 or 2020. These fair value measurements fall within Level 3 of the fair value hierarchy as described in Note 14.
In addition, definite-lived assets (groups) are tested for recoverability when events or changes in circumstances indicate that the carrying value of an asset (group) may not be recoverable or the estimated useful life is no longer appropriate. 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 the estimated related undiscounted future cash flows are less than its carrying amount. There were no indicators, including adverse trends in the business, that indicated that the carrying value of the Company’s definite-lived assets (groups) were not recoverable in fiscal 2022, 2021 or 2020.
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 14). 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 may 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 derivatives designated as 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 designated 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 associated with all derivatives are reported as cash flows from operating activities in the Consolidated Statements of Cash Flows, unless the derivative contains an other-than-insignificant financing element, in which case its cash flows are reported as cash flows from financing activities.
Leases — The Company leases office space, certain warehouses and equipment primarily through operating lease agreements. The Company has no material finance lease agreements. 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.
For lease arrangements that 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.
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.
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 $204.0, $167.7 and $160.4 in fiscal 2022, 2021 and 2020, 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 $1.4 and $1.1 as of September 30, 2022 and 2021, 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 the equity or liability award. For liability awards, the fair market value is remeasured at each quarterly reporting period. The cost for equity and liability awards is recognized ratably 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 19 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 tax expense. The Company considers the undistributed earnings of its foreign subsidiaries to be permanently invested, so no United States (“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.
Earnings (Loss) per Share — The Company presents basic and diluted earnings (loss) per share for both continuing and discontinued operations. Basic earnings (loss) per share is based on the average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is based on the average number of shares used for the basic earnings (loss) per share calculation, adjusted for the dilutive effect of stock options, stock appreciation rights and restricted stock units using the “treasury stock” method and convertible senior notes using the “if-converted” method.
Remeasurements to the redemption value of the redeemable noncontrolling interest (“NCI”) (as discussed in Note 5) are recognized as a deemed dividend. The Company has made an election to treat the portion of the deemed dividend that exceeds fair value as an adjustment to income available to common shareholders for basic and diluted earnings (loss) from continuing operations per share. In addition, dilutive net earnings from continuing operations was adjusted for interest expense, net of tax, related to the Company’s convertible senior notes, and dilutive net earnings from discontinued operations was adjusted for the Company’s share of Old BellRing’s consolidated net earnings prior to the BellRing Spin-off, to the extent it was dilutive. Net earnings (loss) from continuing operations was utilized as the “control number” to determine whether potential shares of common stock were dilutive or anti-dilutive.
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, comprehensive income, financial condition, cash flows, shareholders’ equity or related disclosures based on current information.
In October 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires a company to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU No. 2014-19, “Revenue from Contracts with Customers (Topic 606)” as if it had originated the contracts. The Company early adopted this ASU as of October 1, 2021 on a prospective basis, as permitted by the ASU. The adoption of this ASU had no impact on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies the accounting for convertible instruments by removing major separation models required under current GAAP. This ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted this ASU on October 1, 2021, using the modified retrospective approach. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In March 2020 and January 2021, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to 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 Topic 848 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company adopted Topic 848 on October 1, 2021. The adoption of Topic 848 did not have and is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
NOTE 4 — BELLRING SPIN-OFF AND DISCONTINUED OPERATIONS
BellRing Spin-off
On October 21, 2019, Old BellRing (the Company’s subsidiary at the time) closed its initial public offering (the “BellRing IPO”) of 39.4 million shares of its Class A common stock, $0.01 par value per share (the “Old BellRing Class A Common Stock”). As a result of the BellRing IPO and certain other transactions completed in connection with the BellRing IPO, Old BellRing became a publicly-traded company, with the Old BellRing Class A Common Stock being traded on the New York Stock Exchange (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 its non-voting membership units (the “BellRing LLC units”) with Post owning 71.2% of the BellRing LLC units and one share of Old BellRing’s Class B common stock, $0.01 par value per share (the “Old BellRing Class B Common Stock”). The Company’s ownership of the BellRing LLC units and the share of Old BellRing Class B Common Stock resulted in the Company having a controlling interest in Old BellRing following the BellRing IPO. This controlling interest resulted in the full consolidation of Old BellRing and its subsidiaries into the Company’s financial statements prior to the BellRing Spin-off, while the remaining interest in Old BellRing’s consolidated net income and net assets not held by the Company were allocated to NCI prior to the BellRing Spin-off.
On March 9, 2022, pursuant to the Transaction Agreement and Plan of Merger, dated as of October 26, 2021 (as amended by Amendment No.1 to the Transaction Agreement and Plan of Merger, dated as of February 28, 2022, the “Spin-off Agreement”), by and among Post, Old BellRing, BellRing and BellRing Merger Sub Corporation, a wholly-owned subsidiary of BellRing (“BellRing Merger Sub”), Post contributed its share of Old BellRing Class B Common Stock, all of its BellRing LLC units and $550.4 of cash to BellRing in exchange for certain limited liability company interests of BellRing and the right to receive $840.0 in aggregate principal amount of BellRing’s 7.00% senior notes maturing in 2030 (the “BellRing Notes” and such transactions, collectively, the “BellRing Contribution”).
On March 10, 2022, BellRing converted into a Delaware corporation and changed its name to “BellRing Brands, Inc.”, and Post consummated the BellRing Distribution, distributing an aggregate of 78.1 million, or 80.1%, of its shares of BellRing common stock, $0.01 par value per share (“BellRing Common Stock”), to Post shareholders of record as of the close of business, Central Time, on February 25, 2022 (the “Record Date”) in a pro-rata distribution. Post shareholders received 1.267788 shares of BellRing Common Stock for every one share of Post common stock held as of the Record Date. No fractional shares of BellRing Common Stock were issued, and instead, cash in lieu of any fractional shares was paid to Post shareholders.
Upon completion of the BellRing Distribution, BellRing Merger Sub merged with and into Old BellRing (the “BellRing Merger”), with Old BellRing continuing as the surviving corporation and becoming a wholly-owned subsidiary of BellRing. Pursuant to the BellRing Merger, each outstanding share of Old BellRing Class A Common Stock was converted into one share of BellRing Common Stock plus $2.97 in cash.
Immediately following the BellRing Spin-off, Post owned approximately 14.2% of the BellRing Common Stock and Post shareholders owned approximately 57.3% of the BellRing Common Stock. The former Old BellRing stockholders owned approximately 28.5% of the BellRing Common Stock, maintaining the same effective percentage ownership interest in the Old BellRing business as prior to the BellRing Spin-off. As a result of the BellRing Spin-off, the dual class voting structure in the BellRing business was eliminated. The BellRing Distribution was structured in a manner intended to qualify as a tax-free
distribution to Post shareholders for U.S. federal income tax purposes, except to the extent of any cash received in lieu of fractional shares of BellRing Common Stock.
The Company incurred separation-related expenses related to the BellRing Spin-off and subsequent partial divestment of its Investment in BellRing (as defined below) (see Note 5) of $29.9 during the year ended September 30, 2022. The Company incurred separation-related expenses related to the BellRing Spin-off of $1.6 during the year ended September 30, 2021. These expenses were included in “Selling, general and administrative expenses” within continuing operations in the Consolidated Statements of Operations. Old BellRing incurred separation-related expenses prior to the BellRing Spin-off of $4.3 and $0.2 during the years ended September 30, 2022 and 2021, respectively, which were included in “Net earnings from discontinued operations, net of tax and noncontrolling interest” in the Consolidated Statements of Operations. These expenses generally included third party costs for advisory services, fees charged by other service providers and government filing fees.
On March 17, 2022, the Company utilized proceeds received in connection with the BellRing Spin-off to redeem a portion of Post’s existing 5.75% senior notes (see Note 16).
The following is a summary of BellRing’s assets and liabilities as of March 10, 2022.
| | | | | | | |
| March 10, 2022 | | |
| Assets | | | |
| Cash and cash equivalents (a) | $ | 50.6 | | | |
| Receivables, net | 120.0 | | | |
| Inventories | 146.1 | | | |
| Prepaid expenses and other current assets | 17.0 | | | |
| | | |
| | | |
| Property, net | 8.7 | | | |
| Goodwill | 65.9 | | | |
| Other intangible assets, net | 214.4 | | | |
| Other assets | 10.3 | | | |
| Total Assets | 633.0 | | | |
| | | |
| Liabilities | | | |
| Current portion of long-term debt | — | | | |
| Accounts payable | 69.5 | | | |
| Other current liabilities | 40.5 | | | |
| | | |
| | | |
| Long-term debt | 938.8 | | | |
| Deferred income taxes (b) | 6.3 | | | |
| Other liabilities | 9.5 | | | |
| Total Liabilities | 1,064.6 | | | |
| | | |
BellRing Net Assets | $ | (431.6) | | | |
(a)Excludes $115.5 of merger consideration paid to former Old BellRing stockholders immediately following the completion of the BellRing Distribution.
(b)Excludes $127.1 related to Post’s investment in BellRing Brands, LLC, which was contributed to BellRing and subsequently eliminated immediately following the completion of the BellRing Distribution.
As a result of the BellRing Spin-off, the Company recorded a $442.5 adjustment to additional paid-in capital, which included BellRing net assets of $(431.6). The BellRing Spin-off also resulted in a reduction of accumulated OCI associated with BellRing’s foreign currency translation adjustments. The total adjustment to accumulated OCI was $2.3.
The Company’s equity interest in BellRing subsequent to the BellRing Spin-off (its “Investment in BellRing”), which was 14.2% immediately following the BellRing Spin-off, did not represent a controlling interest in BellRing. As such, the Company’s remaining proportionate share of BellRing’s net assets were recorded at a zero carrying value on March 10, 2022, as the BellRing net assets were negative. See Note 5 for additional information regarding the subsequent sale of a portion of the Company’s Investment in BellRing. See Note 14 for additional information regarding the Company’s remeasurement of its Investment in BellRing to fair value at September 30, 2022.
Discontinued Operations
The BellRing Spin-off represented a strategic shift that had a major effect on the Company’s operations and consolidated financial results. Accordingly, the historical results of Old BellRing and BellRing Distribution, LLC prior to the BellRing Spin-off have been presented as discontinued operations in the Company’s Consolidated Statements of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash Flows.
The following table presents the components of net earnings from discontinued operations. The year ended September 30, 2022 represents the period ending March 10, 2022, the completion date of the BellRing Spin-off.
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
| Net Sales | $ | 541.9 | | | $ | 1,246.0 | | | $ | 987.7 | |
| Cost of goods sold | 390.3 | | | 859.8 | | | 649.7 | |
| Gross Profit | 151.6 | | | 386.2 | | | 338.0 | |
| Selling, general and administrative expenses | 68.5 | | | 167.1 | | | 151.8 | |
| Amortization of intangible assets | 8.7 | | | 51.2 | | | 22.2 | |
| Other operating income, net | — | | | (0.1) | | | — | |
| Operating Profit | 74.4 | | | 168.0 | | | 164.0 | |
| Interest expense, net | 13.1 | | | 43.2 | | | 54.7 | |
| Loss on extinguishment and refinancing of debt, net | 17.6 | | | 1.6 | | | — | |
| Earnings from Discontinued Operations before Income Taxes | 43.7 | | | 123.2 | | | 109.3 | |
| Income tax expense | 10.3 | | | 28.4 | | | 24.8 | |
| Net Earnings from Discontinued Operations, Including Noncontrolling Interest | 33.4 | | | 94.8 | | | 84.5 | |
| Less: Net earnings attributable to noncontrolling interest from discontinued operations | 11.8 | | | 33.0 | | | 27.2 | |
| Net Earnings from Discontinued Operations, net of tax and noncontrolling interest | $ | 21.6 | | | $ | 61.8 | | | $ | 57.3 | |
The following table presents the carrying amounts of major classes of assets and liabilities that were included in discontinued operations at September 30, 2021. There were no assets or liabilities classified as discontinued operations at September 30, 2022.
| | | | | | | |
| | | September 30, 2021 |
| Cash and cash equivalents | | | $ | 152.6 | |
| Receivables, net | | | 101.5 | |
| Inventories | | | 117.9 | |
| Prepaid expenses and other current assets | | | 13.7 | |
| Current assets of discontinued operations | | | $ | 385.7 | |
| | | |
| Property, net | | | $ | 8.9 | |
| Goodwill | | | 65.9 | |
| Other intangible assets, net | | | 223.1 | |
| Other assets | | | 10.5 | |
| Other assets of discontinued operations | | | $ | 308.4 | |
| | | |
| Current portion of long-term debt | | | $ | 116.3 | |
| Accounts payable | | | 89.5 | |
| Other current liabilities | | | 43.1 | |
| Current liabilities of discontinued operations | | | $ | 248.9 | |
| | | |
| Long-term debt | | | $ | 481.2 | |
| Deferred income taxes | | | 134.8 | |
| Other liabilities | | | 11.7 | |
| Other liabilities of discontinued operations | | | $ | 627.7 | |
NOTE 5 — NONCONTROLLING INTERESTS, EQUITY INTERESTS AND RELATED PARTY TRANSACTIONS
Post Holdings Partnering Corporation
In May and June of 2021, the Company and Post Holdings Partnering Corporation, a special purpose acquisition company (“PHPC”), consummated the initial public offering of 34.5 million units of PHPC (the “PHPC Units” and such transaction, the “PHPC IPO”), of which PHPC Sponsor, LLC, our wholly-owned subsidiary (“PHPC Sponsor”), purchased 4.0 million PHPC Units. 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. The PHPC Units, PHPC Series A Common Stock and PHPC Warrants each trade on the NYSE under the ticker symbols “PSPC.U”, “PSPC” and “PSPC WS”, respectively. Under the terms of the PHPC IPO, PHPC is required to consummate a partnering transaction by May 28, 2023 (which may be extended to August 28, 2023 in certain circumstances).
Substantially concurrently with the closing of the PHPC IPO, PHPC completed the private sale of 1.1 million units of PHPC (the “PHPC Private Placement Units”), at a purchase price of $10.00 per PHPC Private Placement Unit, to PHPC Sponsor, 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 million 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 PHPC IPO, 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 million 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, $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 Accounting Standards Codification (“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 the VIE that most significantly impact the VIE’s economic performance, as well as the obligation to absorb losses of the entity or the right to receive benefits from the VIE that could potentially be significant to the VIE. 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. At September 30, 2022, there was $346.8 held in the trust account, which was included in “Current investments held in trust” on the Consolidated Balance Sheet as the period in which PHPC has to complete a partnering transaction was less than twelve months as of September 30, 2022. At September 30, 2021, there was $345.0 held in the trust account, which was included in “Investments held in trust” on the Consolidated Balance Sheet as the period in which PHPC had to complete a partnering transaction was greater than twelve months as of September 30, 2021.
The public stockholders’ ownership of PHPC equity represents a 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 earnings 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, 2022 and 2021, the carrying amount of the redeemable NCI was recorded at its redemption value of $306.6 and $305.0, respectively. 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 Sheets.
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 current liabilities” and “Other liabilities” on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively. Additionally, the initial valuation of the PHPC Warrants of $16.9 was recorded to redeemable NCI for the year ended September 30, 2021. For additional information on the financial statement impacts of the PHPC Warrants, see Notes 13 and 14.
As of both September 30, 2022 and 2021, the Company beneficially owned 31.0% of the equity of PHPC and the net earnings and net assets of PHPC were consolidated within the Company’s financial statements. The remaining 69.0% of the consolidated net earnings 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 the Company’s redeemable NCI on the Company’s equity. The period 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, | | |
| 2022 | | 2021 | | |
| | | | | |
| PHPC IPO offering costs | $ | — | | | $ | (16.9) | | | |
| Initial valuation of PHPC Warrants | — | | | (16.9) | | | |
| Net earnings attributable to redeemable NCI | 6.7 | | | 5.8 | | | |
| Redemption value adjustment | (1.6) | | | — | | | |
| | | | | |
| PHPC deemed dividend | $ | 5.1 | | | $ | (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.
| | | | | | | | | | | |
| As Of and For the Year Ended September 30, |
| 2022 | | 2021 |
| Balance, beginning of year | $ | 305.0 | | | $ | — | |
| Impact of PHPC IPO (a) | — | | | 271.2 | |
| Net earnings attributable to redeemable NCI | 6.7 | | | 5.8 | |
| PHPC deemed dividend | (5.1) | | | 28.0 | |
| Balance, end of year | $ | 306.6 | | | $ | 305.0 | |
(a)For the year ended September 30, 2021, 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.
8th Avenue
The Company has a 60.5% common equity interest in 8th Avenue that is accounted for using the equity method. In determining the accounting treatment of the common equity interest, management concluded that 8th Avenue was not a VIE as defined by ASC Topic 810, 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 third parties 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. For the year ended September 30, 2022, 8th Avenue’s equity method loss attributable to Post exceeded the Company’s remaining investment in 8th Avenue. In accordance with ASC Topic 323, “Investments—Equity Method and Joint Ventures”, the Company did not recognize equity method losses in excess of its remaining investment in 8th Avenue, which was $66.6 as of September 30, 2021. As of September 30, 2022, the Company’s investment in 8th Avenue was zero.
| | | | | | | | | | | | | |
| | | Year Ended September 30, |
| | | 2021 | | 2020 |
| Net loss attributable to 8th Avenue common shareholders | | | $ | (60.6) | | | $ | (38.9) | |
| | | 60.5 | % | | 60.5 | % |
| Equity method loss attributable to Post | | | $ | (36.7) | | | $ | (23.5) | |
| Less: Amortization of basis difference, net of tax (a) | | | 6.8 | | | 6.9 | |
| | | | | |
| Equity method loss, net of tax | | | $ | (43.5) | | | $ | (30.4) | |
(a)The Company adjusted the historical basis of 8th Avenue’s assets and liabilities to fair value and recognized a basis difference of $70.3 upon the initial recording of its equity method investment in 8th Avenue. The basis difference related to property, plant and equipment and other intangible assets was initially amortized over the weighted-average useful lives of the assets. During the year ended September 30, 2022, the carrying value of the Company’s investment in 8th Avenue was reduced to zero, resulting in the termination of basis difference amortization in accordance with ASC Topic 323. At September 30, 2021, the remaining basis difference to be amortized was $47.8.
Summarized financial information of 8th Avenue is presented in the following tables.
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
| Net sales | $ | 1,089.0 | | | $ | 900.8 | | | $ | 924.2 | |
| Gross profit | $ | 159.9 | | | $ | 132.3 | | | $ | 160.0 | |
| | | | | |
| Net loss | $ | (210.9) | | | $ | (24.3) | | | $ | (6.4) | |
| Less: Preferred stock dividend | 40.4 | | | 36.3 | | | 32.5 | |
| Net loss attributable to 8th Avenue common shareholders | $ | (251.3) | | | $ | (60.6) | | | $ | (38.9) | |
| | | | | |
| | | September 30, |
| | | 2022 | | 2021 |
| Current assets | | | $ | 337.0 | | | $ | 282.8 | |
| Other assets | | | 746.6 | | | 903.0 | |
| Total Assets | | | $ | 1,083.6 | | | $ | 1,185.8 | |
| | | | | |
| Current portion of long-term debt | | | $ | 6.5 | | | $ | 6.5 | |
| Accounts payable and other current liabilities | | | 166.3 | | | 131.7 | |
| Long-term debt | | | 862.4 | | | 780.0 | |
| Other liabilities | | | 54.1 | | | 63.0 | |
| Total Liabilities | | | 1,089.3 | | | 981.2 | |
| Preferred stock | | | 138.3 | | | 97.9 | |
| Other shareholders’ (deficit) equity | | | (144.0) | | | 106.7 | |
| Shareholders’ (Deficit) Equity | | | (5.7) | | | 204.6 | |
| Total Liabilities and Shareholders’ Equity | | | $ | 1,083.6 | | | $ | 1,185.8 | |
The Company provides services to 8th Avenue under a master services agreement (the “MSA”), as well as certain advisory services for a fee. During the years ended September 30, 2022, 2021 and 2020, the Company recorded MSA and advisory income of $3.2, $3.5 and $3.9, respectively, which were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations.
During the years ended September 30, 2022, 2021 and 2020, the Company had net sales to 8th Avenue of $8.1, $6.7 and $5.7, respectively, and purchases from and royalties paid to 8th Avenue of $102.9, $54.1 and $9.9 respectively. Sales and purchases between the Company and 8th Avenue were all made at arm’s-length. The investment in 8th Avenue was zero and $66.6 at September 30, 2022 and 2021, 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 $4.4, $26.1 and $0.7, respectively, at September 30, 2022, and current receivables, current payables and a long-term liability of $4.6, $1.2 and $0.7, respectively, at September 30, 2021. The current receivables, current payables and long-term liability were included in “Receivables, net,” “Accounts payable” and “Other liabilities,” respectively, on the Consolidated Balance Sheets and 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.
Investment in BellRing
During the period subsequent to the BellRing Spin-off, the Company’s Investment in BellRing did not represent a controlling interest in BellRing and was accounted for as an equity security. The Company’s Investment in BellRing represented 19.4 million shares of BellRing Common Stock, or 14.2% of the equity interest in BellRing, immediately following the BellRing Spin-off.
On August 11, 2022, the Company transferred 14.8 million shares of its Investment in BellRing to repay certain outstanding debt obligations as part of a Debt-for-Equity Exchange (as defined in Note 16). See Note 16 for additional information regarding the Debt-for-Equity Exchange. The Company’s remaining Investment in BellRing as of September 30, 2022 represented 4.6 million shares of BellRing Common Stock, or 3.4% of the outstanding equity of BellRing.
As of September 30, 2022, the Company’s Investment in BellRing was recorded at its fair value of $94.8, and was included in “Investment in BellRing” on the Consolidated Balance Sheet (see Note 14). The Company recognized a gain on its
Investment in BellRing of $437.1 during the year ended September 30, 2022, which was recorded in “Gain on investment in BellRing” in the Consolidated Statement of Operations. No deferred income taxes have been recorded with respect to the non-cash mark-to-market adjustment on the Company’s Investment in BellRing as of September 30, 2022, as the Company expects to fully divest, and has already partially divested through a Debt-for-Equity Exchange, its remaining Investment in BellRing within 12 months of the BellRing Spin-off in a manner intended to qualify as tax-free for U.S. federal income tax purposes.
Weetabix East Africa and Alpen
The Company holds a controlling equity interest in Weetabix East Africa Limited (“Weetabix East Africa”). 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 21). The remaining interest in the consolidated net earnings and net assets of Weetabix East Africa is allocated to NCI.
The Company holds an equity interest in Alpen Food Company South Africa (Pty) Limited (“Alpen”). 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, net of tax, attributable to Alpen was $0.5, $0.4 and $0.5 for the years ended September 30, 2022, 2021 and 2020, respectively, and was included in “Equity method loss, net of tax” in the Consolidated Statements of Operations. The investment in Alpen was $4.1 at both September 30, 2022 and 2021 and was included in “Equity method investments” on the Consolidated Balance Sheets. The Company had a note receivable balance with Alpen of $0.4 and $0.5 at September 30, 2022 and 2021, respectively, which was included in “Other assets” on the Consolidated Balance Sheets.
NOTE 6 — BUSINESS COMBINATIONS
Fiscal 2022
On April 5, 2022, the Company completed its acquisition of Lacka Foods Limited (“Lacka Foods”), a U.K.-based distributor and marketer of ready-to-drink protein shakes and nutritional snacks, for £24.5 million (approximately $32.2), net of cash acquired. The acquisition included earnings-based contingent consideration of £3.5 million (approximately $4.6), representing its initial fair value estimate, which may be paid to the seller in annual installments over the next three years with a maximum cash payout of £3.5 million. The acquisition was completed using cash on hand. Lacka Foods is reported in the Weetabix segment (see Note 21). Based upon the purchase price allocation, the Company identified and recorded net assets of $32.9, including cash acquired of $0.7. The net assets acquired included customer relationships and trademarks of $11.8 and $8.9, respectively, which are each being amortized over a weighted-average period of 13 years.
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 21). Based on the purchase price allocation at September 30, 2021, 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 expense (income), net” in the Consolidated Statement of Operations 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 21).
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 21). 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. During the year ended September 30, 2022, the Company recorded a final measurement period adjustment and a working capital adjustment of $0.3 and $1.3, respectively, and reached a final net working capital settlement, resulting in an amount received by the Company of $2.9. As a result of the final net working capital settlement, the Company recorded a gain of $1.2, which was included in “Other operating expense (income), net” in the Consolidated Statement of Operations for the year ended September 30, 2022.
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 21). 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 5). In April 2021, the Company reached a final settlement of net working capital, resulting in an amount received by the Company of $2.0.
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 21). 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 expense (income), 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. 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 expense (income), 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, 2022, 2021 and 2020, the Company incurred transaction-related expenses of $3.2, $6.4 and $3.8, 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. The results of operations for the fiscal 2022 and 2020 acquisitions were immaterial for presentation within the following unaudited pro forma information. 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. Pro forma adjustments related to the fiscal 2021 acquisitions did not affect results of operations for the year ended September 30, 2022.
| | | | | | | | | | | | | |
| | | Year Ended September 30, |
| | | 2021 | | 2020 |
| Pro forma net sales | | | $ | 5,184.3 | | | $ | 5,182.0 | |
| Pro forma net earnings (loss) from continuing operations available to common shareholders | | | $ | 96.9 | | | $ | (42.2) | |
| Pro forma basic earnings (loss) from continuing operations per common share | | | $ | 1.51 | | | $ | (0.61) | |
| Pro forma diluted earnings (loss) from continuing operations per common share | | | $ | 1.48 | | | $ | (0.61) | |
NOTE 7 — DIVESTITURES AND AMOUNTS HELD FOR SALE
Divestiture
On December 1, 2021, the Company completed the WEF Transaction, which included the sale of $62.8 book value of assets, for total proceeds of $56.1. Of the $56.1, the Company had $6.0 in escrow, subject to certain contingencies, which was included in “Receivables, net” on the Consolidated Balance Sheet at September 30, 2022. As a result of the WEF Transaction, during the year ended September 30, 2022, the Company recorded a net loss on sale of business of $6.3, which included a favorable working capital adjustment of $0.4, and was reported as “Other operating expense (income), net” in the Consolidated Statement of Operations. Subsequent to the WEF Transaction, Willamette Egg Farms was no longer consolidated in the Company’s financial statements. Prior to the WEF Transaction, Willamette Egg Farms’ operating results were reported in the Refrigerated Retail segment (see Note 21).
Amounts Held For Sale
The Company had certain Foodservice production equipment in Klingerstown, Pennsylvania (the “Klingerstown Equipment”) and Jefferson City, Tennessee (the “Jefferson City Equipment”) classified as held for sale. The Company sold the Klingerstown Equipment in November 2021 and entered into an agreement to sell the Jefferson City Equipment in August 2022, which is expected to close in fiscal 2023.
In the year ended September 30, 2022, a net gain on assets held for sale of $9.4 was recorded consisting of (i) a gain of $9.8 related to the sale of the Klingerstown Equipment and (ii) a loss of $0.4 related to the sale of the Jefferson City Equipment. In the year ended September 30, 2022, the Company received total proceeds of $10.3 related to the sale of the Klingerstown Equipment, which was included in “Proceeds from sale of property and assets held for sale” on the Consolidated Statement of Cash Flows for the year ended September 30, 2022. As of September 30, 2022, the Jefferson City Equipment was classified as held for sale and was reported as “Prepaid expenses and other current assets” on the Consolidated Balance Sheet.
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 a Weetabix manufacturing facility in Corby, U.K. in November 2020 (the “Corby Facility”), (ii) a loss of $0.1 related to the sale of land and a building at the Post Consumer Brands RTE cereal manufacturing facility in Asheboro, North Carolina in November 2020 (the “Asheboro Facility”) and (iii) a loss of $0.1 related to the sale of the remaining portion of a Post Consumer Brands RTE cereal manufacturing plant in Clinton, Massachusetts in February 2021 (the “Clinton Plant”).
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.
The above held for sale gains and losses were included in “Other operating expense (income), net” in the Consolidated Statements of Operations for the years ended September 30, 2022, 2021 and 2020.
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 | | | | Total |
| Balance, September 30, 2020 | | | | | | | | | | | |
| Goodwill (gross) | $ | 2,011.8 | | | $ | 889.5 | | | $ | 1,335.6 | | | $ | 793.6 | | | | | $ | 5,030.5 | |
| Accumulated impairment losses | (609.1) | | | — | | | — | | | (48.7) | | | | | (657.8) | |
| Goodwill (net) | $ | 1,402.7 | | | $ | 889.5 | | | $ | 1,335.6 | | | $ | 744.9 | | | | | $ | 4,372.7 | |
| 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 | | | | | $ | 5,159.4 | |
| Accumulated impairment losses | (609.1) | | | — | | | — | | | (48.7) | | | | | (657.8) | |
| Goodwill (net) | $ | 1,458.0 | | | $ | 929.4 | | | $ | 1,355.0 | | | $ | 759.2 | | | | | $ | 4,501.6 | |
| Goodwill acquired (a) | — | | | 13.9 | | | 0.3 | | | — | | | | | 14.2 | |
| Sale of business (b) | — | | | — | | | — | | | (4.2) | | | | | (4.2) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Currency translation adjustment | (0.3) | | | (161.7) | | | — | | | — | | | | | (162.0) | |
| Balance, September 30, 2022 | | | | | | | | | | | |
| Goodwill (gross) | $ | 2,066.8 | | | $ | 781.6 | | | $ | 1,355.3 | | | $ | 803.7 | | | | | $ | 5,007.4 | |
| Accumulated impairment losses | (609.1) | | | — | | | — | | | (48.7) | | | | | (657.8) | |
| Goodwill (net) | $ | 1,457.7 | | | $ | 781.6 | | | $ | 1,355.3 | | | $ | 755.0 | | | | | $ | 4,349.6 | |
(a)In April 2022, the Company recorded $13.9 of goodwill related to its acquisition of Lacka Foods, and in January 2022, the Company recorded a final measurement period adjustment of $0.3 related to the Almark acquisition. For additional information on the Company’s acquisitions, see Note 6.
(b)In December 2021, the Company completed the WEF Transaction. For additional information on the WEF Transaction, see Note 7.
The Company did not record a goodwill impairment charge during the years ended September 30, 2022, 2021 or 2020, as all reporting units subjected to the quantitative test passed during each year. At September 30, 2022, the Cheese and Dairy reporting unit and the Refrigerated Retail reporting unit fair values exceeded their carrying values by approximately 6.5% and 8.5%, respectively. At September 30, 2022, the estimated fair values of all other reporting units exceeded their carrying values by at least 10%. 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%). 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%).
The fair values of the Cheese and Dairy and Refrigerated Retail reporting units at September 30, 2022 were impacted by raw material cost inflation and supply constraints, which impacted near-term profitability. The Company expects these impacts to be transitory in nature; however, inherent risk to their respective cash flows remains. 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 and consumer responses to marketing and pricing strategy, (ii) changes in product costs, including commodities, (iii) a significant change in profitability, (iv) interest rate fluctuations and (v) currency fluctuations.
NOTE 9 — INCOME TAXES
The components of “Earnings (Loss) 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, |
| 2022 | | 2021 | | 2020 |
| Domestic | $ | 799.9 | | | $ | 105.9 | | | $ | (146.5) | |
| Foreign | 95.4 | | | 108.1 | | | 100.6 | |
| Earnings (Loss) before Income Taxes and Equity Method Loss | $ | 895.3 | | | $ | 214.0 | | | $ | (45.9) | |
| | | | | |
| Income tax expense (benefit) | $ | 85.7 | | | $ | 58.2 | | | $ | (21.3) | |
| Effective income tax rate | 9.6 | % | | 27.2 | % | | (46.4) | % |
Income tax expense (benefit) consisted of the following:
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
| Current: | | | | | |
| Federal | $ | 71.1 | | | $ | (20.3) | | | $ | 9.2 | |
| State | 11.1 | | | (0.2) | | | 4.6 | |
| Foreign | 13.2 | | | 10.5 | | | 9.0 | |
| 95.4 | | | (10.0) | | | 22.8 | |
| Deferred: | | | | | |
| Federal | (9.7) | | | 22.6 | | | (45.9) | |
| State | — | | | 3.4 | | | (14.6) | |
| Foreign | — | | | 42.2 | | | 16.4 | |
| (9.7) | | | 68.2 | | | (44.1) | |
| Income tax expense (benefit) | $ | 85.7 | | | $ | 58.2 | | | $ | (21.3) | |
A reconciliation of income tax expense (benefit) with amounts computed at the statutory federal rate follows:
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
Computed tax (21%) | $ | 188.0 | | | $ | 44.9 | | | $ | (9.6) | |
| Enacted tax law and changes in deferred tax rates | 0.9 | | | 40.0 | | | 10.2 | |
| Gain on investment in BellRing (a) | (91.8) | | | — | | | — | |
| | | | | |
| Non-deductible compensation | 5.9 | | | 5.4 | | | 4.5 | |
| | | | | |
| | | | | |
| State income tax, net of effect on federal tax | 10.3 | | | 1.7 | | | (7.8) | |
| | | | | |
| Valuation allowances | 1.4 | | | 2.9 | | | 6.1 | |
| | | | | |
| | | | | |
| Net losses and basis difference attributable to equity method investment | (14.1) | | | (9.2) | | | (6.5) | |
| Income tax credits | (1.9) | | | (1.5) | | | (2.6) | |
| Rate differential on foreign income | (10.2) | | | (11.0) | | | (10.7) | |
| Excess tax benefits for share-based payments | (3.6) | | | (6.1) | | | (1.3) | |
| Gain on bargain purchase | — | | | (2.4) | | | (2.5) | |
| Enhanced deduction for food donations | (1.0) | | | (0.8) | | | (1.3) | |
| Return-to-provision and changes in prior year accruals | (0.5) | | | (2.8) | | | (1.4) | |
Other, net (none in excess of 5% of statutory tax) | 2.3 | | | (2.9) | | | 1.6 | |
| Income tax expense (benefit) | $ | 85.7 | | | $ | 58.2 | | | $ | (21.3) | |
(a)No deferred income taxes have been recorded with respect to the non-cash mark-to-market adjustment on the Company’s Investment in BellRing during the year ended September 30, 2022, as the Company expects to fully divest, and has already partially divested through the Debt-for-Equity Exchange, its remaining Investment in BellRing within 12 months of the BellRing Spin-off in a manner intended to qualify as tax-free for U.S. federal income tax purposes. See Note 4 for additional information on the BellRing Spin-off.
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, 2022 | | September 30, 2021 |
| Assets | | Liabilities | | Net | | Assets | | Liabilities | | Net |
| Derivatives and mark-to-market adjustments | $ | 34.9 | | | $ | — | | | $ | 34.9 | | | $ | 100.0 | | | $ | — | | | $ | 100.0 | |
| Disallowed interest carryforwards | 55.4 | | | — | | | 55.4 | | | 34.2 | | | — | | | 34.2 | |
| Lease liabilities | 35.8 | | | — | | | 35.8 | | | 31.9 | | | — | | | 31.9 | |
| Net operating loss and credit carryforwards | 24.1 | | | — | | | 24.1 | | | 29.1 | | | — | | | 29.1 | |
| Stock-based and deferred compensation | 19.9 | | | — | | | 19.9 | | | 17.5 | | | — | | | 17.5 | |
| Accrued liabilities | 7.0 | | | — | | | 7.0 | | | 9.4 | | | — | | | 9.4 | |
| Accrued vacation, incentive and severance | 6.2 | | | — | | | 6.2 | | | 8.2 | | | — | | | 8.2 | |
| Inventory | 8.8 | | | — | | | 8.8 | | | 4.1 | | | — | | | 4.1 | |
| Intangible assets | — | | | (611.4) | | | (611.4) | | | — | | | (643.5) | | | (643.5) | |
| Property | — | | | (197.6) | | | (197.6) | | | — | | | (218.7) | | | (218.7) | |
| | | | | | | | | | | |
| ROU assets | — | | | (32.9) | | | (32.9) | | | — | | | (30.0) | | | (30.0) | |
| Pension and other postretirement benefits | | | (11.4) | | | (11.4) | | | — | | | (21.7) | | | (21.7) | |
| Basis difference attributable to equity method investment | 4.6 | | | — | | | 4.6 | | | — | | | (11.8) | | | (11.8) | |
| | | | | | | | | | | |
| Other items | 5.5 | | | (1.8) | | | 3.7 | | | 5.6 | | | (1.8) | | | 3.8 | |
| Total gross deferred income taxes | 202.2 | | | (855.1) | | | (652.9) | | | 240.0 | | | (927.5) | | | (687.5) | |
| Valuation allowance | (35.5) | | | — | | | (35.5) | | | (41.6) | | | — | | | (41.6) | |
| Total deferred taxes | $ | 166.7 | | | $ | (855.1) | | | $ | (688.4) | | | $ | 198.4 | | | $ | (927.5) | | | $ | (729.1) | |
As of September 30, 2022, the Company’s $24.1 deferred tax asset for net operating loss (“NOL”) and credit carryforwards is comprised of U.S. federal NOL carryforwards of $1.9, state NOLs of $13.5, foreign tax loss carryforwards of $5.3 and state credit carryforwards of $3.4. The expiration for the majority of these carryforwards are either greater than 10 years or are able to be carried forward indefinitely. The Company has offset approximately $13.4 of the state NOLs and all of the $5.3 of foreign tax loss carryforwards 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. In addition, as of September 30, 2022, the Company had a
deferred tax asset for disallowed U.S. interest expense of $55.4 subject to Internal Revenue Code Section 163(j) limitations, which may be carried forward indefinitely. Based on management’s judgement, with the exception of a $4.8 valuation allowance recorded for state-related disallowed interest carryforwards, it is more likely than not that the Company will recognize the benefit of this deferred tax asset in the future.
As of September 30, 2022 and 2021, the Company had a recognized valuation allowance of $35.5 and $41.6, respectively, based on management’s judgment that it is more likely than not that the benefits of its deferred tax assets will not be realized in the future. The changes in the valuation allowance during the years ended September 30, 2022, 2021 and 2020 were $(6.1), $0.5 and $8.5, respectively. These changes primarily relate to valuation allowances on state carryforwards.
The Company generally repatriates a portion of current year earnings from select non-U.S. subsidiaries only if the economic cost of the repatriation is not considered material. No provision has been made for income taxes on undistributed earnings of consolidated foreign subsidiaries of $90.0 as of September 30, 2022, as it is the Company’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries to, amongst other things, fund local operations, fund debt service payments, fund pension and other post-retirement obligations, fund capital projects and support foreign growth initiatives, including potential acquisitions. If the Company repatriated any of the earnings, it could be subject to withholding tax and the impact of foreign currency movements. 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. Applicable income and withholding taxes will be provided on these earnings in the periods in which they are no longer considered reinvested.
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 years ended September 30, 2022 and 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 $0.9 and $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 years ended September 30, 2022 and 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, 2022, 2021 and 2020 is presented in the following table.
| | | | | | | | | | | | | | | | | |
| September 30, |
| 2022 | | 2021 | | 2020 |
| Balance, beginning of year | $ | 12.5 | | | $ | 8.3 | | | $ | 8.6 | |
| Additions for tax positions taken in current year and acquisitions | 0.1 | | | 0.3 | | | 0.2 | |
| Additions for tax positions taken in prior years | — | | | 5.2 | | | — | |
| | | | | |
| Settlements with tax authorities/statute expirations | (0.9) | | | (1.3) | | | (0.5) | |
| Balance, end of year | $ | 11.7 | | | $ | 12.5 | | | $ | 8.3 | |
The amount of the net unrecognized tax benefits that, if recognized, would directly affect the effective income tax rate was $6.5 at September 30, 2022. 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 $0.2 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 expense (benefit). The Company recorded income tax expense (benefit) of $0.1, $(0.5) and zero related to interest and penalties in the years ended September 30, 2022, 2021 and 2020, respectively. The Company had accrued interest and penalties of $0.6 and $0.5 at September 30, 2022 and 2021, 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, 2019 through September 30, 2021 are generally open and subject to examination by the tax authorities in each respective jurisdiction.
NOTE 10 — EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per share for both continuing and discontinued operations.
| | | | | | | | | | | | | | | | | |
| Year ended September 30, |
| 2022 | | 2021 | | 2020 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Net Earnings (Loss) from Continuing Operations | | | | | |
| Net earnings (loss) from continuing operations | $ | 735.0 | | | $ | 104.9 | | | $ | (56.5) | |
| Impact of redeemable NCI | — | | | (11.0) | | | — | |
| Net earnings (loss) from continuing operations for basic earnings (loss) per share | $ | 735.0 | | | $ | 93.9 | | | $ | (56.5) | |
| Impact of interest expense, net of tax, related to convertible senior notes | 1.5 | | | — | | | — | |
| Net earnings (loss) from continuing operations for diluted earnings (loss) per share | $ | 736.5 | | | $ | 93.9 | | | $ | (56.5) | |
| | | | | |
| Net Earnings from Discontinued Operations | | | | | |
| | | | | |
| | | | | |
| Net earnings from discontinued operations for basic earnings per share | $ | 21.6 | | | $ | 61.8 | | | $ | 57.3 | |
Dilutive impact of Old BellRing net earnings from discontinued operations | — | | | (0.1) | | | — | |
| Net earnings from discontinued operations for diluted earnings per share | $ | 21.6 | | | $ | 61.7 | | | $ | 57.3 | |
| | | | | |
| Net Earnings | | | | | |
| Net earnings for basic earnings per share | $ | 756.6 | | | $ | 155.7 | | | $ | 0.8 | |
| Net earnings for diluted earnings per share | $ | 758.1 | | | $ | 155.6 | | | $ | 0.8 | |
| | | | | |
| | | | | |
| | | | | |
| shares in millions | | | | | |
| Weighted-average shares for basic earnings per share | 60.9 | | | 64.2 | | | 68.9 | |
| Effect of dilutive securities: | | | | | |
Stock options | 0.3 | | | 0.6 | | | — | |
Stock appreciation rights | 0.1 | | | 0.1 | | | — | |
| Restricted stock units | 0.5 | | | 0.3 | | | — | |
| Market-based performance restricted stock units | 0.1 | | | 0.1 | | | — | |
| Earnings-based performance restricted stock units | 0.1 | | | — | | | — | |
| Shares issuable upon conversion of convertible senior notes | 0.7 | | | — | | | — | |
| | | | | |
| Total dilutive securities | 1.8 | | | 1.1 | | | — | |
| Weighted-average shares for diluted earnings per share | 62.7 | | | 65.3 | | | 68.9 | |
| | | | | |
| Earnings (Loss) from Continuing Operations per Common Share: | | | | | |
| Basic | $ | 12.07 | | | $ | 1.46 | | | $ | (0.82) | |
| Diluted | $ | 11.75 | | | $ | 1.44 | | | $ | (0.82) | |
| Earnings from Discontinued Operations per Common Share: | | | | | |
| Basic | $ | 0.35 | | | $ | 0.96 | | | $ | 0.83 | |
| Diluted | $ | 0.34 | | | $ | 0.94 | | | $ | 0.83 | |
| Earnings per Common Share: | | | | | |
| Basic | $ | 12.42 | | | $ | 2.42 | | | $ | 0.01 | |
| Diluted | $ | 12.09 | | | $ | 2.38 | | | $ | 0.01 | |
The following table details the securities that have been excluded from the calculation of weighted-average shares for diluted earnings (loss) per share for both continuing and discontinued operations as they were anti-dilutive.
| | | | | | | | | | | | | | | | | |
| Year ended September 30, |
| 2022 | | 2021 | | 2020 |
| Stock options | — | | | — | | | 1.6 | |
| Stock appreciation rights | — | | | — | | | 0.1 | |
| Restricted stock units | 0.3 | | | — | | | 0.5 | |
| | | | | |
| | | | | |
| Market-based performance restricted stock units | 0.1 | | | — | | | 0.2 | |
| | | | | |
NOTE 11 — SUPPLEMENTAL OPERATIONS STATEMENT AND CASH FLOW INFORMATION
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
| Advertising expenses | $ | 93.2 | | | $ | 112.3 | | | $ | 113.1 | |
| | | | | |
| Research and development expenses | 18.9 | | | 21.9 | | | 19.1 | |
| | | | | |
| Interest income | (4.4) | | | (0.6) | | | (6.2) | |
| Interest paid | 320.0 | | | 348.2 | | | 300.0 | |
| Income taxes paid | 45.8 | | | 45.6 | | | 44.4 | |
| Accrued additions to property | 36.4 | | | 38.3 | | | 29.8 | |
NOTE 12 — SUPPLEMENTAL BALANCE SHEET INFORMATION
| | | | | | | | | | | |
| September 30, |
| 2022 | | 2021 |
| Receivables, net | | | |
Trade | $ | 499.4 | | | $ | 374.8 | |
Income tax receivable | 17.4 | | | 57.2 | |
| Related party | 4.4 | | | 4.6 | |
Other | 25.3 | | | 18.0 | |
| 546.5 | | | 454.6 | |
| Allowance for credit losses | (2.3) | | | (2.2) | |
| $ | 544.2 | | | $ | 452.4 | |
| Inventories | | | |
Raw materials and supplies | $ | 130.9 | | | $ | 99.6 | |
Work in process | 21.1 | | | 19.2 | |
Finished products | 361.9 | | | 318.7 | |
Flocks | 35.2 | | | 39.1 | |
| $ | 549.1 | | | $ | 476.6 | |
| Other Assets | | | |
Pension asset | $ | 93.9 | | | $ | 153.4 | |
| Operating ROU assets | 122.9 | | | 115.5 | |
| Other investments | 26.9 | | | 22.9 | |
| Derivative assets | 3.0 | | | 29.1 | |
Other | 20.1 | | | 27.1 | |
| $ | 266.8 | | | $ | 348.0 | |
| Accounts Payable | | | |
Trade | $ | 362.1 | | | $ | 369.1 | |
Book cash overdrafts | 53.3 | | | 1.5 | |
| Related party | 26.1 | | | 1.2 | |
Other | 11.2 | | | 12.4 | |
| $ | 452.7 | | | $ | 384.2 | |
| Other Current Liabilities | | | |
Advertising and promotion | $ | 47.2 | | | $ | 40.2 | |
Accrued interest | 69.5 | | | 68.1 | |
Accrued compensation | 63.4 | | | 41.7 | |
Hedging liabilities | 25.9 | | | 127.7 | |
| Operating lease liabilities | 25.5 | | | 23.5 | |
| | | |
| Accrued freight | 25.1 | | | 24.0 | |
| Other accrued taxes | 19.1 | | | 21.6 | |
Other | 94.3 | | | 68.2 | |
| $ | 370.0 | | | $ | 415.0 | |
| Other Liabilities | | | |
Pension and other postretirement benefit obligations | $ | 45.6 | | | $ | 64.2 | |
| Derivative liabilities | 49.1 | | | 256.0 | |
| Accrued compensation | 33.1 | | | 36.1 | |
| Operating lease liabilities | 113.7 | | | 105.2 | |
Other | 25.4 | | | 46.4 | |
| $ | 266.9 | | | $ | 507.9 | |
NOTE 13 — 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, 2022, 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;
•foreign currency forward contracts maturing in the next year that have the effect of hedging currency fluctuations between the Euro and the Pound Sterling;
•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;
•rate-lock interest rate swaps that require lump sum settlements with the first settlement occurring in July 2023 and the last in July 2026; and
•interest rate swaps that mature in June 2023 and give the Company the option of pay-variable, receive-fixed lump sum settlements; and
•the PHPC Warrants (see Note 5).
Interest rate swaps
In fiscal 2022, the Company terminated $700.0 notional value of its rate-lock interest rate swap contracts. In connection with this termination, the Company paid $17.0, which was recorded in “(Income) expense on swaps, net” in the Consolidated Statement of Operations for the year ended September 30, 2022. The Company also restructured two 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.
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.
In 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.
Cross-currency swaps
The Company terminated $448.7 notional value of its cross-currency swap contracts that were designated as hedging instruments during fiscal 2020. In connection with this termination, the Company received cash proceeds of $50.3 during the year ended September 30, 2020, which was 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,
2022 | | September 30,
2021 |
| | | | |
| Commodity contracts | | $ | 145.0 | | | $ | 56.4 | |
| Energy contracts | | 23.7 | | | 45.9 | |
| Foreign exchange contracts - Forward contracts | | 3.2 | | | — | |
| Interest rate swap | | 200.0 | | | 200.0 | |
| Interest rate swaps - Rate-lock swaps | | 849.3 | | | 1,549.3 | |
| Interest rate swaps - Options | | 332.6 | | | — | |
| PHPC Warrants | | 16.9 | | | 16.9 | |
| | | | |
| | | | |
| | | | |
| | | | |
The following table presents the balance sheet location and fair value of the Company’s derivative instruments. The Company does not offset derivative assets and liabilities within the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Balance Sheet Location | | September 30,
2022 | | September 30,
2021 | | | | |
| Asset Derivatives: | | | | | | | | | | |
| Commodity contracts | | Prepaid expenses and other current assets | | $ | 12.9 | | | $ | 16.3 | | | | | |
| Energy contracts | | Prepaid expenses and other current assets | | 13.6 | | | 20.1 | | | | | |
| Interest rate swaps | | Prepaid expenses and other current assets | | 3.4 | | | — | | | | | |
| Commodity contracts | | Other assets | | 0.5 | | | 2.9 | | | | | |
| Energy contracts | | Other assets | | — | | | 2.0 | | | | | |
| Interest rate swaps | | Other assets | | 2.5 | | | 24.2 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | $ | 32.9 | | | $ | 65.5 | | | | | |
| | | | | | | | | | |
| Liability Derivatives: | | | | | | | | | | |
| Commodity contracts | | Other current liabilities | | $ | 1.5 | | | $ | 2.8 | | | | | |
| Energy contracts | | Other current liabilities | | 1.8 | | | — | | | | | |
| Interest rate swaps | | Other current liabilities | | 22.5 | | | 124.9 | | | | | |
| Foreign exchange contracts | | Other current liabilities | | 0.1 | | | — | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Interest rate swaps | | Other liabilities | | 48.1 | | | 246.8 | | | | | |
| PHPC Warrants | | Other liabilities | | 1.0 | | | 9.2 | | | | | |
| | | | $ | 75.0 | | | $ | 383.7 | | | | | |
The following table presents the effects of the Company’s derivative instruments on the Company’s Consolidated Statements of Operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivatives Not Designated as Hedging Instruments | | Statement of Operations Location | | (Gain) Loss Recognized in Statement of Operations |
| | 2022 | | 2021 | | 2020 |
| Commodity contracts | | Cost of goods sold | | $ | (32.2) | | | $ | (11.3) | | | $ | 3.8 | |
| Energy contracts | | Cost of goods sold | | (28.5) | | | (43.1) | | | 21.6 | |
| Foreign exchange contracts | | Selling, general and administrative expenses | | 0.1 | | | 0.1 | | | (0.1) | |
| | | | | | | | |
| | | | | | | | |
| Interest rate swaps | | (Income) expense on swaps, net | | (268.0) | | | (122.8) | | | 187.1 | |
| PHPC Warrants | | Other income, net | | (8.2) | | | (7.7) | | | — | |
The following table presents the effects of the Company’s derivative instruments on the Company’s Consolidated Statement of Comprehensive Income for the year ended September 30, 2020. The effects of the Company’s derivative instruments for the years ended September 30, 2022 and 2021 included in the Company’s Consolidated Statements of Comprehensive Income related to the Company’s discontinued operations and therefore were not included in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivatives Designated as Hedging Instruments | | | | | | Gain Recognized in OCI | | | | | | Loss Reclassified from Accumulated OCI into Earnings (a) | | Statement of Operations Location |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Interest rate swaps | | | | | | $ | (0.6) | | | | | | | $ | 7.2 | | | Interest expense, net |
| Cross-currency swaps | | | | | | (32.2) | | | | | | | — | | | (Income) expense on swaps, net |
(a)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.
Accumulated OCI included a $99.5 net gain on hedging instruments before taxes ($74.9 after taxes) at both September 30, 2022 and September 30, 2021 related to settlements of and previously unrealized gains on cross-currency swaps. 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, 2022 and 2021, the Company had pledged collateral of $2.8 and $6.4, respectively, related to its commodity and energy contracts. These amounts were classified as “Restricted cash” on the Consolidated Balance Sheets.
NOTE 14 — 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, 2022 | | September 30, 2021 |
| Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
| Assets: | | | | | | | | | | | |
| Deferred compensation investment | $ | 12.0 | | | $ | 12.0 | | | $ | — | | | $ | 15.5 | | | $ | 15.5 | | | $ | — | |
| Derivative assets | 32.9 | | | — | | | 32.9 | | | 65.5 | | | — | | | 65.5 | |
| Equity securities | 32.1 | | | 32.1 | | | — | | | 28.9 | | | 28.9 | | | — | |
| Investment in BellRing | 94.8 | | | 94.8 | | | — | | | — | | | — | | | — | |
| $ | 171.8 | | | $ | 138.9 | | | $ | 32.9 | | | $ | 109.9 | | | $ | 44.4 | | | $ | 65.5 | |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | |
| Deferred compensation liabilities | $ | 33.7 | | | $ | — | | | $ | 33.7 | | | $ | 36.0 | | | $ | — | | | $ | 36.0 | |
| Derivative liabilities | 75.0 | | | 1.0 | | | 74.0 | | | 383.7 | | | 9.2 | | | 374.5 | |
| $ | 108.7 | | | $ | 1.0 | | | $ | 107.7 | | | $ | 419.7 | | | $ | 9.2 | | | $ | 410.5 | |
Deferred Compensation
The deferred compensation investments are primarily invested in mutual funds, and their 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.
Derivatives
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 13 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.
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, 2022 and 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 5 and 13.
Equity Securities and Investment in BellRing
The Company uses the market approach to measure the fair value of its equity securities. The Company’s Investment in BellRing represented its 3.4% equity interest in BellRing as of September 30, 2022, which was measured at its fair value of $94.8 based on the trading value of the BellRing Common Stock on September 30, 2022. For additional information on the Company’s Investment in BellRing, see Notes 4 and 5.
Other Fair Value Measurements
Investments held in trust are invested in a fund consisting entirely of U.S. treasury securities. The fund is valued at net asset (“NAV”) per share, 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 Sheets (see Note 5).
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 any outstanding borrowings under the municipal bond as of September 30, 2022 and 2021 approximated their carrying values. Based on current market rates, the fair value (Level 2) of the Company’s debt, excluding outstanding borrowings under
the municipal bond (which are also categorized as Level 2), was $5,171.0 and $6,596.7 as of September 30, 2022 and 2021, respectively, which included $566.1 and zero related to the Company’s convertible senior notes, 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. No impairment charges were recorded for property, goodwill, definite-lived or indefinite-lived intangibles or assets held for sale during the years ended September 30, 2022, 2021 or 2020.
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. The Company sold the Klingerstown Equipment and entered into an agreement to sell the Jefferson City Equipment in fiscal 2022. The Klingerstown Equipment and the Jefferson City Equipment were reported in the Foodservice 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 the carrying amount or fair value less cost to sell. 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, 2020 | $ | 7.3 | |
| |
| |
| Proceeds from the sale of assets held for sale | (7.9) | |
| Currency translation adjustment | 0.1 | |
| Net gain related to assets held for sale | 0.5 | |
| |
| Balance, September 30, 2021 | $ | — | |
| Transfers of assets into held for sale | 1.0 | |
| |
| |
| Net gain related to assets held for sale | 9.4 | |
| Proceeds from the sale of assets held for sale | (10.3) | |
| |
| |
| |
| Balance, September 30, 2022 | $ | 0.1 | |
NOTE 15 — 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 54 years and most leases provide the Company with the option to exercise one or more renewal terms.
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, 2022 | | September 30, 2021 |
| ROU assets: | | | |
| Other assets | $ | 122.9 | | | $ | 115.5 | |
| | | |
| Lease liabilities: | | | |
| Other current liabilities | $ | 25.5 | | | $ | 23.5 | |
| Other liabilities | 113.7 | | | 105.2 | |
| Total lease liabilities | $ | 139.2 | | | $ | 128.7 | |
The following table presents maturities of the Company’s operating lease liabilities.
| | | | | | | |
| September 30, 2022 | | |
| Fiscal 2023 | $ | 32.1 | | | |
| Fiscal 2024 | 26.3 | | | |
| Fiscal 2025 | 20.4 | | | |
| Fiscal 2026 | 18.9 | | | |
| Fiscal 2027 | 14.5 | | | |
| Thereafter | 64.3 | | | |
| Total future minimum payments | $ | 176.5 | | | |
| Less: Implied interest | 37.3 | | | |
| Total lease liabilities | $ | 139.2 | | | |
The following table presents supplemental information related to the Company’s operating leases.
| | | | | | | | | | | | | | | | | |
| Year Ended September 30, |
| 2022 | | 2021 | | 2020 |
| Operating lease expense | $45.5 | | $40.1 | | $38.0 |
| Variable lease expense | 5.2 | | 4.8 | | 4.5 |
| Short-term lease expense | 9.4 | | 7.5 | | 7.4 |
| | | | | |
| Weighted-average remaining lease term | 9 years | | 9 years | | 7 years |
| Weighted-average IBR | 5.26% | | 4.70% | | 4.46% |
Operating cash flows for amounts included in the measurement of the Company’s operating lease liabilities for the years ended September 30, 2022, 2021 and 2020 were $29.6, $28.4 and $26.0, respectively. ROU assets obtained in exchange for operating lease liabilities during the years ended September 30, 2022, 2021 and 2020 were $20.7, $33.8 and $5.3, respectively. Of the $33.8 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 16 — LONG-TERM DEBT
Long-term debt as of the dates indicated consists of the following:
| | | | | | | | | | | |
| September 30, |
| 2022 | | 2021 |
| 2.50% convertible senior notes maturing August 2027 | $ | 575.0 | | | $ | — | |
| 4.50% senior notes maturing September 2031 | 1,270.5 | | | 1,800.0 | |
| 4.625% senior notes maturing April 2030 | 1,482.2 | | | 1,650.0 | |
| 5.50% senior notes maturing December 2029 | 1,235.0 | | | 750.0 | |
| 5.625% senior notes maturing January 2028 | 940.9 | | | 940.9 | |
| | | |
| 5.75% senior notes maturing March 2027 | 459.3 | | | 1,299.3 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Municipal bond | 6.4 | | | 7.5 | |
| | | |
| $ | 5,969.3 | | | $ | 6,447.7 | |
| Less: Current portion of long-term debt | 1.1 | | | 1.1 | |
| Debt issuance costs, net | 50.1 | | | 47.2 | |
| Plus: Unamortized premium, net | 38.5 | | | 42.2 | |
| Total long-term debt | $ | 5,956.6 | | | $ | 6,441.6 | |
Debt Transactions in Connection with BellRing
On March 8, 2022, the Company entered into a Joinder Agreement No. 1 (the “First Joinder Agreement”) by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, the institutions constituting the Funding Incremental Term Loan Lenders (as defined in the First Joinder Agreement, referred to herein as the “First Funding Incremental Term Loan Lenders”), Barclays Bank PLC, as administrative agent, and JPMorgan Chase Bank, N.A., as sub-agent to the administrative agent. The First Joinder Agreement provided for an incremental term loan (the “First Incremental Term Loan”) of $840.0 under the Company’s Credit Agreement (as defined below), which the Company borrowed in full on March 8, 2022.
Interest on the First Incremental Term Loan accrued at the adjusted term secured overnight financing rate (“SOFR”) rate (as defined in the Credit Agreement) plus a margin of 1.50% per annum, and the maturity date for the First Incremental Term Loan was May 6, 2022. The First Joinder Agreement permitted the Company to repay the First Incremental Term Loan, in whole or in part, in cash or, with prior written consent of the First Funding Incremental Term Loan Lenders, in lieu of cash, to exchange its obligations under the First Incremental Term Loan with the First Funding Incremental Term Loan Lenders for the BellRing Notes.
On March 10, 2022, the Company and the First Funding Incremental Term Loan Lenders entered into an exchange agreement (the “First Exchange Agreement”) pursuant to which the Company repaid the First Incremental Term Loan and all accrued and unpaid interest and expenses owed thereunder through a combination of (i) with respect to the principal amount owed under the First Incremental Term Loan, the assignment and transfer by the Company of all $840.0 of the BellRing Notes to the First Funding Incremental Term Loan Lenders and (ii) with respect to accrued and unpaid interest and fees and expenses owed under the First Incremental Term Loan, cash on hand (collectively, the “Debt-for-Debt Exchange”). As provided in the First Exchange Agreement, upon completion of the transfer of the BellRing Notes to the First Funding Incremental Term Loan Lenders and payment of interest, fees and expenses, the First Incremental Term Loan was deemed satisfied and paid in full. For additional information, see “Repayments of Debt” below.
On March 17, 2022, the Company redeemed $840.0 in aggregate principal amount, or approximately 65%, of the outstanding 5.75% senior notes maturing in March 2027 using the proceeds from the First Incremental Term Loan. The 5.75% senior notes were redeemed at a redemption price of 102.875% of the aggregate principal amount of the 5.75% senior notes being redeemed, plus accrued and unpaid interest for each day from March 1, 2022 to, but excluding, March 17, 2022. For additional information, see “Repayments of Debt” below.
On July 25, 2022, the Company entered into a Joinder Agreement No. 2 (the “Second Joinder Agreement”) by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, the institutions constituting the Funding Incremental Term Loan Lenders (as defined in the Second Joinder Agreement, referred to herein as the “Second Funding Incremental Term Loan Lenders”), Barclays Bank PLC, as administrative agent, and JPMorgan Chase Bank, N.A., as sub-agent to the administrative agent. The Second Joinder Agreement provided for an incremental term loan (the “Second Incremental Term Loan”) of $450.0 under the Company’s Credit Agreement, which the Company borrowed in full on July 25, 2022.
Interest on the Second Incremental Term Loan accrued at the adjusted term SOFR rate plus a margin of 1.50% per annum, and the maturity date for the Second Incremental Term Loan was September 23, 2022. The Second Joinder Agreement permitted the Company to repay the Second Incremental Term Loan, in whole or in part, in cash or, with the prior written consent of the Second Funding Incremental Term Loan Lenders, with an alternative form of consideration in lieu of cash.
On August 8, 2022, the Company and the Second Funding Incremental Term Loan Lenders entered into an exchange agreement (the “Second Exchange Agreement”) pursuant to which the Company transferred on August 11, 2022 14.8 million shares of its Investment in BellRing to the Second Funding Incremental Term Loan Lenders to repay $342.3 in aggregate principal amount of the Second Incremental Term Loan, excluding accrued interest, which was paid with cash (such exchange, the “Debt-for-Equity Exchange”). On September 14, 2022, the Company repaid the remaining principal balance of $107.7 of the Second Incremental Term Loan using cash on hand. For additional information, see “Repayments of Debt” below.
Convertible Senior Notes
On August 12, 2022, the Company issued $575.0 principal value of 2.50% convertible senior notes maturing in August 2027. The 2.50% convertible senior notes were issued at par, and the Company received $559.1 after incurring investment banking and other fees and expenses of $15.9, which were deferred and are being amortized to interest expense over the term of the 2.50% convertible senior notes. Interest payments on the 2.50% convertible senior notes are due semi-annually each February 15 and August 15, beginning on February 15, 2023. With a portion of the net proceeds received from the issuance, the Company repurchased 1.1 million shares of its common stock in privately negotiated transactions effected through one of the initial purchasers of the 2.50% convertible senior notes (or an affiliate thereof), as the Company’s agent, and paid the fees and
expenses associated with the repurchase (see Note 20). The Company intends to use the remainder of the net proceeds for general corporate purposes.
The initial conversion rate of the 2.50% convertible senior notes is 9.4248 shares of the Company’s common stock per one thousand principal amount of notes, which represents an initial conversion price of approximately $106.10 per share of common stock. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture governing the 2.50% convertible senior notes (the “Indenture”). The Company may settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. If a “make-whole fundamental change” (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.
The 2.50% convertible senior notes may be converted at the holder’s option up to the second scheduled trading day immediately before the maturity date of August 15, 2027 under the following circumstances:
•during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ended September 30, 2022, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “Measurement Period”) in which the trading price per one thousand principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;
•upon the occurrence of certain corporate events or distributions on the Company’s common stock described in the Indenture;
•if the Company calls the notes for redemption; and
•at any time from, and including, May 15, 2027 until the close of business on the second scheduled trading day immediately before the August 15, 2027 maturity date.
If a “fundamental change” (as defined in the Indenture) occurs, then, except as described in the Indenture, holders of the 2.50% convertible senior notes may require the Company to repurchase their notes at a cash repurchase price equal to the principal amount of the 2.50% convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the “fundamental change repurchase date” (as defined in the Indenture).
The 2.50% convertible senior notes may be redeemed, in whole or in part (subject to the partial redemption limitation described in the Indenture), at the Company’s option at any time, and from time to time, on or after August 20, 2025 and on or before the 35th scheduled trading day immediately before August 15, 2027, at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (ii) the trading day immediately before the date the Company sends such notice.
As of September 30, 2022, none of the conditions permitting holders to convert their 2.50% convertible senior notes had been satisfied, and no shares of the Company’s common stock had been issued in connection with any conversions of the 2.50% convertible senior notes.
The Company evaluated the terms of the 2.50% convertible senior notes and concluded there were no embedded features that required separate bifurcation under ASC Topic 815. As such, the 2.50% convertible senior notes were recorded at the principal amount, net of issuance costs, on the Company’s Consolidated Balance Sheet at the time of issuance.
As of September 30, 2022, the net carrying value of the 2.50% convertible senior notes was $559.5, which included $15.5 of unamortized debt issuance costs.
The Company’s 2.50% convertible senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior, unsecured basis, by each of the Company’s existing domestic subsidiaries that have guaranteed its other senior notes, which excludes certain immaterial subsidiaries, certain excluded subsidiaries and subsidiaries the Company designated as unrestricted subsidiaries, which include 8th Avenue and its subsidiaries, PHPC and PHPC Sponsor. If, after the date the 2.50% convertible senior notes were issued, any domestic wholly-owned subsidiary of the Company guarantees any of the Company’s existing 2.50% convertible senior notes or any other debt securities the Company may issue in the form of senior unsecured notes or
convertible or exchangeable notes, then the Company will cause such subsidiary to become a guarantor under the 2.50% convertible senior notes as well.
Other Senior Notes
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 incurring investment banking and other fees and expenses of $10.5, which were deferred and are being amortized to interest expense over the term of the 5.75% senior notes. On August 10, 2017, the Company issued an additional $750.0 principal value of 5.75% senior notes. The additional 5.75% senior notes were issued at a price of 105.5% of par value, and the Company received $784.0 after incurring investment banking and other fees and expenses 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 additional 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 5.75% senior 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 incurring investment banking and other fees and expenses of $9.4, which were deferred and are being amortized to interest expense over the term of the 5.625% senior 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 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 5.50% senior notes. On December 22, 2021, the Company issued an additional $500.0 principal value of 5.50% senior notes. The additional 5.50% senior notes were issued at a price of 103.5% of the par value, and the Company received $514.0 after incurring investment banking and other fees and expenses of $3.5, which were deferred and are being amortized to interest expense over the term of the 5.50% senior notes. The premium related to the additional 5.50% senior notes was recorded as an unamortized premium and is being amortized as a reduction to interest expense over the term of the 5.50% senior notes. Interest payments on the 5.50% senior notes 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 4.625% senior notes. On August 14, 2020, the Company issued an additional $400.0 principal value of 4.625% senior notes. 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 4.625% senior notes. The premium related to the additional 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 4.625% senior notes. Interest payments on the 4.625% senior notes are due semi-annually each April 15 and October 15.
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 4.50% senior notes. Interest payments are due semi-annually each March 15 and September 15. With the net proceeds received from the issuance, the Company redeemed the outstanding principal balance of the Company’s previously held 5.00% senior notes maturing in August 2026. For additional information, see “Repayments of 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, 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, including by the First Joinder Agreement and the Second Joinder Agreement, 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.
As of September 30, 2022 and 2021, the Revolving Credit Facility had outstanding letters of credit of $19.7 and $19.2, respectively, which reduced the available borrowing capacity under the Revolving Credit Facility to $730.3 and $730.8, respectively. 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, 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.
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.
On December 17, 2021, the Company entered into a second amendment to the Credit Agreement to, among other provisions, facilitate the BellRing Spin-off. For additional information regarding the BellRing Spin-off, see Note 4. The amendment also amended the Credit Agreement to change the reference interest rate applicable to revolving loan borrowings in U.S. Dollars from LIBOR to a rate based on the adjusted term SOFR rate. During the year ended September 30, 2022, the Company paid $0.4 of deferred financing fees in connection with the amendment.
Borrowings in U.S. Dollars under the Revolving Credit Facility bear interest, at the option of the Company, at an annual rate equal to either (a) the term SOFR 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 adjusted term SOFR rate plus 1.00% per annum, in each case plus an applicable margin, which is determined by reference to the secured net leverage ratio (as defined in the Credit Agreement), with the applicable margin for adjusted term SOFR 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 accrue at a rate of 0.375% if the Company’s secured net leverage ratio is greater than 3.00:1.00, and 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.
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 initial public offering and formation of Old BellRing, 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 LLC entered into a borrower assignment and assumption agreement with the Company and the administrative agent under the 2020 Bridge Loan Facility, under which BellRing LLC 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 LLC and its domestic subsidiaries, who were subsidiaries of the Company at the time) 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 LLC 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. For additional information, see “Repayments of Debt” below.
Municipal Bond
In connection with the 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.
Repayments of Debt
On June 27, 2022, the Company commenced a modified “Dutch Auction” tender offer to purchase up to $450.0 in aggregate cash consideration (excluding accrued interest) of its (i) 4.625% senior notes at a bid range of 81% to 88% of par and (ii) 4.50% senior notes at a bid range of 80% to 87% of par (collectively, the “Tender Offer”). The Tender Offer included a tender premium of 5% of par for holders who tendered their senior notes prior to 5:00 p.m., New York City time, on July 11, 2022 (the “Tender Premium”). On July 26, 2022, the Company settled the Tender Offer and purchased $139.8 in aggregate principal amount, or approximately 8%, of its outstanding 4.625% senior notes at 87% of par, including the Tender Premium, and $381.8 in aggregate principal amount, or approximately 22%, of its outstanding 4.50% senior notes at 86% of par, including the Tender Premium, for aggregate cash consideration of $450.0, excluding accrued interest and fees. The Company paid tender fees of $1.7 in connection with the Tender Offer, which were included in “(Gain) loss on extinguishment of debt, net” in the Consolidated Statement of Operations for the year ended September 30, 2022.
The following table presents the Company’s cash repayments of debt, net of discounts included in the Consolidated Statements of Cash Flows and associated gain or loss included in “(Gain) loss on extinguishment of debt, net” in the Consolidated Statements of Operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash repayments of debt | | | | (Gain) Loss on Extinguishment of Debt, net |
Year Ended
September 30, | | Issuance | | Principal Amount Repaid | | | | Debt Discounts (Received) / Premiums Paid | | Write-off of Debt Issuance Costs /
Tender Fees | | Write-off of Unamortized Premium |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 4.50% senior notes | | $ | 529.5 | | | | | $ | (74.7) | | | $ | 6.0 | | | $ | — | |
| | 4.625% senior notes | | 167.8 | | | | | (21.9) | | | 1.1 | | | (1.8) | |
| | 5.50% senior notes maturing in 2029 | | 15.0 | | | | | (1.2) | | | 0.1 | | | (0.2) | |
| | 5.75% senior notes | | 840.0 | | | | | 24.1 | | | 5.0 | | | (13.3) | |
| | Second Incremental Term Loan | | 107.7 | | | | | — | | | — | | | — | |
| | Municipal bond | | 1.1 | | | | | — | | | — | | | — | |
| 2022 | | Total | | $ | 1,661.1 | | | | | $ | (73.7) | | | $ | 12.2 | | | $ | (15.3) | |
| | | | | | | | | | | | |
| | 5.00% senior notes | | $ | 1,697.3 | | | | | $ | 74.3 | | | $ | 18.9 | | | $ | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Municipal bond | | 1.0 | | | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| 2021 | | Total | | $ | 1,698.3 | | | | | $ | 74.3 | | | $ | 18.9 | | | $ | — | |
| | | | | | | | | | | | |
| | Term Loan | | $ | 1,309.5 | | | | | $ | — | | | $ | 9.1 | | | $ | — | |
| | | | | | | | | | | | |
| | 5.50% senior notes maturing in 2025 | | 1,000.0 | | | | | 41.3 | | | 8.7 | | | — | |
| | Revolving Credit Facility | | 500.0 | | | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | 8.00% senior notes | | 122.2 | | | | | 8.5 | | | 0.7 | | | — | |
| | | | | | | | | | | | |
| | Municipal bond | | 1.1 | | | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | Credit Agreement | | — | | | | | — | | | 0.8 | | | — | |
| 2020 | | Total | | $ | 2,932.8 | | | | | $ | 49.8 | | | $ | 19.3 | | | $ | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The following table presents the Company’s non-cash repayments of debt, which are not included in the Consolidated Statements of Cash Flows, and the associated gain or loss included in “(Gain) loss on extinguishment of debt, net” in the Consolidated Statements of Operations. There were no non-cash repayments of debt for the year ended September 30, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Non-cash repayments of debt | | | | (Gain) Loss on Extinguishment of Debt, net |
Year Ended
September 30, | | Issuance | | Principal Amount Repaid | | | | Debt Discounts (Received) / Premiums Paid | | Write-off of Debt Issuance Costs | | Write-off of Unamortized Premium |
| | First Incremental Term Loan | | $ | 840.0 | | | | | $ | — | | | $ | 3.5 | | | $ | — | |
| | Second Incremental Term Loan | | 342.3 | | | | | — | | | 0.7 | | | — | |
| 2022 | | Total | | $ | 1,182.3 | | | | | $ | — | | | $ | 4.2 | | | $ | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 2020 Bridge Loan | | $ | 1,225.0 | | | | | $ | — | | | $ | 3.8 | | | $ | — | |
| 2020 | | Total | | $ | 1,225.0 | | | | | $ | — | | | $ | 3.8 | | | $ | — | |
As of September 30, 2022, expected principal payments on the Company’s debt for the next five fiscal years were:
| | | | | |
| September 30, 2022 |
| Fiscal 2023 | $ | 1.1 | |
| Fiscal 2024 | 1.1 | |
| Fiscal 2025 | 1.2 | |
| Fiscal 2026 | 1.2 | |
| Fiscal 2027 (a) | 1,035.6 | |
(a)Includes principal payments of $575.0 related to the Company’s 2.50% convertible senior notes.
Estimated future interest payments on the Company’s debt through fiscal 2027 are expected to be $1,395.6 (with $284.1 expected in fiscal 2023) based on interest rates as of September 30, 2022.
Debt Covenants
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 4.25:1.00, 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, 2022, 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.
NOTE 17 — 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 prior to fiscal 2022: Prior to fiscal 2022, MFI 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.
Fiscal 2022: During September 2022, MFI settled the remaining pending claims for this matter on confidential terms, which had sought damages based on purchases of egg products by three opt-out plaintiffs.
MFI has at all times denied liability in this matter, and no settlement contains any admission of liability by MFI. During the year ended September 30, 2022, the Company expensed $13.8 related to the September 2022 settlement, 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 or 2020 related to these matters. At September 30, 2021, the Company had accrued $3.5 for this matter, which was included in “Other current liabilities” on the Consolidated Balance Sheet. The Company had no accrual related to this matter as of September 30, 2022 as the settlement was paid prior to year end. 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.
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 Farms, Inc. (“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 in 2018, but have subsequently been adjusted to 130 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, 2022, 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 $12.9 and will increase up to 1.5% annually based on indexed inflation. The lease terms for the majority of the leases extend for approximately 15 years from September 30, 2022, 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 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 continued 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, 2022.
NOTE 18 — 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, 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, 2022 and a statement of the funded status and amounts recognized on the Consolidated Balance Sheets as of September 30, 2022 and 2021.
| | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Other International |
| Year Ended
September 30, | | Year Ended
September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Change in benefit obligation | | | | | | | |
| Benefit obligation at beginning of year | $ | 133.3 | | | $ | 131.1 | | | $ | 821.3 | | | $ | 834.4 | |
| Service cost | 4.3 | | | 3.9 | | | — | | | — | |
| Interest cost | 3.5 | | | 3.2 | | | 15.7 | | | 15.2 | |
| Plan participants’ contributions | 0.4 | | | 0.4 | | | — | | | — | |
| Prior service cost (a) | — | | | 0.5 | | | — | | | — | |
| Actuarial gain | (38.9) | | | (1.4) | | | (251.6) | | | (32.7) | |
| Business combinations | — | | | 0.5 | | | — | | | — | |
| Benefits paid | (5.9) | | | (5.8) | | | (28.4) | | | (34.7) | |
| | | | | | | |
| | | | | | | |
| Currency translation | (1.2) | | | 0.9 | | | (135.9) | | | 39.1 | |
| Benefit obligation at end of year | $ | 95.5 | | | $ | 133.3 | | | $ | 421.1 | | | $ | 821.3 | |
| | | | | | | |
| Change in fair value of plan assets | | | | | | | |
| Fair value of plan assets at beginning of year | $ | 136.6 | | | $ | 121.5 | | | $ | 970.9 | | | $ | 993.2 | |
| Actual return on plan assets | (27.1) | | | 19.5 | | | (273.0) | | | (34.1) | |
| Employer contributions | 0.4 | | | 0.2 | | | — | | | — | |
| | | | | | | |
| Plan participants’ contributions | 0.4 | | | 0.4 | | | — | | | — | |
| Benefits paid | (5.9) | | | (5.8) | | | (28.4) | | | (34.7) | |
| Currency translation | (1.5) | | | 0.8 | | | (162.1) | | | 46.7 | |
| Other | — | | | — | | | (0.1) | | | (0.2) | |
| Fair value of plan assets at end of year | 102.9 | | | 136.6 | | | 507.3 | | | 970.9 | |
| Funded status | $ | 7.4 | | | $ | 3.3 | | | $ | 86.2 | | | $ | 149.6 | |
| | | | | | | |
| Amounts recognized in assets or liabilities | | | | | | | |
| Other assets | $ | 7.7 | | | $ | 3.8 | | | $ | 86.2 | | | $ | 149.6 | |
| | | | | | | |
| Other liabilities | (0.3) | | | (0.5) | | | — | | | — | |
| Net amount recognized | $ | 7.4 | | | $ | 3.3 | | | $ | 86.2 | | | $ | 149.6 | |
| | | | | | | |
| Amounts recognized in accumulated OCI | | | | | | | |
| Net actuarial loss (gain) | $ | 5.0 | | | $ | 11.3 | | | $ | 40.2 | | | $ | (6.0) | |
| Prior service cost | 0.6 | | | 0.7 | | | 10.7 | | | 11.1 | |
| Total | $ | 5.6 | | | $ | 12.0 | | | $ | 50.9 | | | $ | 5.1 | |
| | | | | | | |
| Weighted-average assumptions used to determine benefit obligation | | | | | | | |
| Discount rate — U.S. plans | 5.65 | % | | 3.05 | % | | n/a | | n/a |
| Discount rate — Canadian plans | 5.12 | % | | 3.32 | % | | n/a | | n/a |
| Discount rate — Other international plans | n/a | | n/a | | 5.15 | % | | 2.05 | % |
| 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 | | 3.85 | % | | 3.45 | % |
(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.
The fair value of plan assets for the North American and other international pension plans exceeded the accumulated benefit obligation at September 30, 2022 and 2021. The aggregate accumulated benefit obligation for the North American
pension plans was $94.6 and $130.8 at September 30, 2022 and 2021, respectively. The aggregate accumulated benefit obligation for the other international pension plans was $418.9 and $817.8 at September 30, 2022 and 2021, 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, 2022, 2021 and 2020, 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, |
| 2022 | | 2021 | | 2020 |
| Components of net periodic benefit cost | | | | | |
| Service cost | $ | 4.3 | | | $ | 3.9 | | | $ | 4.3 | |
| Interest cost | 3.5 | | | 3.2 | | | 3.7 | |
| Expected return on plan assets | (7.0) | | | (6.4) | | | (6.4) | |
| Recognized net actuarial loss | 1.6 | | | 2.4 | | | 1.8 | |
| Recognized prior service cost | 0.1 | | | 0.1 | | | 0.1 | |
| | | | | |
| Net periodic benefit cost | $ | 2.5 | | | $ | 3.2 | | | $ | 3.5 | |
| | | | | |
| Weighted-average assumptions used to determine net benefit cost | | | | | |
| Discount rate — U.S. plans | 3.05 | % | | 3.01 | % | | 3.32 | % |
| Discount rate — Canadian plans | 3.32 | % | | 2.71 | % | | 2.84 | % |
| 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 | 5.75 | % | | 5.40 | % | | 5.53 | % |
| Expected return on plan assets — Canadian plans | 5.25 | % | | 5.25 | % | | 5.75 | % |
| | | | | |
| Changes in plan assets and benefit obligation recognized in total comprehensive income | | | | | |
| Net (gain) loss | $ | (4.7) | | | $ | (14.5) | | | $ | 6.6 | |
| Recognized loss | (1.6) | | | (2.4) | | | (1.8) | |
| Prior service cost (a) | — | | | 0.5 | | | — | |
| Recognized prior service cost | (0.1) | | | (0.1) | | | (0.1) | |
| | | | | |
| Total recognized in OCI (before tax effects) | $ | (6.4) | | | $ | (16.5) | | | $ | 4.7 | |
(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, |
| 2022 | | 2021 | | 2020 |
| Components of net periodic benefit cost | | | | | |
| | | | | |
| Interest cost | $ | 15.7 | | | $ | 15.2 | | | $ | 14.7 | |
| Expected return on plan assets | (24.8) | | | (24.9) | | | (24.6) | |
| | | | | |
| Recognized prior service cost | 0.4 | | | 0.5 | | | — | |
| | | | | |
| Net periodic benefit income | $ | (8.7) | | | $ | (9.2) | | | $ | (9.9) | |
| | | | | |
| Weighted-average assumptions used to determine net benefit cost | | | | | |
| Discount rate | 2.05 | % | | 1.73 | % | | 1.84 | % |
| | | | | |
| Rate of compensation increase | 3.45 | % | | 2.65 | % | | 2.55 | % |
| Expected return on plan assets | 2.73 | % | | 2.38 | % | | 2.53 | % |
| | | | | |
| Changes in plan assets and benefit obligation recognized in total comprehensive income | | | | | |
| Net loss | $ | 46.2 | | | $ | 26.4 | | | $ | 14.2 | |
| | | | | |
| Prior service cost (a) | — | | | — | | | 11.4 | |
| Recognized prior service cost | (0.4) | | | (0.5) | | | — | |
| | | | | |
| | | | | |
| Total recognized in OCI (before tax effects) | $ | 45.8 | | | $ | 25.9 | | | $ | 25.6 | |
(a)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 Company expects to make contributions of $0.3 and zero to its defined benefit North American and other international pension plans, respectively, during fiscal 2023.
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 58.1% equity securities, 37.8% fixed income and bonds, 3.4% real assets and 0.7% cash and cash equivalents. At September 30, 2022, equity securities were 54.5%, fixed income and bonds were 33.9%, real assets were 2.9% and cash and cash equivalents were 8.7% of the fair value of total plan assets, 91.9% of which was invested in passive index funds. 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. 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 71.7% fixed income and bonds, 27.6% liability driven investments, 0.5% real assets and 0.2% cash and cash equivalents. At September 30, 2022, fixed income and bonds were 78.8%, liability driven investments were 18.7%, real assets were 0.4% and cash and cash equivalents were 2.1% of the fair value of total plan assets, 20.2% of which was invested in passive index funds. 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. 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America |
| September 30, 2022 | | September 30, 2021 |
| Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
| Equities | $ | 11.0 | | | $ | — | | | $ | 11.0 | | | $ | 13.8 | | | $ | — | | | $ | 13.8 | |
| Fixed income and bonds | 5.0 | | | — | | | 5.0 | | | 5.7 | | | — | | | 5.7 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Cash and cash equivalents | 8.9 | | | 8.9 | | | — | | | 3.4 | | | 3.4 | | | — | |
| Fair value of plan assets in the fair value hierarchy | 24.9 | | | 8.9 | | | 16.0 | | | 22.9 | | | 3.4 | | | 19.5 | |
| Equities | 45.1 | | | — | | | — | | | 70.1 | | | — | | | — | |
| | | | | | | | | | | |
| Fixed income and bonds | 29.9 | | | — | | | — | | | 41.2 | | | — | | | — | |
| Real assets | 3.0 | | | — | | | — | | | 2.4 | | | — | | | — | |
| Investments measured at net asset value (a) | 78.0 | | | — | | | — | | | 113.7 | | | — | | | — | |
| Total plan assets | $ | 102.9 | | | $ | 8.9 | | | $ | 16.0 | | | $ | 136.6 | | | $ | 3.4 | | | $ | 19.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other International |
| September 30, 2022 | | September 30, 2021 |
| Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
| Fixed income and bonds | $ | 321.3 | | | $ | 321.3 | | | $ | — | | | $ | 649.3 | | | $ | 649.3 | | | $ | — | |
| Liability driven instruments | 77.9 | | | 77.9 | | | — | | | 206.4 | | | 206.4 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Cash and cash equivalents | 10.6 | | | 10.6 | | | — | | | 17.8 | | | 17.8 | | | — | |
| Fair value of plan assets in the fair value hierarchy | 409.8 | | | 409.8 | | | — | | | 873.5 | | | 873.5 | | | — | |
| Fixed income and bonds | 78.5 | | | — | | | — | | | 56.1 | | | — | | | — | |
| Liability driven instruments | 16.9 | | | — | | | — | | | 29.3 | | | — | | | — | |
| | | | | | | | | | | |
| Real assets | 2.1 | | | — | | | — | | | 9.5 | | | — | | | — | |
| Cash and cash equivalents | — | | | — | | | — | | | 2.5 | | | — | | | — | |
| Investments measured at net asset value (a) | 97.5 | | | — | | | — | | | 97.4 | | | — | | | — | |
| Total plan assets | $ | 507.3 | | | $ | 409.8 | | | $ | — | | | $ | 970.9 | | | $ | 873.5 | | | $ | — | |
(a)In accordance with ASC Topic 820, 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, 2022. Besides the North American plans, the Company does not maintain any other postretirement benefit plans.
| | | | | | | | | | | |
| Year Ended
September 30, |
| 2022 | | 2021 |
| Change in benefit obligation | | | |
| Benefit obligation at beginning of year | $ | 66.5 | | | $ | 70.7 | |
| Service cost | 0.5 | | | 0.5 | |
| Interest cost | 1.5 | | | 1.5 | |
| | | |
| | | |
| Actuarial gain | (17.4) | | | (4.3) | |
| | | |
| Benefits paid | (2.3) | | | (2.4) | |
| | | |
| | | |
| Currency translation | (0.5) | | | 0.5 | |
| Benefit obligation at end of year | $ | 48.3 | | | $ | 66.5 | |
| | | |
| Change in fair value of plan assets | | | |
| | | |
| | | |
| Employer contributions | 2.3 | | | 2.4 | |
| | | |
| | | |
| Benefits paid | (2.3) | | | (2.4) | |
| | | |
| Fair value of plan assets at end of year | — | | | — | |
| Funded status | $ | (48.3) | | | $ | (66.5) | |
| | | |
| Amounts recognized in assets or liabilities | | | |
| | | |
| Other current liabilities | (3.0) | | | (2.8) | |
| Other liabilities | (45.3) | | | (63.7) | |
| Net amount recognized | $ | (48.3) | | | $ | (66.5) | |
| | | |
| Amounts recognized in accumulated OCI | | | |
| Net actuarial loss | $ | (9.2) | | | $ | 8.9 | |
| Prior service credit | (5.4) | | | (10.0) | |
| Total | $ | (14.6) | | | $ | (1.1) | |
| | | |
| Weighted-average assumptions used to determine benefit obligation | | | |
| Discount rate — U.S. plans | 5.62 | % | | 2.89 | % |
| Discount rate — Canadian plans | 5.12 | % | | 3.45 | % |
| | | |
| 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, 2022, 2021 and 2020, 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, |
| 2022 | | 2021 | | 2020 |
| Components of net periodic benefit cost | | | | | |
| Service cost | $ | 0.5 | | | $ | 0.5 | | | $ | 0.6 | |
| Interest cost | 1.5 | | | 1.5 | | | 1.9 | |
| Recognized net actuarial loss | 0.6 | | | 1.1 | | | 0.6 | |
| Recognized prior service credit | (4.6) | | | (4.7) | | | (4.7) | |
| Net periodic benefit cost | $ | (2.0) | | | $ | (1.6) | | | $ | (1.6) | |
| | | | | |
| Weighted-average assumptions used to determine net benefit cost | | | | | |
| | | | | |
| Discount rate — U.S. plans | 2.89 | % | | 2.79 | % | | 3.20 | % |
| Discount rate — Canadian plans | 3.45 | % | | 2.78 | % | | 2.86 | % |
| | | | | |
| Rate of compensation increase — Canadian plans | 2.75 | % | | 2.75 | % | | 2.75 | % |
| | | | | |
| Changes in benefit obligation recognized in total comprehensive income | | | | | |
| Net (gain) loss | $ | (17.5) | | | $ | (4.3) | | | $ | 4.6 | |
| Recognized net actuarial loss | (0.6) | | | (1.1) | | | (0.6) | |
| | | | | |
| Recognized prior service credit | 4.6 | | | 4.7 | | | 4.7 | |
| | | | | |
| Total recognized in OCI (before tax effects) | $ | (13.5) | | | $ | (0.7) | | | $ | 8.7 | |
For September 30, 2022 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to domestic plans for 2023 was 6.3% for participants both under the age of 65 and over the age of 65, declining gradually to an ultimate rate of 5.0% for 2028 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 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 both September 30, 2022 and 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 2023 and beyond.
Additional Information
As of September 30, 2022, expected future benefit payments and related federal subsidy receipts (Medicare Part D) in the next ten fiscal years were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 - 2032 |
| Pension benefits | $ | 24.3 | | | $ | 24.8 | | | $ | 25.9 | | | $ | 27.1 | | | $ | 28.2 | | | $ | 156.2 | |
| Other benefits | 3.2 | | | 3.4 | | | 3.4 | | | 3.4 | | | 3.5 | | | 17.9 | |
| Subsidy receipts | 0.1 | | | 0.1 | | | 0.1 | | | 0.2 | | | 0.2 | | | 1.1 | |
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 $19.6, $19.9 and $18.4 for the years ended September 30, 2022, 2021 and 2020, respectively.
NOTE 19 — STOCK-BASED COMPENSATION
Long-Term Incentive Plans
The Company’s employees participate in various Company long-term incentive plans (the “Long-Term Incentive Plans”). On January 27, 2022, the Company’s shareholders approved the 2021 Long-Term Incentive Plan (the “2021 Plan”), which permits the issuance of stock-based compensation awards of up to 2.4 million shares, plus shares remaining to be issued under the 2019 Long-Term Incentive Plan (including any shares assumed thereunder from the 2016 and 2012 Long-Term Incentive Plans) which were transferred to the 2021 Plan upon its effectiveness. Awards issued under the Long-Term Incentive Plans have a maximum term of 10 years. At September 30, 2022, there were 1.8 million shares remaining to be issued for stock-based compensation awards under the 2021 Plan.
Total compensation cost for the Company’s cash and non-cash stock-based compensation awards recognized in the years ended September 30, 2022, 2021 and 2020 was $66.4, $49.7 and $43.2, respectively, and the related recognized deferred tax benefit for each of those periods was approximately $9.1, $5.8 and $6.0, respectively. As of September 30, 2022, the total compensation cost related to Post’s non-vested awards not yet recognized was $78.5, which is expected to be recognized over a weighted-average period of 1.3 years.
BellRing Spin-off Impact
In connection with the BellRing Spin-off, adjustments were made to the terms of outstanding equity-based awards (the “Equity Awards”) to preserve the intrinsic value of the Equity Awards and to participants’ accounts under the deferred compensation plans maintained by the Company with respect to notional investments in Post common stock (the “Deferred Compensation Accounts”). The adjustments to the Equity Awards and Deferred Compensation Accounts were based on the volume weighted average price of a share of Post common stock during the five trading day period prior to and including March 10, 2022 and the volume weighted average price of a share of Post common stock during the five trading day period immediately following March 10, 2022.
In addition, certain market-based performance restricted stock units granted in fiscal 2020 to named executive officers of Post pursuant to the 2019 Long-Term Incentive Plan that were outstanding as of immediately prior to the BellRing Spin-off (the “Fiscal 2020 Market PRSUs”) were converted into a number of time-based restricted stock units based on achievement of Post’s total shareholder return ranking compared to such rankings of peer companies over a specified performance period ending on March 10, 2022. The vesting of the converted Fiscal 2020 Market PRSUs was subject to the requirement to remain employed through October 15, 2022, and otherwise remained subject to the terms and restrictions of the applicable award agreements.
The adjustments to the Equity Awards had an immaterial impact on the Company’s Consolidated Statement of Operations for the year ended September 30, 2022. The disclosures regarding the Company’s equity arrangements below include certain awards issued to BellRing employees in Post common stock prior to the BellRing IPO and still outstanding at the beginning of fiscal 2022.
Stock Appreciation Rights (“SARs”)
| | | | | | | | | | | | | | | | | | | | | | | |
| in millions, except SARs or where otherwise indicated | SARs | | Weighted-
Average
Exercise
Price Per Share (a) | | Weighted-
Average
Remaining
Contractual
Term in Years | | Aggregate
Intrinsic
Value |
| Outstanding at September 30, 2021 | 95,000 | | | $ | 46.59 | | | | | |
| Granted | — | | | | | | | |
| Impact of BellRing Spin-off | 41,038 | | | 33.62 | | | | | |
| Exercised | (54,484) | | | 31.22 | | | | | |
| Forfeited | — | | | | | | | |
| Expired | — | | | | | | | |
| Outstanding at September 30, 2022 | 81,554 | | | 33.42 | | | 1.64 | | $ | 4.0 | |
| Vested and expected to vest as of September 30, 2022 | 81,554 | | | 33.42 | | | 1.64 | | 4.0 | |
| Exercisable at September 30, 2022 | 81,554 | | | 33.42 | | | 1.64 | | 4.0 | |
(a)The weighted-average exercise price per share for activity subsequent to the BellRing Spin-off, including the outstanding balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
Upon exercise of each SAR, 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 SARs exercised was $3.0, $3.2 and $0.1 during the years ended September 30, 2022, 2021 and 2020, respectively. There were no SARs granted during the years ended September 30, 2022, 2021 or 2020.
Stock Options
| | | | | | | | | | | | | | | | | | | | | | | |
| in millions, except stock options or where otherwise indicated | Stock Options | | Weighted-
Average
Exercise
Price Per Share (a) | | Weighted-
Average
Remaining
Contractual
Term in Years | | Aggregate
Intrinsic
Value |
| Outstanding at September 30, 2021 | 889,096 | | | $ | 65.67 | | | | | |
| Granted | — | | | — | | | | | |
| Impact of BellRing Spin-off | 353,559 | | | 48.89 | | | | |
| Exercised | (231,340) | | | 39.28 | | | | | |
| Forfeited | — | | | — | | | | | |
| Expired | — | | | — | | | | | |
| Outstanding at September 30, 2022 | 1,011,315 | | | 48.75 | | | 4.34 | | $ | 33.5 | |
| Vested and expected to vest as of September 30, 2022 | 1,011,315 | | | 48.75 | | | 4.34 | | 33.5 | |
| Exercisable at September 30, 2022 | 996,235 | | | 48.40 | | | 4.30 | | 33.4 | |
(a)The weighted-average exercise price per share for activity subsequent to the BellRing Spin-off, including the outstanding balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
The fair value of each stock option was estimated on the date of grant using the Black-Scholes Model. The Company used the simplified method for estimating a stock option term as it did not have sufficient historical stock option exercise experience upon which to estimate an expected term. The expected term was estimated based on the award’s vesting period and contractual term. Expected volatilities were based on historical volatility trends and other factors. The risk-free rate was the interpolated U.S. Treasury rate for a term equal to the expected term. The weighted-average assumptions and fair values for stock options granted during the year ended September 30, 2020 are summarized in the table below. There were no stock options granted during the years ended September 30, 2022 and 2021.
| | | | | | | | | |
| | | | | |
| Expected term (in years) | | | | | 6.5 |
| Expected stock price volatility | | | | | 29.2% |
| Risk-free interest rate | | | | | 1.8% |
| Expected dividends | | | | | 0% |
| Fair value (per stock option) | | | | | $35.32 |
The total intrinsic value of stock options exercised was $14.1, $46.4 and $5.5 in the years ended September 30, 2022, 2021 and 2020, respectively. The Company received proceeds from the exercise of stock options of $4.9, $7.6 and $3.9 during the years ended September 30, 2021, 2021 and 2020, respectively.
Restricted Stock Units (“RSUs”)
| | | | | | | | | | | |
| RSUs | | Weighted-
Average
Grant Date Fair Value Per Share (a) |
| Nonvested at September 30, 2021 | 822,112 | | | $ | 97.23 | |
| Granted | 432,538 | | | 102.58 | |
| Impact of BellRing Spin-off (b) | 520,090 | | | n/a |
| Vested | (361,026) | | | 91.68 | |
| Forfeited | (64,908) | | | 81.63 | |
| Nonvested at September 30, 2022 | 1,348,806 | | | 68.38 | |
(a)The weighted-average grant date fair value for the activity subsequent to the BellRing Spin-off, including the nonvested balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
(b)The Impact of BellRing Spin-off includes the adjustments to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off and the incremental RSUs from conversion of the Fiscal 2020 Market PRSUs.
The grant date fair value of each 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 RSUs was $68.38, $97.23 and $89.14 at
September 30, 2022, 2021 and 2020, respectively. The total vest date fair value of RSUs that vested during fiscal 2022, 2021 and 2020 was $35.1, $49.8 and $42.1, respectively.
Cash-Settled Restricted Stock Units (“Cash RSUs”)
| | | | | | | | | | | |
| Cash RSUs | | Weighted-
Average
Grant Date Fair Value Per Share (a) |
| Nonvested at September 30, 2021 | 29,400 | | | $ | 51.43 | |
| Granted | — | | | — | |
| Impact of BellRing Spin-off | 14,193 | | | n/a |
| Vested | (14,530) | | | 34.68 | |
| Forfeited | — | | | — | |
| Nonvested at September 30, 2022 | 29,063 | | | 34.68 | |
(a)The weighted-average grant date fair value for the activity subsequent to the BellRing Spin-off, including the nonvested balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
At September 30, 2022, the 29,063 nonvested Cash RSUs were valued at the greater of the closing stock price or the grant price adjusted for the BellRing Spin-off of $34.68. Cash used by the Company to settle Cash RSUs was $1.1, $1.1 and $0.9 for the years ended September 30, 2022, 2021 and 2020, respectively.
Earnings-Based Performance Restricted Stock Units (“Earnings PRSUs”)
| | | | | | | | | | | |
| Earnings PRSUs | | Weighted-
Average
Grant Date Fair Value Per Share (a) |
| Nonvested at September 30, 2021 | 7,526 | | | $ | 98.33 | |
| Granted | 195,533 | | | 104.74 |
| Impact of BellRing Spin-off | 96,177 | | | n/a |
| Adjustment for performance achievement (b) | (12,588) | | | n/a |
| Vested | — | | | — | |
| Forfeited | (14,221) | | | 78.27 | |
| Nonvested at September 30, 2022 | 272,427 | | | 70.46 | |
(a)The weighted-average grant date fair value for the activity subsequent to the BellRing Spin-off, including the nonvested balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
(b)Represents the adjustment to previously granted Earnings PRSUs for performance achievement.
During the years ended September 30, 2022 and 2021, the Company granted Earnings PRSUs to certain employees. These awards will be earned based on reaching certain earnings-based targets over a period ranging from one to three years. The grant date fair value of each Earnings PRSU award was determined based upon the closing price of the Company’s common stock on the date of grant and the assumption that the Company would meet the full earnings-based targets. The Company reassesses the probability of achieving the earnings-based targets each quarterly reporting period and adjusts compensation cost accordingly. The weighted-average grant date fair value of nonvested Earnings PRSUs was $70.46 and $98.33 at September 30, 2022 and 2021, respectively. There were no Earnings PRSUs granted during the year ended September 30, 2020, and there were no Earnings PRSUs vested during the years ended September 30, 2022, 2021 or 2020.
Market-Based Performance Restricted Stock Units (“Market PRSUs”)
| | | | | | | | | | | |
| Market PRSUs | | Weighted-
Average
Grant Date Fair Value Per Share (a) |
| Nonvested at September 30, 2021 | 285,335 | | | $ | 142.61 | |
| Granted | 108,922 | | | 163.63 | |
| Impact of BellRing Spin-off (b) | 62,114 | | | n/a |
| Adjustment for performance achievement (c) | (19,508) | | | n/a |
| Vested | (61,940) | | | 122.34 | |
| Forfeited | (521) | | | 110.35 | |
| Nonvested at September 30, 2022 | 374,402 | | | 106.10 | |
(a)The weighted-average grant date fair value for the activity subsequent to the BellRing Spin-off, including the nonvested balance as of September 30, 2022, reflects the adjustment to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off.
(b)The Impact of BellRing Spin-off includes adjustments to preserve the intrinsic value of the Equity Awards outstanding immediately prior to the BellRing Spin-off, offset by the conversion of the Fiscal 2020 Market PRSUs into RSUs.
(c)Represents the adjustment to previously granted Market PRSUs for performance achievement.
The total vest date fair value of Market PRSUs that vested during fiscal 2022 and 2021 was $6.6 and $3.9, respectively. There were no Market PRSUs vested during the year ended September 30, 2020.
During the years ended September 30, 2022, 2021 and 2020, the Company granted Market PRSUs to certain employees. As described above, the Fiscal 2020 Market PRSUs were converted into a number of time-based RSUs in connection with the BellRing Spin-off. The fiscal 2022 and 2021 Market PRSUs 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 a Market PRSU grant may earn a total award ranging from 0% to 260% of the target award. The fair value of each Market PRSU was estimated on the grant date using a Monte Carlo simulation. The assumptions for Market PRSUs granted during the years ended September 30, 2022, 2021 and 2020 are summarized in the table below.
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| 2022 | | 2021 | | 2020 |
| Expected term (in years) | 3.0 | | 3.0 | | 3.0 |
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| Expected stock price volatility | 27.7% | | 28.3% | | 22.2% |
| Risk-free interest rate | 0.9% | | 0.2% | | 1.6% |
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| Fair value (per Market PRSU) | $163.63 | | $152.58 | | $138.10 |
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 the Equity Option. 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 regarding deferred compensation, refer to Note 14.
NOTE 20 — SHAREHOLDERS’ EQUITY
The following table summarizes the Company’s repurchases of its common stock.
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| September 30, |
| 2022 | | 2021 | | 2020 |
Shares repurchased (in millions) | 4.9 | | | 4.0 | | | 6.1 | |
| Average price per share including broker’s commissions (a) | $ | 90.04 | | | $ | 98.39 | | | $ | 97.67 | |
| Total cost including broker’s commissions (b) | $ | 439.0 | | | $ | 393.7 | | | $ | 587.8 | |
(a)Average repurchase price per share including broker’s commissions during the year ended September 30, 2022 was $103.81 prior to the BellRing Spin-off and $81.54 subsequent to the BellRing Spin-off.
(b)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.
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 “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 21 — SEGMENTS
At September 30, 2022, the Company managed and reported operating results through the following four reportable segments:
•Post Consumer Brands: North American RTE cereal and Peter Pan nut butters;
•Weetabix: primarily U.K. RTE cereal, muesli and protein-based RTD shakes;
•Foodservice: primarily egg and potato products; and
•Refrigerated Retail: primarily side dish, egg, cheese and sausage products.
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 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 sale of businesses and facilities, gain on/adjustment to bargain purchase, interest expense and other unallocated corporate income and expenses.
In fiscal 2022, 2021 and 2020, Post’s external revenues were primarily generated by sales within the U.S.; foreign sales were 12.5%, 14.3% and 14.5% of total net sales, respectively. The largest concentration of foreign sales was within the U.K., which accounted for 52.9%, 54.6% and 53.6% of total foreign sales in fiscal 2022, 2021 and 2020, respectively. Sales are attributed to individual countries based on the address to which the product is shipped.
As of September 30, 2022 and 2021, 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 $253.6 and $300.2, respectively.
In the years ended September 30, 2022, 2021 and 2020, one customer, including its affiliates, accounted for 14.4%, 15.9% and 18.7%, respectively, of Post’s 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 6).
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| | | Year Ended September 30, |
| | 2022 | | 2021 | | 2020 |
| Net Sales | | | | | |
| Post Consumer Brands | $ | 2,242.7 | | | $ | 1,915.3 | | | $ | 1,949.1 | |
| Weetabix | 477.3 | | | 477.5 | | | 440.4 | |
| Foodservice | 2,095.0 | | | 1,615.6 | | | 1,361.8 | |
| Refrigerated Retail | 1,036.6 | | | 974.5 | | | 961.2 | |
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| Eliminations and Corporate | (0.4) | | | (2.2) | | | (1.5) | |
| Total | $ | 5,851.2 | | | $ | 4,980.7 | | | $ | 4,711.0 | |
| Segment Profit | | | | | |
| Post Consumer Brands | $ | 314.6 | | | $ | 316.6 | | | $ | 393.5 | |
| Weetabix | 109.5 | | | 115.4 | | | 112.3 | |
| Foodservice | 151.0 | | | 61.7 | | | 25.6 | |
| Refrigerated Retail | 57.1 | | | 75.9 | | | 125.6 | |
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| Total segment profit | 632.2 | | | 569.6 | | | 657.0 | |
| General corporate expenses and other | 196.8 | | | 52.6 | | | 109.0 | |
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| Interest expense, net | 317.8 | | | 332.6 | | | 333.9 | |
| (Gain) loss on extinguishment of debt, net | (72.6) | | | 93.2 | | | 72.9 | |
| (Income) expense on swaps, net | (268.0) | | | (122.8) | | | 187.1 | |
| Gain on investment in BellRing | (437.1) | | | — | | | — | |
| Earnings (loss) before income taxes and equity method loss | $ | 895.3 | | | $ | 214.0 | | | $ | (45.9) | |
| Net sales by product | | | | | |
| Cereal | $ | 2,595.0 | | | $ | 2,333.3 | | | $ | 2,388.7 | |
| Nut butters | 111.7 | | | 58.7 | | | — | |
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| Eggs and egg products | 2,026.1 | | | 1,556.1 | | | 1,307.8 | |
| Side dishes (including potato products) | 652.4 | | | 575.0 | | | 536.6 | |
| Cheese and dairy | 214.3 | | | 223.0 | | | 253.2 | |
| Sausage | 171.2 | | | 165.9 | | | 168.1 | |
| Protein-based products | 12.9 | | | — | | | — | |
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| Other | 68.5 | | | 70.9 | | | 58.1 | |
| Eliminations and Corporate | (0.9) | | | (2.2) | | | (1.5) | |
| Total | $ | 5,851.2 | | | $ | 4,980.7 | | | $ | 4,711.0 | |
| Additions to property and intangibles | | | | | |
| Post Consumer Brands | $ | 91.2 | | | $ | 81.2 | | | $ | 67.4 | |
| Weetabix | 26.7 | | | 19.6 | | | 24.6 | |
| Foodservice and Refrigerated Retail | 136.1 | | | 89.7 | | | 139.5 | |
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| Corporate (a) | 20.8 | | | 0.4 | | | 1.0 | |
| Total | $ | 274.8 | | | $ | 190.9 | | | $ | 232.5 | |
| Depreciation and amortization | | | | | |
| Post Consumer Brands | $ | 133.1 | | | $ | 122.0 | | | $ | 112.4 | |
| Weetabix | 37.5 | | | 39.0 | | | 35.9 | |
| Foodservice | 127.5 | | | 126.0 | | | 119.6 | |
| Refrigerated Retail | 78.4 | | | 75.5 | | | 73.1 | |
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| | Total segment depreciation and amortization | 376.5 | | | 362.5 | | | 341.0 | |
| Corporate | 3.7 | | | 4.0 | | | 4.0 | |
| Total | $ | 380.2 | | | $ | 366.5 | | | $ | 345.0 | |
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| September 30, |
| 2022 | | 2021 | | |
| Assets, end of year | | | | | |
| Post Consumer Brands | $ | 3,529.1 | | | $ | 3,467.8 | | | |
| Weetabix | 1,591.3 | | | 1,930.4 | | | |
| Foodservice and Refrigerated Retail | 5,022.7 | | | 5,074.2 | | | |
| Corporate | 1,164.9 | | | 1,248.2 | | | |
| Total assets of continuing operations | 11,308.0 | | | 11,720.6 | | | |
| | Total assets of discontinued operations | — | | | 694.1 | | | |
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| Total assets | $ | 11,308.0 | | | $ | 12,414.7 | | | |
(a)During the year ended September 30, 2022, the Company had non-cash exchanges of fixed assets of $19.5, which were included in the Corporate additions to property and intangibles.