Post(POST) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements detail performance, financial position, and cash flows for the periods ended June 30, 2021 Condensed Consolidated Statements of Operations Q3 net sales rose 19% but a net loss was recorded due to swap expenses, while nine-month earnings improved significantly Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,589.8 | $1,336.4 | $4,531.1 | $4,287.4 | | Gross Profit | $479.4 | $436.8 | $1,385.8 | $1,347.1 | | Operating Profit | $206.5 | $172.1 | $517.9 | $521.6 | | Net (Loss) Earnings | $(54.3) | $36.0 | $136.8 | $(56.2) | | Diluted (Loss) Earnings per Share | $(0.95) | $0.52 | $1.99 | $(0.81) | Condensed Consolidated Balance Sheets Total assets grew to $12.6 billion, driven by goodwill and investments related to the PHPC SPAC IPO Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $2,099.2 | $2,287.8 | | Total Assets | $12,562.4 | $12,146.7 | | Total Current Liabilities | $930.9 | $974.4 | | Long-term debt | $6,932.1 | $6,959.0 | | Total Liabilities | $9,424.6 | $9,317.7 | | Total Shareholders' Equity | $2,832.8 | $2,829.0 | Condensed Consolidated Statements of Cash Flows Operating cash flow slightly decreased while investing cash outflow increased significantly due to acquisitions and the PHPC IPO Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $395.3 | $408.4 | | Net Cash Used in Investing Activities | $(737.4) | $(94.8) | | Net Cash Used in Financing Activities | $(75.2) | $(313.9) | | Net (Decrease) Increase in Cash | $(411.1) | $0.2 | Notes to Condensed Consolidated Financial Statements Notes detail the consolidation of the PHPC SPAC, four acquisitions, significant debt refinancing, and a U.K. tax rate change - The company completed the IPO of a special purpose acquisition company, Post Holdings Partnering Corporation (PHPC), on May 28, 2021, raising gross proceeds of $345.0 million; Post maintains control and consolidates PHPC[22][26] - During fiscal 2021, the company completed four acquisitions: the private label RTE cereal business from TreeHouse Foods ($85.0M), the Egg Beaters brand ($50.0M), the Almark Foods business ($52.0M), and the Peter Pan nut butter brand ($102.0M)[49][50][51] - In March 2021, the company issued $1.8 billion of 4.50% senior notes due 2031 and used the proceeds to redeem its 5.00% senior notes, resulting in a loss on extinguishment of debt of $94.8 million for the nine-month period[125][144] - The company recorded a tax expense of $39.3 million during the three and nine months ended June 30, 2021, due to remeasuring its U.K. deferred tax assets and liabilities following an enacted increase in the U.K.'s corporate income tax rate from 19% to 25%, effective April 2023[64] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes a 19% Q3 sales increase driven by Foodservice recovery, segment performance, liquidity, and financing activities Overview The company discusses its five operating segments, recent acquisitions, and the mixed impacts of the COVID-19 pandemic - The company operates through five reportable segments: Post Consumer Brands, Weetabix, Foodservice, Refrigerated Retail, and BellRing Brands[163] - The COVID-19 pandemic initially boosted retail sales due to at-home consumption, but these are now trending toward pre-pandemic levels; the foodservice business, while recovering, remains below pre-pandemic levels and is pressured by labor and freight shortages[174][175][176] - In fiscal 2021, the company completed four acquisitions: PL RTE Cereal Business, Egg Beaters, Almark, and Peter Pan[171] Results of Operations Q3 sales and operating profit grew 19% and 20% respectively, but a net loss resulted from swap expenses and a U.K. tax charge Overall Financial Performance (in millions) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,589.8 | $1,336.4 | 19% | | Operating Profit | $206.5 | $172.1 | 20% | | Net (Loss) Earnings | $(54.3) | $36.0 | (251)% | - The Q3 net loss was primarily driven by a $121.6 million expense from mark-to-market adjustments on interest rate swaps not designated as hedges[191] - The effective tax rate was significantly impacted by a $39.3 million tax expense recorded due to the U.K. increasing its corporate income tax rate from 19% to 25%, effective in 2023[193] Segment Results Foodservice and BellRing Brands drove growth, while Post Consumer and Refrigerated Retail declined against prior-year pandemic highs Segment Net Sales (in millions) | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | | Post Consumer Brands | $468.7 | $528.1 | (11)% | | Weetabix | $123.4 | $111.8 | 10% | | Foodservice | $435.1 | $242.3 | 80% | | Refrigerated Retail | $220.8 | $250.3 | (12)% | | BellRing Brands | $342.6 | $204.2 | 68% | Segment Profit (Loss) (in millions) | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | | Post Consumer Brands | $87.8 | $127.6 | (31)% | | Weetabix | $28.6 | $32.6 | (12)% | | Foodservice | $27.9 | $(40.3) | 169% | | Refrigerated Retail | $14.3 | $42.3 | (66)% | | BellRing Brands | $51.5 | $30.6 | 68% | - Post Consumer Brands' sales decline was driven by lapping prior year's COVID-19 demand, softness in value cereal, and exiting low-margin private label business[197] - Foodservice sales surged due to recovery from prior year's pandemic impact, though current period volumes were negatively impacted by labor shortages reducing service levels[205] - Refrigerated Retail sales declined due to reduced service levels from labor shortages and lapping increased purchases from the prior year[210] Liquidity and Capital Resources The company maintains sufficient liquidity through cash, operating flows, and credit, detailing major financing and investing activities - Key financing activities in the first nine months of fiscal 2021 included issuing $1.8B of 4.50% senior notes, repaying $1.7B of 5.00% senior notes, and repurchasing 3.3 million shares for $315.3 million[223] Cash Flow Summary (Nine Months Ended June 30, in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Operating activities | $395.3 | $408.4 | | Investing activities | $(737.4) | $(94.8) | | Financing activities | $(75.2) | $(313.9) | - The company was not required to comply with its secured net leverage ratio covenant as of June 30, 2021, as outstanding revolving credit obligations did not exceed the 30% threshold; BellRing was in compliance with its total net leverage ratio covenant[238][240] Quantitative and Qualitative Disclosures About Market Risk The company details its exposure to commodity, foreign currency, and interest rate risks and the use of derivatives for hedging - A hypothetical 10% adverse change in the market price of principal hedged commodities would have decreased the fair value of the commodity derivatives portfolio by approximately $20 million as of June 30, 2021[253] - As of June 30, 2021, the company had $7,066.4 million in debt, with $6,440.2 million at a weighted-average fixed interest rate of 5.1%[255] - A hypothetical 10% decrease in interest rates would have increased the fair value of the fixed-rate debt by approximately $32 million as of June 30, 2021[256] Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of June 30, 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[258] - The company is in the process of implementing changes in controls and procedures related to its fiscal 2021 acquisitions[259] PART II. OTHER INFORMATION Legal Proceedings The company discloses ongoing antitrust litigation against its subsidiary MFI, with an accrued liability of $3.5 million - MFI, a subsidiary, remains a defendant in antitrust litigation concerning egg products, with claims from three opt-out plaintiffs still pending[112] - The company has accrued $3.5 million for this legal matter as of June 30, 2021[114] Risk Factors New risks are highlighted concerning the PHPC SPAC and the proposed distribution of its interest in BellRing Brands - A new risk factor relates to the uncertainties surrounding Post Holdings Partnering Corporation (PHPC), a SPAC sponsored by the company, including the potential failure to find a suitable acquisition target and heightened regulatory focus on SPACs[263][264] - The company's proposed plan to distribute its interest in BellRing Brands, Inc to shareholders is subject to inherent risks, including the possibility that the transaction may not be consummated or deliver anticipated benefits[266] Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q3, with $333.6 million remaining under the current buyback authorization - No shares of common stock were repurchased during the three months ended June 30, 2021[267] - As of June 30, 2021, $333.6 million remained available under the company's share repurchase authorization[268] Exhibits This section lists all exhibits filed with the Form 10-Q, including indentures and required officer certifications - This section provides a list of all exhibits filed with or incorporated by reference into the Form 10-Q[271]