POSITION: DISCUSSION AND ANALYSIS BY THE DEPARTMENT OF FINANCIAL POSITION AND OPERATING RESULTS. (form 10-Q)

The following discussion summarizes the significant factors affecting the
consolidated operating results, financial condition, liquidity and capital
resources of Post Holdings, Inc. and its consolidated subsidiaries. This
discussion should be read in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included herein, our audited
financial statements and notes thereto found in our Annual Report on Form 10-K
for the fiscal year ended September 30, 2020 and the "Cautionary Statement on
Forward-Looking Statements" section included below. The terms "our," "we," "us,"
"Company" and "Post" as used herein refer to Post Holdings, Inc. and its
consolidated subsidiaries.
                                    OVERVIEW
We are a consumer packaged goods holding company operating in five reportable
segments: Post Consumer Brands, Weetabix, Foodservice, Refrigerated Retail and
BellRing Brands. Our products are sold through a variety of channels, including
grocery, club and drug stores, mass merchandisers, foodservice, food ingredient
and eCommerce.
At June 30, 2021, our reportable segments were as follows:
•Post Consumer Brands: North American ready-to-eat ("RTE") cereal and Peter Pan
nut butters;
•Weetabix: primarily United Kingdom (the "U.K.") RTE cereal and muesli;
•Foodservice: primarily egg and potato products;
•Refrigerated Retail: primarily side dish, egg, cheese and sausage products; and
•BellRing Brands: ready-to-drink ("RTD") protein shakes, other RTD beverages,
powders and nutrition bars.
Transactions
Fiscal 2021
On May 28, 2021, we and Post Holdings Partnering Corporation, a newly formed
special purpose acquisition company incorporated as a Delaware corporation
("PHPC"), consummated the initial public offering of 30.0 million units of PHPC
(the "PHPC Units"). On June 3, 2021, PHPC issued an additional 4.5 million PHPC
Units pursuant to the underwriters' exercise in full of their over-allotment
option. The term "PHPC IPO" as used herein generally refers to the consummation
of the initial public offering on May 28, 2021 and the underwriters' exercise in
full of their over-allotment option on June 3, 2021. Each PHPC Unit consists of
one share of Series A common stock of PHPC, par value $0.0001 per share ("PHPC
Series A Common Stock"), and one-third of one redeemable warrant of PHPC, each
whole warrant entitling the holder thereof to purchase one share of PHPC Series
A Common Stock at an exercise price of $11.50 per share (the "PHPC Warrants").
The PHPC Units were sold at a price of $10.00 per PHPC Unit, generating gross
proceeds to PHPC of $345.0. PHPC Sponsor, LLC, our wholly owned subsidiary
("PHPC Sponsor"), purchased 4.0 million of the 30.0 million PHPC Units in the
initial public offering on May 28, 2021 for $40.0. The PHPC Units began trading
on the New York Stock Exchange (the "NYSE") under the ticker symbol "PSPC.U" on
May 26, 2021. As of July 16, 2021, holders of the PHPC Units may elect to
separately trade their shares of PHPC Series A Common Stock and PHPC Warrants,
with the shares of PHPC Series A Common Stock and the PHPC Warrants listed on
the NYSE under the symbols "PSPC" and "PSPC WS", respectively. Under the terms
of the PHPC IPO, PHPC is required to consummate a partnering transaction within
24 months (or 27 months under certain circumstances) of the completion of the
PHPC IPO.
Substantially concurrently with the closing of the initial public offering on
May 28, 2021, PHPC completed the private sale of 1.0 million units of PHPC (the
"PHPC Private Placement Units"), at a purchase price of $10.00 per PHPC Private
Placement Unit, to PHPC Sponsor, and in connection with the underwriters'
exercise in full of their option to purchase additional PHPC Units, PHPC Sponsor
purchased an additional 0.1 million PHPC Private Placement Units, generating
proceeds to PHPC of $10.9 million (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, we, through PHPC Sponsor's ownership of 8.6 million shares of
Series F common stock of PHPC, par value $0.0001 per share, have certain
governance rights in PHPC.
                                       32

————————————————– ——————————

Contents

In connection with the completion of the initial public offering on May 28,
2021, PHPC also entered into a forward purchase agreement with PHPC Sponsor (the
"Forward Purchase Agreement"), providing for the purchase by PHPC Sponsor, at
the election of PHPC, of up to 10.0 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, par value of $0.0001 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 million in a private placement to occur concurrently with the closing of
PHPC's partnering transaction.
In determining the accounting treatment of our 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 a VIE
that most significantly impact the entity's economic performance, as well as the
obligation to absorb losses of the entity or the right to receive benefits from
the entity that could potentially be significant to the entity. PHPC Sponsor is
the primary beneficiary of PHPC as it has, through its equity interest, the
right to receive benefits or the obligation to absorb losses from PHPC, as well
as the power to direct a majority of the activities that significantly impact
PHPC's economic performance, including target identification. As such, PHPC is
fully consolidated into our financial statements.
As of June 30, 2021, we beneficially owned 31.0% of the equity of PHPC and the
net income and net assets of PHPC were consolidated within our financial
statements. The remaining 69.0% of the consolidated net income and net assets of
PHPC, representing the percentage of economic interest in PHPC held by the
public stockholders of PHPC through their ownership of PHPC equity, were
allocated to redeemable noncontrolling interest ("NCI"). All transactions
between PHPC and PHPC Sponsor, as well as related financial statement impacts,
eliminate in consolidation.
Fiscal 2020
On October 21, 2019, BellRing Brands, Inc. ("BellRing"), our subsidiary, 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 "BellRing Class A Common
Stock"). BellRing received net proceeds from the BellRing IPO of $524.4 million,
after deducting underwriting discounts and commissions. As a result of the
BellRing IPO and certain other transactions completed in connection with the
BellRing IPO, BellRing became a publicly-traded company with the BellRing Class
A Common Stock being traded on the NYSE under the ticker symbol "BRBR" and the
holding company of BellRing Brands, LLC, a Delaware limited liability company
("BellRing LLC"), owning 28.8% of BellRing LLC's non-voting membership units
(the "BellRing LLC units"), with us owning 71.2% of the BellRing LLC units and
one share of BellRing's Class B common stock, $0.01 par value per share (the
"BellRing Class B Common Stock" and, collectively with the BellRing Class A
Common Stock, the "BellRing Common Stock"). The BellRing Class B Common Stock
has voting rights but no rights to dividends or other economic rights. For so
long as we or our affiliates (other than BellRing and its subsidiaries) directly
own more than 50% of the BellRing LLC units, the BellRing Class B Common Stock
represents 67% of the combined voting power of the BellRing Common Stock.
BellRing LLC is the holding company for our historical active nutrition
business. The term "BellRing" as used herein generally refers to BellRing
Brands, Inc.; however, in discussions related to debt facilities, the term
"BellRing" refers to BellRing Brands, LLC. BellRing is reported herein as the
BellRing Brands segment.
As of June 30, 2021 and September 30, 2020, we and our affiliates (other than
BellRing and its subsidiaries) owned 71.2% of the BellRing LLC units and the net
income and net assets of BellRing and its subsidiaries were consolidated within
our financial statements, and the remaining 28.8% of the consolidated net income
and net assets of BellRing and its subsidiaries, representing the percentage of
economic interest in BellRing LLC held by BellRing (and therefore indirectly
held by the public stockholders of BellRing through their ownership of the
BellRing Class A Common Stock), were allocated to NCI.
Acquisitions
We completed the following acquisitions during fiscal 2021 and 2020:
Fiscal 2021
•Private label RTE cereal business of TreeHouse Foods, Inc (the "PL RTE Cereal
Business"), acquired on June 1, 2021 and reported in our Post Consumer Brands
segment;
•Egg Beaters brand ("Egg Beaters"), acquired on May 27, 2021 and reported in our
Refrigerated Retail segment;
•Almark Foods business and related assets ("Almark"), acquired on February 1,
2021 and reported in our Foodservice and Refrigerated Retail segments; and
•Peter Pan nut butter brand ("Peter Pan"), acquired on January 25, 2021 and
reported in our Post Consumer Brands segment.
Fiscal 2020
•Henningsen Foods, Inc. ("Henningsen"), acquired on July 1, 2020 and reported in
our Foodservice segment.
                                       33

————————————————– ——————————

Contents

We completed the acquisitions of Egg Beaters and Peter Pan on May 27, 2021 and
January 25, 2021, respectively. The quarter close date for both Egg Beaters and
Peter Pan was June 27, 2021. As the amounts associated with the additional three
days are immaterial, results of these entities have not been adjusted to conform
with our fiscal calendar. Due to the level of integration within our existing
Foodservice and Refrigerated Retail businesses, certain discrete financial data
for Almark is not available for the Foodservice and Refrigerated Retail segments
for the three and nine months ended June 30, 2021. Due to the level of
integration within our existing Foodservice businesses, certain discrete
financial data for Henningsen is not available for the three and nine months
ended June 30, 2021.
COVID-19
The COVID-19 pandemic has caused and continues to cause global economic
disruption and uncertainty, including in our business. We continue to closely
monitor the impact of the COVID-19 pandemic and developments related thereto and
are taking or have taken necessary actions to ensure our ability to safeguard
the health of our employees, including their economic health, maintain the
continuity of our supply chain to serve customers and consumers and preserve
financial liquidity to navigate the uncertainty caused by the pandemic. Examples
of actions we have taken in response to the pandemic include:
•reinforcing manufacturing facilities with adequate supplies, staffing and
support;
•enhancing facility safety measures and working closely with public health
officials to follow additional health and safety guidelines;
•in fiscal 2020, drawing $500.0 million of our $750.0 million revolving credit
facility and $65.0 million of BellRing's revolving credit facility to further
enhance liquidity in March 2020. Borrowings under both credit facilities were
repaid prior to the end of fiscal 2020;
•in fiscal 2020, temporarily suspending our share repurchase program, which we
resumed in May 2020; and
•in fiscal 2020 and in the first half of fiscal 2021, actively managing our
foodservice egg supply, including taking measures to reduce internal production,
delivering contract suspension notices invoking force majeure clauses with
respect to certain of our suppliers in the second quarter of fiscal 2020 (these
contract suspensions were provisionally lifted on July 1, 2020) and repurposing
product into our retail channel.
Our products sold through retail channels generally experienced an uplift in
sales starting in March 2020 and continuing through the first half of fiscal
2021 driven by increased at-home consumption in reaction to the COVID-19
pandemic. In addition, most of our retail categories exhibited a mix shift to
premium products. In the third quarter of fiscal 2021, most of our retail
channel product categories trended toward growth rates in line with their
pre-pandemic levels.
At the onset of the COVID-19 pandemic, our foodservice business was
significantly impacted by lower away-from-home demand resulting from the impact
of the COVID-19 pandemic on various channels, including full service
restaurants, quick service restaurants, education and travel and lodging. Since
then, the recovery of our foodservice volumes has been closely tracking with
changes in the degree of restrictions on mobility and gathering. Volumes have
nearly fully recovered to pre-pandemic levels in certain channels and product
categories, and volumes in other channels impacted by the COVID-19 pandemic
continue to show meaningful improvement sequentially and when compared to the
prior year period. However, our overall foodservice business volumes remain
below pre-pandemic levels.
Supply chain performance for our cereal businesses has stabilized, following
disruptions during fiscal 2020 and the first half of fiscal 2021 that resulted
from the impact of the COVID-19 pandemic. As the overall economy continues to
recover from the impact of the COVID-19 pandemic, labor and freight shortages
and other disruptions are pressuring our foodservice and refrigerated retail
supply chain. As a result, service levels and fill rates have declined, costs
have increased and certain products have been placed on allocation. We
anticipate our foodservice and refrigerated retail supply chain performance will
be dependent upon our ability to adequately hire, train and retain manufacturing
staff.
Volume recovery in our foodservice business is now two-fold dependent not only
on changes in the degree of restrictions on mobility and gathering, but also on
stabilization of supply chain performance. Volume growth in our refrigerated
retail business, most notably for side dish products, is expected to be
constrained until supply chain performance has stabilized.
BellRing's primary categories returned to growth rates in line with their
pre-pandemic levels in the fourth quarter of fiscal 2020 and have remained
strong in subsequent periods.
For additional discussion, refer to "Liquidity and Capital Resources" and
"Cautionary Statement on Forward-Looking Statements" within this section.

                                       34

————————————————– ——————————

  Table of Contents

                             RESULTS OF OPERATIONS
                                                                                Three Months Ended June 30,                                                                                   Nine Months Ended June 30,
                                                                                                      favorable/(unfavorable)                                                                                      favorable/(unfavorable)
dollars in millions                            2021                2020                          $ Change                           % Change                2021               2020                           $ Change                           % Change
Net Sales                                 $   1,589.8          $ 1,336.4          $               253.4                                     19  %       $ 4,531.1          $  4,287.4          $               243.7                                      6  %

Operating Profit                          $     206.5          $   172.1          $                34.4                                     20  %       $   517.9          $    521.6          $                (3.7)                                    (1) %
Interest expense, net                            91.9               96.4                            4.5                                      5  %           283.3               293.3                           10.0                                      3  %
Loss on extinguishment and refinancing of
debt, net                                         0.1                  -                           (0.1)                                      n/a            94.8                72.9                          (21.9)                                   (30) %
Expense (income) on swaps, net                  121.6               29.2                          (92.4)                                  (316) %          (105.6)              192.4                          298.0                                    155  %
Other income, net                                (2.9)              (3.1)                          (0.2)                                    (6) %           (19.8)               (9.6)                          10.2                                    106  %
Income tax expense (benefit)                     28.5                5.0                          (23.5)                                  (470) %            81.2               (11.7)                         (92.9)                                  (794) %
Equity method loss, net of tax                   11.6                4.2                           (7.4)                                  (176) %            26.5                22.6                           (3.9)                                   (17) %
Less: Net earnings attributable to
noncontrolling interests                         10.0                4.4                           (5.6)                                  (127) %            20.7                17.9                           (2.8)                                   (16) %
Net (Loss) Earnings                       $     (54.3)         $    36.0          $               (90.3)                                  (251) %       $   136.8          $    (56.2)         $               193.0                                    343  %


Net Sales
Net sales increased $253.4 million, or 19%, during the three months ended
June 30, 2021, compared to the corresponding period in the prior year, as a
result of growth in our Foodservice, BellRing Brands and Weetabix segments, as
well as incremental contributions from our current year and prior year
acquisitions. These positive impacts were partially offset by declines in our
Post Consumer Brands and Refrigerated Retail segments.
Net sales increased $243.7 million, or 6%, during the nine months ended June 30,
2021, compared to the corresponding period in the prior year, as a result of
growth in our BellRing Brands, Foodservice and Weetabix segments, as well as
incremental contributions from our current year and prior year acquisitions.
These positive impacts were partially offset by declines in our Post Consumer
Brands and Refrigerated Retail segments.
For further discussion, refer to "Segment Results" within this section.
Operating Profit
Operating profit increased $34.4 million, or 20%, during the three months ended
June 30, 2021, compared to the corresponding period in the prior year, driven by
higher segment profit within our Foodservice and BellRing Brands segments and
decreased general corporate expenses and other, partially offset by lower
segment profit in our Post Consumer Brands, Refrigerated Retail and Weetabix
segments.
Operating profit decreased $3.7 million, or 1%, during the nine months ended
June 30, 2021, compared to the corresponding period in the prior year, due to
lower segment profit within our Post Consumer Brands, Refrigerated Retail and
Weetabix segments, partially offset by decreased general corporate expenses and
other and higher segment profit within our Foodservice segment.
For further discussion, refer to "Segment Results" within this section.
Interest Expense, Net
Interest expense, net decreased $4.5 million, or 5%, during the three months
ended June 30, 2021, compared to the corresponding period in the prior year,
driven by a lower weighted-average interest rate when compared to the prior year
period and decreased losses of $1.4 million on interest rate swap contracts. Our
weighted-average interest rate on our total outstanding debt decreased to 5.0%
for the three months ended June 30, 2021 from 5.2% for the three months ended
June 30, 2020, driven by refinancing debt at lower interest rates.
Interest expense, net decreased $10.0 million, or 3%, during the nine months
ended June 30, 2021, compared to the corresponding period in the prior year,
driven by decreased losses of $7.4 million on interest rate swap contracts, a
lower weighted-average interest rate when compared to the prior year period,
increased amortization of debt premium of $1.5 million and decreased
amortization of debt issuance costs, deferred financing fees and debt discount
of $1.3 million. These positive
                                       35

————————————————– ——————————

Contents

impacts were partially offset by lower interest income of $5.6 million on our
cash balances. Our weighted-average interest rate on our total outstanding debt
decreased to 5.2% for the nine months ended June 30, 2021 from 5.4% for the nine
months ended June 30, 2020, driven by refinancing debt at lower interest rates.
For additional information on our interest rate swap contracts, refer to Note 13
within "Notes to Condensed Consolidated Financial Statements." For additional
information on our debt, refer to Note 17 within "Notes to Condensed
Consolidated Financial Statements" and "Quantitative and Qualitative Disclosures
About Market Risk" within Item 3.
Loss on Extinguishment and Refinancing of Debt, Net
Fiscal 2021
During the nine months ended June 30, 2021, we recognized a loss of $94.8
million related to the repayment of the outstanding principal balance of our
5.00% senior notes, as well as BellRing's amendment of its credit agreement (as
amended, the "BellRing Credit Agreement"). The loss included debt premiums and
refinancing fees paid of $75.9 million and write-offs of debt issuance costs of
$18.9 million.
Fiscal 2020
During the nine months ended June 30, 2020, we recognized a net loss of $72.9
million related to the repayments of the outstanding principal balances of our
2020 bridge loan (the "2020 Bridge Loan") by BellRing, our term loan, our 5.50%
senior notes maturing in March 2025 and our 8.00% senior notes, as well as the
amendment and restatement of our credit agreement. The loss included debt
premiums paid of $49.8 million and write-offs of debt issuance costs and
deferred financing fees of $23.1 million.
For additional information on our debt, refer to Note 17 within "Notes to
Condensed Consolidated Financial Statements."
Expense (Income) on Swaps, Net
Fiscal 2021
During the three and nine months ended June 30, 2021, we recognized net losses
(gains) of $121.6 million and $(105.6) million, respectively, related to
mark-to-market adjustments on our interest rate swaps that were not designated
as hedging instruments.
Fiscal 2020
During the three and nine months ended June 30, 2020, we recognized net losses
of $29.2 million and $192.4 million, respectively, related to mark-to-market
adjustments on our interest rate swaps that were not designated as hedging
instruments.
For additional information on our interest rate swap contracts, refer to Note 13
within "Notes to Condensed Consolidated Financial Statements" and "Quantitative
and Qualitative Disclosures About Market Risk" within Item 3.
Income Tax Expense (Benefit)
Our effective income tax rate was (678.6)% and 30.6% for the three and nine
months ended June 30, 2021, respectively. Our effective income tax rates
differed significantly from the statutory rates in both current year periods,
primarily due to 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 three and nine months ended June 30, 2021, we
remeasured our existing deferred tax assets and liabilities considering the 25%
U.K. corporate income tax rate for future periods and recorded tax expense of
$39.3 million. Other changes made to the U.K.'s tax law did not have a material
impact on our financial statements during the three or nine months ended June
30, 2021.
Our effective income tax rate was 10.1% and 42.7% for the three and nine months
ended June 30, 2020, respectively. Our effective income tax rates differed
significantly from the statutory rates in both prior year periods, primarily due
to a rate differential on foreign income and net discrete tax benefits of $3.9
million and $8.7 million in the three and nine months ended June 30, 2020,
respectively, which largely related to our equity method investment in 8th
Avenue Food & Provisions, Inc. ("8th Avenue").
                                 SEGMENT RESULTS
We evaluate each segment's performance based on its segment profit, which for
all segments excluding BellRing Brands is its earnings/loss before income taxes
and equity method earnings/loss before impairment of property, goodwill and
other intangible assets, facility closure related costs, restructuring expenses,
gain/loss on assets and liabilities held for sale, gain/loss on sale of
businesses and facilities, gain on/adjustment to bargain purchase, interest
expense and other unallocated corporate income and expenses. Segment profit for
BellRing Brands, as it is a publicly-traded company, is its operating profit.
                                       36

————————————————– ——————————

Contents

Post-consumer brands

                                                                               Three Months Ended June 30,                                                                                      Nine Months Ended June 30,
                                                                                                       favorable/(unfavorable)                                                                                         favorable/(unfavorable)
dollars in millions                          2021                  2020                           $ Change                           % Change                 2021                 2020                           $ Change                           % Change
Net Sales                              $      468.7           $     528.1          $               (59.4)                                   (11) %       $   1,393.6          $   1,477.2          $               (83.6)                                    (6) %
Segment Profit                         $       87.8           $     127.6          $               (39.8)                                   (31) %       $     250.1          $     300.6          $               (50.5)                                   (17) %
Segment Profit Margin                            19   %                24  %                                                                                      18  %                20  %


Net sales for the Post Consumer Brands segment decreased $59.4 million, or 11%,
for the three months ended June 30, 2021, when compared to the prior year
period. Net sales for the three months ended June 30, 2021 were positively
impacted by the inclusion of incremental net sales of $38.4 million attributable
to our current year acquisitions of Peter Pan and the PL RTE Cereal Business.
Excluding this impact, net sales decreased $97.8 million, or 19%, driven by 19%
lower volume. This volume decrease was primarily due to the lapping of increased
purchases in the prior year period driven by increased at-home consumption in
reaction to the COVID-19 pandemic, continuing broader softness across value and
private label cereal products and the decision to exit certain low-margin
private label business. Volume declines in Malt-O-Meal bag cereal, private label
cereal, Honey Bunches of Oats and adult classic and licensed brands were
partially offset by increased Pebbles and Grape Nuts volumes.
Net sales for the Post Consumer Brands segment decreased $83.6 million, or 6%,
for the nine months ended June 30, 2021, when compared to the prior year period.
Net sales for the nine months ended June 30, 2021 were positively impacted by
the inclusion of incremental net sales of $55.8 million attributable to our
current year acquisitions of Peter Pan and the PL RTE Cereal Business. Excluding
this impact, net sales decreased $139.4 million, or 9%, primarily due to 12%
lower volume, partially offset by higher average net selling prices. This
decrease in volume was primarily due to the lapping of increased purchases in
the prior year period driven by consumer pantry loading and increased at-home
consumption in reaction to the COVID-19 pandemic, continuing broader softness
across value and private label cereal products and the decision to exit certain
low-margin private label business. Volume declines in private label cereal,
Malt-O-Meal bag cereal, Honey Bunches of Oats and licensed and adult classic
brands were partially offset by increased Pebbles volume and incremental volumes
from new product innovations. Average net selling prices increased as a result
of a favorable product mix, partially offset by increased trade spending.
Additionally, net sales for the nine months ended June 30, 2021 were negatively
impacted by an estimated $9.8 million in lost revenue, resulting from COVID-19
related production shutdowns and employee absences at our Battle Creek, Michigan
RTE cereal facility.
Segment profit for the three months ended June 30, 2021 decreased $39.8 million,
or 31%, when compared to the prior year period, primarily driven by lower net
sales, as previously discussed, higher manufacturing costs of $12.5 million
(primarily due to unfavorable fixed cost absorption, partially offset by
manufacturing cost efficiencies) and increased freight costs of $4.7 million
(excluding volume-driven impacts). These negative impacts were partially offset
by lower employee-related expenses and decreased advertising and consumer
spending of $1.6 million.
Segment profit for the nine months ended June 30, 2021 decreased $50.5 million,
or 17%, when compared to the prior year period. Segment profit for the nine
months ended June 30, 2021 was positively impacted by the inclusion of
incremental segment profit of $3.6 million attributable to our current year
acquisitions of Peter Pan and the PL RTE Cereal Business. Excluding this impact,
segment profit decreased $54.1 million, or 18%, primarily driven by lower net
sales, as previously discussed, a provision for legal settlement of $15.0
million, higher manufacturing costs of $23.0 million (primarily due to
unfavorable fixed cost absorption and increased costs related to the COVID-19
pandemic, partially offset by manufacturing cost efficiencies), increased
freight costs of $16.3 million (excluding volume-driven impacts) and increased
raw material costs of $2.4 million. These negative impacts were partially offset
by lower advertising and consumer spending of $4.0 million, gains on sale of
property of $3.9 million, lower employee-related expenses, favorable foreign
exchange rates when compared to the prior year period and decreased warehousing
expenses of $1.1 million. Additionally, segment profit for the nine months ended
June 30, 2021 was negatively impacted by lost revenue at our Battle Creek,
Michigan RTE cereal facility, as previously discussed, resulting in an estimated
$5.6 million in lost profit contribution.
                                       37

————————————————– ——————————

  Table of Contents

Weetabix
                                                                              Three Months Ended June 30,                                                                                         Nine Months Ended June 30,
                                                                                                      favorable/(unfavorable)                                                                                            favorable/(unfavorable)
dollars in millions                         2021                  2020                           $ Change                            % Change                  2021                  2020                           $ Change                            % Change
Net Sales                             $      123.4           $     111.8          $                11.6                                      10  %       $      350.3           $     326.7          $                23.6                                       7  %
Segment Profit                        $       28.6           $      32.6          $                (4.0)                                    (12) %       $       82.6           $      84.3          $                (1.7)                                     (2) %
Segment Profit Margin                           23   %                29  %                                                                                        24   %                26  %


Net sales for the Weetabix segment increased $11.6 million, or 10%, for the
three months ended June 30, 2021, when compared to the prior year period.
Excluding the impact of favorable foreign exchange rates, net sales decreased
approximately 2%, driven by 2% lower volume. The decrease in volume was driven
by declines in RTE cereal products as a result of the lapping of increased
purchases in the prior year period driven by increased at-home consumption in
reaction to the COVID-19 pandemic, as well as lapping the benefit in the prior
year of our participation in a government-backed parcel initiative. These
negative impacts were partially offset by private label cereal distribution
gains, new product introductions and volume increases in Weetabix On the Go
drinks.
Net sales for the Weetabix segment increased $23.6 million, or 7%, for the nine
months ended June 30, 2021, when compared to the prior year period, primarily
driven by favorable foreign exchange rates. Excluding this impact, net sales
decreased $1.0 million, on 1% lower volume. This decrease in volume was driven
by declines in RTE cereal products as a result of the lapping of increased
purchases in the prior year period driven by consumer pantry loading and
increased at-home consumption in reaction to the COVID-19 pandemic and declines
in on-the-go consumption of cereal bars and Weetabix On the Go drinks, partially
offset by private label distribution gains and new product introductions.
Average net selling prices increased primarily due to targeted price increases
that went into effect in March 2020, partially offset by an unfavorable product
mix.
Segment profit for the three months ended June 30, 2021 decreased $4.0 million,
or 12%, when compared to the prior year period. This decrease was driven by
lower net sales when excluding the impact of favorable foreign exchange rates,
as previously discussed, unfavorable manufacturing and raw material costs of
$1.4 million and higher advertising and consumer spending of $1.3 million,
partially offset by favorable foreign exchange rates and lower employee-related
expenses.
Segment profit for the nine months ended June 30, 2021 decreased $1.7 million,
or 2%, when compared to the prior year period. This decrease was driven by lower
net sales when excluding the impact of favorable foreign exchange rates, as
previously discussed, unfavorable manufacturing and raw material costs of $2.3
million, higher advertising and consumer spending of $1.0 million and increased
warehousing costs of $1.0 million, partially offset by favorable foreign
exchange rates and lower employee-related expenses.
Foodservice
                                                                       Three Months Ended June 30,                                                                                      Nine Months Ended June 30,
                                                                                               favorable/(unfavorable)                                                                                         favorable/(unfavorable)
dollars in millions                  2021                  2020                           $ Change                           % Change                 2021                 2020                           $ Change                           % Change
Net Sales                      $      435.1           $     242.3          $               192.8                                     80  %       $   1,158.8          $   1,041.3          $               117.5                                     11  %
Segment Profit (Loss)          $       27.9           $     (40.3)         $                68.2                                    169  %       $      47.5          $      30.5          $                17.0                                     56  %
Segment Profit (Loss) Margin              6   %               (17) %                                                                                       4  %                 3  %


Net sales for the Foodservice segment increased $192.8 million, or 80%, for the
three months ended June 30, 2021, when compared to the prior year period. Net
sales for the three months ended June 30, 2021 were positively impacted by the
inclusion of incremental net sales of $18.3 million attributable to our current
year acquisition of Almark. Excluding this impact, net sales increased
$174.5 million, or 72%, on 53% higher volume. Volume growth was negatively
impacted in the current year period by reduced service levels (driven by labor
shortages). Egg product sales were up $140.2 million, or 65%, with volume up
43%, driven by the lapping of lower foodservice product demand in the prior year
period as a result of the COVID-19 pandemic, higher average net selling prices
resulting from the pass-through of higher input costs due to increased grain
markets and incremental volumes in the food ingredient channel attributable to
our prior year acquisition of Henningsen. Sales of side dishes were up $22.6
million, or 104%, with volume up 99%, driven by the lapping of lower product
demand in the prior year period as a result of the COVID-19 pandemic, as well as
distribution gains. Sausage sales were up $3.9 million, or 160%, driven by 126%
higher volume and higher average net selling prices resulting from the
pass-through of higher input costs due to increased sow costs. Other product
sales were up $7.8 million, or 206%, with volume up 99%, primarily due to the
inclusion of
                                       38

————————————————– ——————————

Contents

incremental results attributable to our prior year acquisition of Henningsen and
higher average net selling prices resulting from the decision to exit certain
low-margin business.
Net sales for the Foodservice segment increased $117.5 million, or 11%, for the
nine months ended June 30, 2021, when compared to the prior year period. Net
sales for the nine months ended June 30, 2021 were positively impacted by the
inclusion of incremental net sales of $32.7 million attributable to our current
year acquisition of Almark. Excluding this impact, net sales increased
$84.8 million, or 8%, on 1% lower volume. Volume growth was negatively impacted
in the current year period by reduced service levels (driven by labor
shortages). Egg product sales were up $65.0 million, or 7%, driven by higher
average net selling prices resulting from the pass-through of higher input costs
due to increased grain markets. Egg volume was flat as lower volume in the
foodservice channel was offset by increased volume in the food ingredient
channel, which was positively impacted by incremental volumes attributable to
our prior year acquisition of Henningsen. Egg volumes were impacted in both
periods by lower foodservice product demand in the prior year period as a result
of the COVID-19 pandemic. Sales of side dishes were down $2.8 million, or 2%,
with volume down 7%, driven by lower product demand as a result of the COVID-19
pandemic, partially offset by higher average net selling prices resulting from
targeted price increases. Sausage sales were up $3.4 million, or 31%, driven by
21% higher volume and higher average net selling prices resulting from the
pass-through of higher input costs due to increased sow costs. Other product
sales were up $19.2 million, or 143%, with volume up 54%, primarily due to the
inclusion of incremental results attributable to our prior year acquisition of
Henningsen and higher average net selling prices resulting from the decision to
exit certain low-margin business.
Segment profit for the three months ended June 30, 2021 increased $68.2 million,
or 169%, when compared to the prior year period, driven by higher net sales, as
previously discussed, lower manufacturing costs of $10.8 million (primarily due
to favorable fixed cost absorption and decreased expense for donated and
obsolete inventory on short-dated products) and insurance recovery of $6.1
million related to previously incurred business interruption losses as a result
of a fire at our Bloomfield, Nebraska laying facility in the second quarter of
fiscal 2020. These positive impacts were partially offset by increased raw
material costs of $21.2 million (primarily driven by higher egg input costs due
to increased grain markets) and higher freight costs of $2.1 million (excluding
volume-driven impacts).
Segment profit for the nine months ended June 30, 2021 increased $17.0 million,
or 56%, when compared to the prior year period, driven by higher net sales, as
previously discussed, insurance recovery of $6.1 million related to previously
incurred business interruption losses as a result of a fire at our Bloomfield,
Nebraska laying facility in the second quarter of fiscal 2020 and decreased
expense for donated and obsolete inventory on short-dated products, partially
offset by higher raw material costs of $41.0 million (primarily driven by higher
egg input costs due to increased grain markets), increased expenses attributable
to the COVID-19 pandemic, including increased employee wages and paid absences,
COVID-19 screening expenses and additional cleaning costs, higher freight costs
of $5.3 million (excluding volume-driven impacts) and increased employee-related
costs (in addition to amounts previously discussed). Prior year segment profit
also was negatively impacted by a $2.5 million insurance deductible and $0.4
million of repair and clean-up expenses due to a fire at our Bloomfield,
Nebraska laying facility in the second quarter of fiscal 2020.
Refrigerated Retail
                                                                             Three Months Ended June 30,                                                                                    Nine Months Ended June 30,
                                                                                                    favorable/(unfavorable)                                                                                       

favorable / (unfavorable)

dollars in millions                         2021                 2020                           $ Change                          % Change                 2021                2020                           $ Change                          % Change
Net Sales                              $     220.8           $    250.3          $               (29.5)                                  (12) %       $     723.4          $    737.8          $               (14.4)                                   (2) %
Segment Profit                         $      14.3           $     42.3          $               (28.0)                                  (66) %       $      72.2          $     98.5          $               (26.3)                                  (27) %
Segment Profit Margin                            6   %               17  %                                                                                     10  %               13  %


Net sales for the Refrigerated Retail segment decreased $29.5 million, or 12%,
for the three months ended June 30, 2021, when compared to the prior year
period. Net sales for the three months ended June 30, 2021 were positively
impacted by the inclusion of incremental net sales of $8.9 million attributable
to our current year acquisitions of Almark and Egg Beaters. Excluding this
impact, net sales decreased $38.4 million, or 15%, driven by 13% lower volume,
primarily due to reduced side dish and sausage service levels (driven by labor
shortages) and lapping of increased purchases of side dishes, cheese and other
dairy products and sausage in the prior year period driven by increased at-home
consumption in response to the COVID-19 pandemic. Sales of side dishes decreased
$6.1 million, or 6%, driven by 10% lower volume. Side dish average net selling
prices increased primarily due to targeted price increases that went into effect
in June 2021 and a favorable product mix. Cheese and other dairy case product
sales were down $20.7 million, or 29%, with volume down 31%. Sausage sales
decreased $9.1 million, or 23%, with volume down 26%. Egg product sales were up
$0.5 million, or 2%, with volume up 4%, driven by distribution gains. Sales of
other products were down $3.0 million.
                                       39

————————————————– ——————————

Contents

Net sales for the Refrigerated Retail segment decreased $14.4 million, or 2%,
for the nine months ended June 30, 2021, when compared to the prior year period.
Net sales for the nine months ended June 30, 2021 were positively impacted by
the inclusion of incremental net sales of $8.9 million attributable to our
current year acquisitions of Almark and Egg Beaters. Excluding this impact, net
sales decreased $23.3 million, or 3%, with volume down 5%. Sales of side dishes
increased $21.6 million, or 7%, driven by increased average net selling prices
and 1% higher volume. The increase in average net selling prices was primarily
due to targeted price increases that went into effect in February 2020 and June
2021 and a favorable product mix. The increase in volume was driven by higher
branded dinner and breakfast sides volume, partially offset by lower private
label dinner sides volume resulting from the decision to exit certain low-margin
business and reduced service levels (driven by labor shortages). Cheese and
other dairy case product sales were down $27.5 million, or 14%, with volume down
15%, driven by the lapping of increased purchases in the prior year period
driven by increased at-home consumption in response to the COVID-19 pandemic.
Sausage sales decreased $7.5 million, or 6%, with volume down 8%, driven by the
lapping of increased purchases in the prior year period driven by increased
at-home consumption in response to the COVID-19 pandemic and reduced service
levels (driven by labor shortages), Egg product sales were down $5.3 million, or
5%, with volume down 4%, driven by the decision to exit certain low-margin
business. Sales of other products were down $4.6 million.
Segment profit decreased $28.0 million, or 66%, for the three months ended
June 30, 2021, when compared to the prior year period. This decrease was driven
by lower net sales, as previously discussed, higher raw material costs of $18.1
million for sows, cheese and eggs, increased manufacturing costs of $4.6
million, higher freight costs of $2.5 million (excluding volume-driven impacts)
and increased advertising and consumer spending of $2.1 million. These negative
impacts were partially offset by lower employee-related expenses.
Segment profit decreased $26.3 million, or 27%, for the nine months ended
June 30, 2021, when compared to the prior year period. This decrease was driven
by higher raw material costs of $29.6 million for sows, cheese and eggs, lower
net sales, as previously discussed, increased manufacturing costs of $12.9
million and higher freight costs of $5.7 million (excluding volume-driven
impacts). These negative impacts were partially offset by lower employee-related
expenses and decreased advertising and consumer spending of $1.2 million.
BellRing Brands
                                                                             Three Months Ended June 30,                                                                                    Nine Months Ended June 30,
                                                                                                    favorable/(unfavorable)                                                                                       favorable/(unfavorable)
dollars in millions                         2021                 2020                           $ Change                          % Change                 2021                2020                           $ Change                          % Change
Net Sales                              $     342.6           $    204.2          $               138.4                                    68  %       $     907.1          $    705.7          $               201.4                                    29  %
Segment Profit                         $      51.5           $     30.6          $                20.9                                    68  %       $     114.9          $    115.0          $                (0.1)                                    -  %
Segment Profit Margin                           15   %               15  %                                                                                     13  %               16  %


Net sales for the BellRing Brands segment increased $138.4 million, or 68%, for
the three months ended June 30, 2021, when compared to the prior year period,
driven by increased volume and the lapping of prior year negative impacts of the
COVID-19 pandemic. Sales of Premier Protein products were up $111.8 million, or
65%, with volume up 60%. Volume increases were driven by higher RTD protein
shake product volumes in the club, food, drug and mass ("FDM") and eCommerce
channels. Average net selling prices increased in the three months ended
June 30, 2021 due to targeted price increases, partially offset by increased
promotional spending. Sales of Dymatize products were up $21.6 million, or 99%,
with volume up 77%. Average net selling prices increased in the three months
ended June 30, 2021 due to a favorable product mix and decreased promotional
spending. Sales of all other products were up $5.0 million.
Net sales for the BellRing Brands segment increased $201.4 million, or 29%, for
the nine months ended June 30, 2021, when compared to the prior year period.
Sales of Premier Protein products were up $164.9 million, or 28%, with volume up
28%. Volume increases were driven by higher RTD protein shake product volumes in
the FDM, club and eCommerce channels. Sales of Dymatize products were up $34.0
million, or 44%, with volume up 25%. Average net selling prices increased in the
nine months ended June 30, 2021 due to a favorable product mix. Sales of all
other products were up $2.5 million.
Segment profit increased $20.9 million, or 68%, for the three months ended
June 30, 2021, when compared to the prior year period. This increase was
primarily driven by higher net sales, as previously discussed, partially offset
by accelerated amortization expense of $11.8 million related to the
discontinuance of the Supreme Protein brand, higher net product costs of $10.5
million, due to unfavorable freight, manufacturing and raw material costs,
increased advertising and consumer spending of $3.4 million and increased
employee-related expenses.
Segment profit decreased $0.1 million, or less than 1%, for the nine months
ended June 30, 2021, when compared to the prior year period. This decrease was
primarily driven by accelerated amortization expense of $29.9 million related to
the discontinuance of the Supreme Protein brand, higher net product costs of
$20.7 million, due to unfavorable raw material and freight costs, restructuring
and facility closure costs, including accelerated depreciation, of $5.6 million,
increased advertising
                                       40

————————————————– ——————————

Contents

and consumer spending of $5.9 million and increased employee-related expenses.
These negative impacts were partially offset by higher net sales, as previously
discussed, and lower BellRing IPO-related transaction costs of $1.9 million.
General Corporate Expenses and Other
                                                                    Three Months Ended June 30,                                                                                   Nine Months Ended June 30,
                                                                                          favorable/(unfavorable)                                                                                      favorable/(unfavorable)
dollars in millions                2021                2020                           $ Change                          % Change                2021                2020                           $ Change                          % Change
General corporate expenses and
other                          $      0.7          $    17.6          $                16.9                                     96  %       $     29.6          $    97.7          $                68.1                                     70  %


General corporate expenses and other decreased $16.9 million, or 96%, for the
three months ended June 30, 2021, when compared to the prior year period,
primarily driven by a gain on bargain purchase of $12.7 related to our
acquisition of the PL RTE Cereal Business, increased net gains related to
mark-to-market adjustments on economic hedges and warrant liabilities of $7.4
million and gains related to mark-to-market adjustments on equity securities of
$1.4 million. These positive impacts were partially offset by higher stock-based
compensation of $1.6 million and increased third party transaction costs of $2.5
million.
General corporate expenses and other decreased $68.1 million, or 70%, for the
nine months ended June 30, 2021, when compared to the prior year period,
primarily driven by increased net gains related to mark-to-market adjustments on
economic hedges and warrant liabilities of $58.6 million (compared to losses in
the prior year period), a net gain on bargain purchase of $12.6 million related
to our acquisitions of the PL RTE Cereal Business and Henningsen, gains related
to mark-to-market adjustments on equity securities of $12.3 million and a net
gain on assets held for sale of $0.5 million. These positive impacts were
partially offset by increased losses related to mark-to-market adjustments on
deferred compensation of $7.9 million (compared to gains in the prior year
period), higher stock-based compensation of $5.1 million and increased third
party transaction costs of $4.3 million.
Restructuring and Facility Closure
The table below shows the amount of restructuring and facility closure costs,
including accelerated depreciation, attributable to each segment. These amounts
are excluded from the measure of segment profit, except for the BellRing Brands
segment, as it is a publicly-traded company, and are included in general
corporate expenses and other. Restructuring and facility closure costs related
to the BellRing Brands segment are included in its segment profit. For
additional information on restructuring costs, refer to Note 5 within "Notes to
Condensed Consolidated Financial Statements."
                                                          Three Months Ended June 30,                                           Nine Months Ended June 30,
                                                                              favorable/(unfavorable)                                              favorable/(unfavorable)
dollars in millions                         2021              2020                   $ Change                     2021             2020                   $ Change
Post Consumer Brands                    $        -          $  0.4          $                    0.4          $     0.3          $  1.5          $                    1.2
Weetabix                                         -             0.6                               0.6                  -             0.5                               0.5

BellRing Brands                                0.1               -                              (0.1)               5.6               -                              (5.6)
                                        $      0.1          $  1.0          $                    0.9          $     5.9          $  2.0          $                   (3.9)


                        LIQUIDITY AND CAPITAL RESOURCES
We completed the following activities during the nine months ended June 30, 2021
(for additional information, see Notes 3, 17 and 19 within "Notes to Condensed
Consolidated Financial Statements") impacting our liquidity and capital
resources:
•$345.0 million proceeds received by PHPC from the PHPC IPO, before deducting
underwriting discounts and commissions, including $40.0 million value of PHPC
Units purchased by PHPC Sponsor in the PHPC IPO;
•$1,800.0 million principal value issued of 4.50% senior notes;
•$1,697.3 million principal value repaid and $74.3 million premium payment made
on the extinguishment of our 5.00% senior notes;
•3.3 million shares of our common stock repurchased at an average share price of
$95.78 per share for a total cost of $315.3 million, including broker's
commissions. Additionally, $7.4 million paid related to the repurchases of
shares of common stock that were accrued at September 30, 2020 and did not
settle until fiscal 2021;
•$47.5 million received in connection with share repurchase contracts entered
into in the fourth quarter of fiscal 2020;
•$55.0 million outstanding principal repaid by BellRing on its term loan (the
"BellRing Term B Facility");
                                       41

————————————————– ——————————

Contents

•$20.0 million borrowed by BellRing under its revolving credit facility (the
"BellRing Revolving Credit Facility");
•$50.0 million repaid by BellRing under the BellRing Revolving Credit Facility;
and
•BellRing entered into a second amendment to the BellRing Credit Agreement (the
"BellRing Amendment"), which provided for the refinancing of the BellRing Term B
Facility on substantially the same terms as in effect prior to the BellRing
Amendment, except that it (i) reduced the interest rate margin by 100 basis
points, resulting in (A) for Eurodollar rate loans, an interest rate of the
Eurodollar rate plus a margin of 4.00% and (B) for base rate loans, an interest
rate of the base rate plus a margin of 3.00%, (ii) reduced the floor for the
Eurodollar rate to 0.75%, (iii) modified the BellRing Credit Agreement to
address the anticipated unavailability of London Interbank Offered Rate
("LIBOR") as a reference interest rate and (iv) provided that if on or before
August 26, 2021 BellRing repays the BellRing Term B Facility in whole or in part
with the proceeds of new or replacement debt at a lower effective interest rate,
or further amends the BellRing Credit Agreement to reduce the effective interest
rate applicable to the BellRing Term B Facility, BellRing must pay a 1.00%
premium on the amount repaid or subject to the interest rate reduction. In
connection with the BellRing Amendment, BellRing paid $1.6 million of debt
refinancing fees.
The following table shows select cash flow data, which is discussed below.
                                                                         Nine Months Ended
                                                                              June 30,
dollars in millions                                                   2021                2020
Cash provided by (used in):
Operating activities                                              $    395.3          $   408.4
Investing activities                                                  (737.4)             (94.8)
Financing activities                                                   (75.2)            (313.9)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

                                                          6.2                0.5

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                              $   

(411.1) $ 0.2


Historically, we have generated and expect to continue to generate positive cash
flows from operations. We believe our cash on hand, cash flows from operations
and current and possible future credit facilities will be sufficient to satisfy
our future working capital requirements, interest payments, research and
development activities, capital expenditures, pension contributions and other
financing requirements for the foreseeable future. Our ability to generate
positive cash flows from operations is dependent on general economic conditions,
competitive pressures and other business risk factors. As a result of
uncertainties in the near-term outlook for our business caused by the COVID-19
pandemic, we took steps across the organization to limit discretionary expenses
and re-prioritize our capital projects and to focus on cash flow generation. We
temporarily suspended our share repurchase program, and we and BellRing borrowed
under our respective revolving credit facilities in order to increase our cash
position and financial flexibility in the second quarter of fiscal 2020. As a
result of our strong operating cash flows and our healthy liquidity position, in
the third quarter of fiscal 2020, we were able to resume our share repurchase
program in May 2020, and we and BellRing repaid such borrowings under our
respective revolving credit facilities prior to the end of fiscal 2020. In
addition, we resumed normal levels of capital investment. We believe that we
have sufficient liquidity and cash on hand to satisfy our cash needs.
Additionally, we expect to generate positive cash flows from the operations of
our diverse businesses; however, we continue to evaluate and take action, as
necessary, to preserve adequate liquidity, navigate the uncertainty caused by
the pandemic and ensure that our business can continue to operate during these
uncertain times. If we are unable to generate sufficient cash flows from
operations, or are otherwise unable to comply with the terms of our credit
facilities, we may be required to seek additional financing alternatives, which
may require waivers under our amended and restated credit agreement (the "Credit
Agreement") and our indentures governing our senior notes, in order to generate
additional cash. There can be no assurance that we would be able to obtain
additional financing or any such waivers on terms acceptable to us or at all.
For additional information on our debt, refer to Note 17 within "Notes to
Condensed Consolidated Financial Statements."
Short-term financing needs primarily consist of working capital requirements and
principal and interest payments on our long-term debt. Long-term financing needs
will depend largely on potential growth opportunities, including acquisition
activity, other strategic transactions and repayment or refinancing of our
long-term debt obligations. We may, from time to time, seek to retire or
purchase our outstanding debt through cash purchases in open market
transactions, privately negotiated transactions or otherwise. Additionally, we
may continue to seek to repurchase shares of our common stock, and BellRing may
seek to repurchase shares of the BellRing Class A Common Stock. Such
repurchases, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors. The amounts involved
may be material.
Obligations under our Credit Agreement are unconditionally guaranteed by our
existing and subsequently acquired or organized domestic subsidiaries (other
than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries we
designate as unrestricted subsidiaries, which include 8th Avenue and its
subsidiaries and BellRing Brands, Inc. and its subsidiaries) and
                                       42

————————————————– ——————————

Contents

are secured by security interests in substantially all of our assets and the
assets of our subsidiary guarantors, but excluding, in each case, real property.
All of our senior notes are fully and unconditionally guaranteed, jointly and
severally, on a senior unsecured basis by each of our existing and subsequently
acquired or organized domestic subsidiaries, other than immaterial subsidiaries,
certain excluded subsidiaries and subsidiaries we designate as unrestricted
subsidiaries, which include 8th Avenue and its subsidiaries and BellRing Brands,
Inc. and its subsidiaries. These guarantees are subject to release in certain
circumstances.
BellRing Brands, Inc. and its subsidiaries, 8th Avenue and its subsidiaries,
PHPC and PHPC Sponsor are not obligors or guarantors under the Credit Agreement
or our senior notes.
Obligations under the BellRing Credit Agreement are unconditionally guaranteed
by the existing and subsequently acquired or organized domestic subsidiaries of
BellRing (other than immaterial subsidiaries, certain excluded subsidiaries and
subsidiaries of BellRing it designates as unrestricted subsidiaries) and are
secured by security interests in substantially all of the assets of BellRing and
the assets of its subsidiary guarantors (other than real property), subject to
limited exceptions. We and our subsidiaries (other than BellRing and certain of
its subsidiaries) are not obligors or guarantors under the BellRing Credit
Agreement.
Operating Activities
Cash provided by operating activities for the nine months ended June 30, 2021
decreased $13.1 million compared to the prior year period, driven by unfavorable
changes related to the fluctuations in the timing of sales and collections of
trade receivables within our BellRing Brands, Foodservice and Post Consumer
Brands segments, partially offset by favorable changes in the timing of payments
of trade accounts payables within our BellRing Brands and Foodservice segments,
lower interest payments of $31.2 million and lower payments on our interest rate
swaps of $11.5 million.
Investing Activities
Nine months ended June 30, 2021
Cash used in investing activities for the nine months ended June 30, 2021 was
$737.4 million, primarily driven by the deposit of $345.0 million of proceeds
received by PHPC from the PHPC IPO and the PHPC Private Placement into a trust
account, net cash paid for acquisitions of $290.3 million, primarily driven by
our current year acquisitions of the PL RTE Cereal Business, Egg Beaters, Peter
Pan and Almark, capital expenditures of $142.7 million and cash paid related to
investments in partnerships of $17.1 million, partially offset by proceeds from
the sale of equity securities and property and assets held for sale of $34.2
million and $19.0 million, respectively. The largest individual capital
expenditure project in the period related to the re-construction of a building
that was destroyed in a fire at our Bloomfield, Nebraska laying facility in the
second quarter of fiscal 2020.
Nine months ended June 30, 2020
Cash used in investing activities for the nine months ended June 30, 2020 was
$94.8 million, primarily consisting of capital expenditures of $160.0 million,
partially offset by proceeds received of $52.7 million largely resulting from
the termination of $448.7 million notional value of our cross-currency swaps
that were designated as hedging instruments and insurance proceeds received of
$10.0 million related to a fire at our Bloomfield, Nebraska layer facility. The
largest individual capital expenditure project in the period related to the
purchase of a previously leased manufacturing plant in Sulphur Springs, Texas.
                                       43

————————————————– ——————————

Contents

Financing Activities
Nine months ended June 30, 2021
Cash used in financing activities for the nine months ended June 30, 2021 was
$75.2 million. We received proceeds of $1,800.0 million from the issuance of our
4.50% senior notes. BellRing borrowed $20.0 million under the BellRing Revolving
Credit Facility. These issuances and borrowings resulted in total proceeds from
the issuance of long-term debt of $1,820.0 million. In connection with the 4.50%
senior notes issuance, we paid $16.8 million in debt issuance costs. We repaid
the outstanding principal balance under our 5.00% senior notes and made a
principal payment on a municipal bond. BellRing repaid $55.0 million of
outstanding principal under the BellRing Term B Facility and repaid $50.0
million of outstanding principal under the BellRing Revolving Credit Facility,
which resulted in total repayments of long-term debt of $1,803.3 million. In
connection with the repayment of the 5.00% senior notes and the BellRing
Amendment (discussed above), we paid $75.9 million in debt premiums and
refinancing fees. We paid $322.7 million, including broker's commissions, for
the repurchase of shares of our common stock, which included repurchases of
common stock that were accrued at September 30, 2020 and did not settle until
fiscal 2021. We received $47.5 million related to the settlement of share
repurchase contracts that were entered into in fiscal 2020 and did not settle
until fiscal 2021. PHPC received $345.0 million gross proceeds from the PHPC IPO
and PHPC Sponsor purchased $40.0 million in PHPC Units in the PHPC IPO, which
resulted in proceeds received from the IPO of $305.0 million. In connection with
the PHPC IPO, PHPC incurred offering costs of $7.1 million.
Nine months ended June 30, 2020
Cash used in financing activities for the nine months ended June 30, 2020 was
$313.9 million. BellRing Brands, Inc. received $524.4 million net proceeds from
the BellRing IPO, after deducting discounts and commissions. We received
proceeds of $1,250.0 million from the issuance of our 4.625% senior notes. We
borrowed $1,225.0 million under the 2020 Bridge Loan and $500.0 million under
our revolving credit facility. BellRing borrowed $700.0 million under the
BellRing Term B Facility, at a discount of $14.0 million, and borrowed $185.0
million under the BellRing Revolving Credit Facility. These issuances and
borrowings, combined with proceeds received of $2.0 million from a municipal
bond, resulted in total proceeds from the issuance of long-term debt of $3,848.0
million. In connection with these issuances, borrowings and the amendment and
restatement of our Credit Agreement, we paid $40.8 million in debt issuance
costs and deferred financing fees. We repaid the outstanding principal balances
under our term loan, our 5.50% senior notes maturing in March 2025 and our 8.00%
senior notes, repaid $325.0 million of outstanding principal borrowings on our
Revolving Credit Facility and made a principal payment on a municipal bond.
BellRing repaid the outstanding principal balance under the 2020 Bridge Loan
which it assumed from us in connection with the BellRing IPO and repaid
principal borrowings under the BellRing Revolving Credit Facility, which
resulted in total repayments of long-term debt of $4,130.3 million. We paid
premiums of $49.8 million related to our early extinguishment of our 5.50%
senior notes maturing in March 2025 and our 8.00% senior notes. In connection
with the BellRing IPO, we were refunded $15.3 million of debt issuance costs
paid in connection with the 2020 Bridge Loan. We paid $469.0 million, including
broker's commissions, for the repurchase of shares of our common stock, which
included repurchases of common stock that were accrued at September 30, 2019 and
did not settle until fiscal 2020.
Debt Covenants
Credit Agreement
Under the terms of our Credit Agreement, we are required to comply with a
financial covenant consisting of a secured net leverage ratio (as defined in the
Credit Agreement) not to exceed 4.25 to 1.00, measured as of the last day of any
fiscal quarter, if, as of the last day of such fiscal quarter, the aggregate
outstanding amount of all revolving credit loans, swing line loans and letter of
credit obligations (subject to certain exceptions specified in the Credit
Agreement) exceeds 30% of our revolving credit commitments. As of June 30, 2021,
we were 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. We do not believe non-compliance is reasonably
likely in the foreseeable future.
Our Credit Agreement provides for incremental revolving and term loan
facilities, and also permits other secured or unsecured debt, if, among other
conditions, certain financial ratios are met, as defined and specified in the
Credit Agreement.
BellRing Credit Agreement
Under the terms of the BellRing Credit Agreement, BellRing is required to comply
with a financial covenant requiring BellRing to maintain a total net leverage
ratio (as defined in the BellRing Credit Agreement) not to exceed 6.00 to 1.00,
measured as of the last day of each fiscal quarter. The total net leverage ratio
of BellRing did not exceed this threshold as of June 30, 2021. We do not believe
non-compliance is reasonably likely in the foreseeable future.
The BellRing Credit Agreement provides for incremental revolving and term
facilities, and also permits other secured or unsecured debt, if, among other
conditions, certain financial ratios are met, as defined and specified in the
BellRing Credit Agreement.
                                       44

————————————————– ——————————

Contents

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies and estimates are more fully described in our
Annual Report on Form 10-K for the year ended September 30, 2020, as filed with
the Securities and Exchange Commission ( the "SEC") on November 20, 2020. There
have been no significant changes to our critical accounting policies and
estimates since September 30, 2020.
                      RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 in the “Notes to Condensed Consolidated Financial Statements” for a discussion of recently issued accounting standards.

               CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, are made throughout this report, including statements regarding the
effect of the COVID-19 pandemic on our business and our continuing response to
the COVID-19 pandemic. These forward-looking statements are sometimes identified
from the use of forward-looking words such as "believe," "should," "could,"
"potential," "continue," "expect," "project," "estimate," "predict,"
"anticipate," "aim," "intend," "plan," "forecast," "target," "is likely,"
"will," "can," "may" or "would" or the negative of these terms or similar
expressions elsewhere in this report. Our financial condition, results of
operations and cash flows may differ materially from those in the
forward-looking statements. Such statements are based on management's current
views and assumptions and involve risks and uncertainties that could affect
expected results. Those risks and uncertainties include, but are not limited to,
the following:
•the impact of the COVID-19 pandemic, including negative impacts on the global
economy and capital markets, the health of our employees, our ability to
manufacture and deliver our products, operating costs, demand for our
foodservice and on-the-go products and our operations generally;
•our high leverage, our ability to obtain additional financing (including both
secured and unsecured debt), our ability to service our outstanding debt
(including covenants that restrict the operation of our business) and a
downgrade or potential downgrade in our credit ratings;
•our ability to continue to compete in our product categories and our ability to
retain our market position and favorable perceptions of our brands;
•our ability to anticipate and respond to changes in consumer and customer
preferences and behaviors and introduce new products;
•changes in economic conditions, disruptions in the U.S. and global capital and
credit markets, changes in interest rates, volatility in the market value of
derivatives and fluctuations in foreign currency exchange rates;
•disruptions or inefficiencies in our supply chain, including as a result of our
reliance on third party suppliers or manufacturers for the manufacturing of many
of our products, pandemics (including the COVID-19 pandemic) and other outbreaks
of contagious diseases, fires and evacuations related thereto, changes in
weather conditions, natural disasters, agricultural diseases and pests and other
events beyond our control;
•significant volatility in the cost or availability of inputs to our business
(including freight, raw materials, energy and other supplies);
•our ability to hire and retain talented personnel, the ability of our employees
to safely perform their jobs, including the potential for physical injuries or
illness (such as COVID-19), employee absenteeism, labor strikes, work stoppages
and unionization efforts;
•allegations that our products cause injury or illness, product recalls and
withdrawals and product liability claims and other related litigation;
•our ability to identify, complete and integrate or otherwise effectively
execute acquisitions or other strategic transactions and effectively manage our
growth;
•the possibility that PHPC, a newly formed special purpose acquisition company
for which the sponsor is our wholly-owned subsidiary and in which we indirectly
own an interest (through PHPC Sponsor), may not consummate a suitable partnering
transaction within the prescribed two-year time period, that the partnering
transaction may not be successful or that the activities for PHPC could be
distracting to our management;
•our ability to successfully execute the proposed plan to distribute our
interest in BellRing;
•our ability to promptly and effectively realize the strategic and financial
benefits expected as a result of the BellRing IPO;
                                       45

————————————————– ——————————

Contents

•impairment in the carrying value of goodwill or other intangibles;
•our ability to successfully implement business strategies to reduce costs;
•legal and regulatory factors, such as compliance with existing laws and
regulations, as well as new laws and regulations and changes to existing laws
and regulations and interpretations thereof, affecting our business, including
current and future laws and regulations regarding food safety, advertising and
labeling and animal feeding and housing operations;
•the loss of, a significant reduction of purchases by or the bankruptcy of a
major customer;
•the failure or weakening of the RTE cereal category and consolidations in the
retail and foodservice distribution channels;
•the ultimate impact litigation or other regulatory matters may have on us;
•our ability to successfully collaborate with third parties that have invested
with us in 8th Avenue and to effectively realize the strategic and financial
benefits expected as a result of the separate capitalization of 8th Avenue;
•costs associated with the obligations of Bob Evans Farms, Inc. ("Bob Evans") in
connection with the sale and separation of its restaurants business in April
2017, which occurred prior to our acquisition of Bob Evans, including certain
indemnification obligations under the restaurants sale agreement and Bob Evans's
payment and performance obligations as a guarantor for certain leases;
•our ability to protect our intellectual property and other assets and to
continue to use third party intellectual property subject to intellectual
property licenses;
•the ability of our and our customers', and 8th Avenue's and its customers',
private brand products to compete with nationally branded products;
•risks associated with our international businesses;
•the impact of the U.K.'s exit from the European Union (commonly known as
"Brexit") on us and our operations;
•costs, business disruptions and reputational damage associated with information
technology failures, cybersecurity incidents or information security breaches;
•changes in estimates in critical accounting judgments;
•losses or increased funding and expenses related to our qualified pension or
other postretirement plans;
•significant differences in our, 8th Avenue's and BellRing's actual operating
results from our guidance regarding our and 8th Avenue's future performance and
BellRing's guidance regarding its future performance;
•our, BellRing's and PHPC's ability to satisfy the requirements of Section 404
of the Sarbanes-Oxley Act of 2002; and
•other risks and uncertainties included under "Risk Factors" within Item 1A of
Part II of this report and in our Annual Report on Form 10-K for the fiscal year
ended September 30, 2020, filed with the SEC on November 20, 2020.
You should not rely upon forward-looking statements as predictions of future
events. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee that the future
results, levels of activity, performance or events and circumstances reflected
in the forward-looking statements will be achieved or occur. Moreover, we
undertake no obligation to update publicly any forward-looking statements for
any reason after the date of this report to conform these statements to actual
results or to changes in our expectations.

© Edgar online, source Previews

Source link

About Vicki Davis

Check Also

Bitcoin exceeds $ 47,000, ether and dogecoin also rise

In cryptocurrencies, Bitcoin prices jumped today to trade above $ 47,000, according to CoinDesk, the …

Leave a Reply

Your email address will not be published. Required fields are marked *