Post(US:POST)2022-02-04 18:24PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 FY2022 financials report a $20.8 million net loss, a significant decline from $81.2 million net earnings year-over-year, with total assets at $12.61 billion and liabilities at $9.74 billion Condensed Consolidated Statements of Operations | Financial Metric | Three Months Ended Dec 31, 2021 (in millions) | Three Months Ended Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Net Sales | $1,643.7 | $1,458.0 | | Gross Profit | $424.0 | $455.4 | | Operating Profit | $128.7 | $166.3 | | Net (Loss) Earnings | $(20.8) | $81.2 | | Diluted (Loss) Earnings per Share | $(0.25) | $1.21 | Condensed Consolidated Balance Sheets | Balance Sheet Item | Dec 31, 2021 (in millions) | Sep 30, 2021 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $2,435.0 | $2,086.1 | | Total Assets | $12,612.9 | $12,414.7 | | Total Current Liabilities | $941.4 | $1,049.2 | | Long-term debt | $7,429.0 | $6,922.8 | | Total Liabilities | $9,736.3 | $9,355.5 | | Total Shareholders' Equity | $2,571.6 | $2,754.2 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended Dec 31, 2021 (in millions) | Three Months Ended Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $106.1 | $114.5 | | Net Cash Provided by (Used in) Investing Activities | $3.2 | $(41.5) | | Net Cash Provided by (Used in) Financing Activities | $227.4 | $(154.5) | | Net Increase (Decrease) in Cash | $335.9 | $(74.9) | Notes to Condensed Consolidated Financial Statements Notes detail significant accounting policies, recent transactions, and financial instruments, including the planned BellRing Brands separation, fiscal 2021 acquisitions, Willamette Egg Farms divestiture, ongoing antitrust litigation, and a new $500 million senior note issuance - Post entered an agreement in October 2021 to distribute a significant portion of its BellRing Brands ownership to shareholders, incurring $4.4 million in separation-related expenses during the quarter37 - The company recorded an equity method loss of $18.5 million for the quarter, net of tax, for its 60.5% common equity interest in 8th Avenue Food & Provisions, Inc3840 - During fiscal 2021, the company completed four acquisitions: the private label RTE cereal business, Egg Beaters brand, Almark Foods business, and Peter Pan nut butter brand49505152 - On December 1, 2021, the company sold its Willamette Egg Farms business, resulting in a loss on sale of $6.7 million56 - The company remains a defendant in antitrust litigation related to egg product purchases by three opt-out plaintiffs, with $3.5 million accrued for this matter as of December 31, 2021119121 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales increased 13% to $1.64 billion, while operating profit fell 23% to $128.7 million due to higher corporate expenses and segment profit declines, as the company navigates significant supply chain disruptions and inflation Overview The company operates five segments and is significantly impacted by COVID-19 related labor shortages, input and freight inflation, and supply chain disruptions, alongside key activities like the announced BellRing Brands separation and fiscal 2021 acquisitions - The company announced a plan to distribute a significant portion of its BellRing Brands ownership to shareholders, expected to close in the first calendar quarter of 2022136 - The company faces significant supply chain pressures across all segments, including labor shortages, input and freight inflation, and availability issues, leading to missed sales, higher manufacturing costs, and downward pressure on profit margins149 - The Foodservice segment's recovery depends on mobility restrictions and supply chain navigation, with pre-pandemic profitability expected in fiscal 2023, while Refrigerated Retail volume growth is constrained by supply chain performance150 Results of Operations For Q1 FY2022, net sales rose 13% to $1.64 billion, operating profit declined 23% to $128.7 million, and the company reported a net loss of $20.8 million compared to $81.2 million net earnings in the prior year, largely due to a $78.5 million unfavorable swing in interest rate swaps | Metric (in millions) | Q1 FY2022 | Q1 FY2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,643.7 | $1,458.0 | $185.7 | 13% | | Operating Profit | $128.7 | $166.3 | $(37.6) | (23)% | | Net (Loss) Earnings | $(20.8) | $81.2 | $(102.0) | (126)% | - Operating profit decreased by $37.6 million (23%) primarily due to increased general corporate expenses and lower segment profit in Refrigerated Retail and Weetabix158 - A significant factor in the net loss was a $78.5 million increase in 'Expense on swaps, net', reflecting mark-to-market adjustments on non-designated interest rate swaps161 Segment Results Segment performance was mixed: Post Consumer Brands sales grew 14% (acquisitions), Weetabix sales rose 4% (pricing/currency), Foodservice sales increased 24% (demand recovery), Refrigerated Retail sales increased 4% (acquisitions) but profit fell 60% (supply/inflation), and BellRing Brands sales grew 9% (pricing/supply constraints) | Segment | Net Sales Q1 FY22 (in millions) | Net Sales Q1 FY21 (in millions) | % Change | Segment Profit Q1 FY22 (in millions) | Segment Profit Q1 FY21 (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Post Consumer Brands | $507.3 | $445.0 | 14% | $71.3 | $70.5 | 1% | | Weetabix | $118.6 | $113.5 | 4% | $27.2 | $28.1 | (3)% | | Foodservice | $438.6 | $354.5 | 24% | $15.1 | $10.8 | 40% | | Refrigerated Retail | $273.4 | $263.1 | 4% | $13.6 | $33.7 | (60)% | | BellRing Brands | $306.5 | $282.4 | 9% | $50.6 | $47.8 | 6% | Liquidity and Capital Resources Operating cash flow was $106.1 million, slightly down year-over-year, while financing activities provided $227.4 million, primarily from a new $500 million senior note issuance, with major cash uses including $159.0 million for share repurchases and $90.1 million for BellRing debt repayment - Key financing activities included the issuance of $500.0 million in additional 5.50% senior notes, repayment of $90.1 million on the BellRing Term B Facility, repurchase of 1.5 million shares of Post common stock for $155.0 million, and repurchase of 0.8 million shares of BellRing Class A Common Stock for $18.1 million184185 | Cash Flow Activity (in millions) | Q1 FY2022 | Q1 FY2021 | | :--- | :--- | :--- | | Operating activities | $106.1 | $114.5 | | Investing activities | $3.2 | $(41.5) | | Financing activities | $227.4 | $(154.5) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity prices, foreign currency, and interest rates, exacerbated by COVID-19, using derivatives to manage exposures, with $7.47 billion in outstanding debt as of December 31, 2021, and a hypothetical 10% adverse change in commodity prices decreasing derivative value by approximately $14 million - The company is exposed to commodity price risk and uses derivatives to hedge, where a hypothetical 10% adverse change in principal hedged commodity prices would decrease the fair value of its derivatives portfolio by approximately $14 million as of December 31, 2021212 - As of December 31, 2021, the company had $7.47 billion in outstanding debt, with $6.94 billion being fixed-rate at a weighted-average interest rate of 5.1%, and interest rate swaps with a notional value of $2.1 billion214216 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no significant changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period, providing reasonable assurance of achieving their objectives217 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ongoing antitrust litigation concerning egg products with claims from three opt-out plaintiffs, for which $3.5 million has been accrued, while other legal proceedings are not expected to have a material impact - The company remains a defendant in antitrust litigation related to egg products, with claims from three opt-out plaintiffs still outstanding119219 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended September 30, 2021, though these risks may be heightened by the COVID-19 pandemic - No material changes have been made to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021221 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 FY2022, the company repurchased approximately 1.5 million shares of common stock for $155.0 million, and in November 2021, the Board approved a new $400 million share repurchase authorization, with $329.7 million remaining available at quarter-end | Period (2021) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October | 463,908 | $106.01 | | November | 709,192 | $103.29 | | December | 326,198 | $99.82 | | Total | 1,499,298 | $103.37 | - On November 17, 2021, the Board approved a new $400 million share repurchase authorization, effective November 20, 2021, and expiring on November 20, 2023223 Item 6. Exhibits This section lists exhibits filed with or incorporated by reference into the Form 10-Q, including agreements, corporate governance documents, and certifications