UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
__________________
For the quarterly period ended June 30, 2024
OR
For the transition period from _____ to _____
Commission File Number: 1-35305
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip Code)
(314 ) 644-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $0.01 par value per share – 58,427,526 shares as of July 29, 2024
POST HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
| PART I. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
i
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net Sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Other operating expense (income), net | ( | ||||||||||||||||||||||
| Operating Profit | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
Gain on extinguishment of debt, net | ( | ( | ( | ( | |||||||||||||||||||
| (Income) expense on swaps, net | ( | ( | ( | ||||||||||||||||||||
| Other income, net | ( | ( | ( | ( | |||||||||||||||||||
| Earnings before Income Taxes and Equity Method Loss | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Equity method loss, net of tax | |||||||||||||||||||||||
| Net Earnings Including Noncontrolling Interests | |||||||||||||||||||||||
| Less: Net earnings attributable to noncontrolling interests | |||||||||||||||||||||||
| Net Earnings | $ | $ | $ | $ | |||||||||||||||||||
Earnings per Common Share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-Average Common Shares Outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
1
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net Earnings Including Noncontrolling Interests | $ | $ | $ | $ | |||||||||||||||||||
Pension and other postretirement benefits adjustments: | |||||||||||||||||||||||
Unrealized pension and other postretirement benefit obligations | ( | ||||||||||||||||||||||
| Reclassifications to net earnings | ( | ( | ( | ( | |||||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||||||||
| Unrealized foreign currency translation adjustments | |||||||||||||||||||||||
Tax benefit on other comprehensive income: | |||||||||||||||||||||||
| Pension and other postretirement benefits adjustments: | |||||||||||||||||||||||
| Unrealized pension and other postretirement benefit obligations | |||||||||||||||||||||||
| Reclassifications to net earnings | |||||||||||||||||||||||
Total Other Comprehensive Income Including Noncontrolling Interests | |||||||||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | |||||||||||||||||||||||
| Total Comprehensive Income | $ | $ | $ | $ | |||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
2
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
| June 30, 2024 | September 30, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Receivables, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Property, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Other current liabilities | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Other liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Shareholders’ Equity | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Treasury stock, at cost | ( | ( | |||||||||
| Total Shareholders’ Equity Excluding Noncontrolling Interests | |||||||||||
| Noncontrolling interests | |||||||||||
| Total Shareholders’ Equity | |||||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
| Nine Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net earnings including noncontrolling interests | $ | $ | |||||||||
| Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
Unrealized loss (gain) on interest rate swaps, foreign exchange contracts and warrant liability, net | ( | ||||||||||
| Gain on extinguishment of debt, net | ( | ( | |||||||||
| Non-cash stock-based compensation expense | |||||||||||
| Equity method loss, net of tax | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Non-cash gain on write-off of deferred underwriting commissions | ( | ||||||||||
| Other, net | ( | ||||||||||
Other changes in operating assets and liabilities, net of business acquisitions: | |||||||||||
Decrease (increase) in receivables, net | ( | ||||||||||
| Decrease (increase) in inventories | ( | ||||||||||
(Increase) decrease in prepaid expenses and other current assets | ( | ||||||||||
Decrease (increase) in other assets | ( | ||||||||||
| Decrease in accounts payable and other current liabilities | ( | ( | |||||||||
| Increase in non-current liabilities | |||||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| Cash Flows from Investing Activities | |||||||||||
| Business acquisitions, net of cash acquired | ( | ( | |||||||||
| Return of subsidiary investments held in trust account | |||||||||||
| Additions to property | ( | ( | |||||||||
| Other, net | |||||||||||
| Net Cash Used in Investing Activities | ( | ( | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Proceeds from issuance of debt | |||||||||||
| Repayments of debt, net of discounts | ( | ( | |||||||||
| Purchases of treasury stock | ( | ( | |||||||||
Payments of debt issuance costs and deferred financing fees | ( | ( | |||||||||
| Payments of debt premiums | ( | ||||||||||
Payment for share repurchase contracts | ( | ||||||||||
Proceeds from share repurchase contracts | |||||||||||
| Redemption of Post Holdings Partnering Corporation Series A common stock | ( | ||||||||||
| Financing portion of cash paid for rate-lock interest rate swaps | ( | ||||||||||
| Other, net | ( | ( | |||||||||
| Net Cash Provided by (Used in) Financing Activities | ( | ||||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | |||||||||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | ( | ||||||||||
| Cash, Cash Equivalents and Restricted Cash, Beginning of Year | |||||||||||
| Cash, Cash Equivalents and Restricted Cash, End of Period | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
4
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
| As of and for the Three Months Ended June 30, | As of and for the Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Beginning and end of period | $ | $ | $ | $ | |||||||||||||||||||
| Additional Paid-in Capital | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Activity under stock and deferred compensation plans | ( | ( | ( | ||||||||||||||||||||
| Non-cash stock-based compensation expense | |||||||||||||||||||||||
| Payment for share repurchase contracts | ( | ||||||||||||||||||||||
Proceeds from share repurchase contracts | |||||||||||||||||||||||
| Issuance of common stock | |||||||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Retained Earnings | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||
| Post Holdings Partnering Corporation deemed dividend | |||||||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||
| Retirement Benefit Adjustments, net of tax | |||||||||||||||||||||||
Beginning of period | ( | ( | ( | ( | |||||||||||||||||||
Net change in retirement benefits, net of tax | ( | ( | ( | ( | |||||||||||||||||||
End of period | ( | ( | ( | ( | |||||||||||||||||||
| Hedging Adjustments, net of tax | |||||||||||||||||||||||
Beginning and end of period | |||||||||||||||||||||||
| Foreign Currency Translation Adjustments | |||||||||||||||||||||||
Beginning of period | ( | ( | ( | ( | |||||||||||||||||||
Foreign currency translation adjustments | |||||||||||||||||||||||
End of period | ( | ( | ( | ( | |||||||||||||||||||
| Treasury Stock | |||||||||||||||||||||||
| Beginning of period | ( | ( | ( | ( | |||||||||||||||||||
| Purchases of treasury stock | ( | ( | ( | ( | |||||||||||||||||||
| End of period | ( | ( | ( | ( | |||||||||||||||||||
| Total Shareholders’ Equity Excluding Noncontrolling Interests | |||||||||||||||||||||||
| Noncontrolling Interests | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Total Shareholders’ Equity | $ | $ | $ | $ | |||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5
POST HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in millions, except per share, per unit and per principal amount information and where indicated otherwise)
NOTE 1 — BASIS OF PRESENTATION
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), under the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”). These unaudited condensed consolidated financial statements have been prepared on a basis substantially consistent with, and should be read in conjunction with, the audited consolidated financial statements of Post Holdings, Inc. (herein referred to as “Post,” the “Company,” “us,” “our” or “we,” and unless otherwise stated or context otherwise indicates, all such references herein mean Post Holdings, Inc. and its subsidiaries), which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on November 17, 2023.
These unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair statement of the Company’s results of operations, comprehensive income, financial condition, cash flows and shareholders’ equity for the interim periods presented. Interim results are not necessarily indicative of the results for any other interim period or for the entire fiscal year. Certain reclassifications have been made to previously reported financial information to conform to the current period presentation.
NOTE 2 — RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has considered all new accounting pronouncements and has concluded there are no new pronouncements (other than the ones described below) that had or will have a material impact on the Company’s results of operations, comprehensive income, financial position, cash flows, shareholders’ equity or related disclosures based on current information.
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU is effective for fiscal years beginning after December 15, 2024 (i.e., the Company’s annual financial statements for the year ended September 30, 2026), with early adoption permitted. This ASU should be adopted prospectively; however, retrospective adoption is permitted. The Company is currently evaluating the impact of this standard.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU is effective for fiscal years beginning after December 15, 2023 (i.e., the Company’s annual financial statements for the year ended September 30, 2025) and for interim periods within fiscal years beginning after December 15, 2024 (i.e., the Company’s interim financial statements for the three months ended December 31, 2025), with early adoption permitted. This ASU requires retrospective adoption. The Company is currently evaluating the impact of this standard.
NOTE 3 — NONCONTROLLING INTERESTS, EQUITY INTERESTS AND RELATED PARTY TRANSACTIONS
Post Holdings Partnering Corporation
In May and June 2021, the Company and Post Holdings Partnering Corporation (“PHPC”), a special purpose acquisition company, consummated the initial public offering of 34.5 units of PHPC (the “PHPC Units” and such transaction, the “PHPC IPO”), of which a wholly-owned subsidiary of the Company (“PHPC Sponsor”) purchased 4.0 PHPC Units. Each PHPC Unit consisted of one share of Series A common stock of PHPC (“PHPC Series A Common Stock”) and one-third of one redeemable warrant 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 . Under the terms of the PHPC IPO, PHPC was required to consummate a partnering transaction by May 28, 2023, which could have been extended to August 28, 2023 in certain circumstances (the “Combination Period”).
Substantially concurrently with the closing of the PHPC IPO, PHPC completed the private sale of 1.1 units of PHPC (the “PHPC Private Placement Units”), at a purchase price of $10.00 per PHPC Private Placement Unit, to PHPC Sponsor, generating proceeds to PHPC of $10.9 (the “PHPC Private Placement”). Each PHPC Private Placement Unit consisted of one share of PHPC Series A Common Stock and one-third of one redeemable warrant of PHPC to purchase one share of PHPC Series A Common Stock at an exercise price of $11.50 per share (the “PHPC Private Placement Warrants”).
In addition, the Company, through PHPC Sponsor’s ownership of 8.6 shares of Series F common stock of PHPC (the “PHPC Series F Common Stock”), had certain governance rights in PHPC relating to the election of PHPC directors and voting rights on amendments to PHPC’s amended and restated certificate of incorporation.
6
PHPC Sponsor was the primary beneficiary of PHPC as it had, 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 impacted PHPC’s economic performance, including partnering transaction target identification. As such, PHPC was fully consolidated into the Company’s financial statements until the time of its dissolution, as discussed below.
Proceeds of $345.0 were deposited in a trust account established for the benefit of PHPC’s public stockholders, which consisted of certain proceeds from the PHPC IPO and certain proceeds from the PHPC Private Placement, net of underwriters’ discounts and commissions and other costs and expenses.
The public stockholders’ ownership of PHPC equity represented a noncontrolling interest (“NCI”) to the Company, which was classified outside of permanent shareholders’ equity as the PHPC Series A Common Stock was redeemable at the option of the public stockholders in certain circumstances. The carrying amount of the redeemable NCI was equal to the greater of (i) the initial carrying amount, increased or decreased for the redeemable NCI’s share of PHPC’s net earnings or loss, other comprehensive income or loss (“OCI”) and distributions or (ii) the redemption value. The redemption value represented the amount the public stockholders of PHPC Series A Common Stock would be entitled in certain circumstances to redeem their shares of PHPC Series A Common Stock for, which was a pro-rata portion of the amount in the trust account at $10.00 per share of PHPC Series A Common Stock held, plus any pro-rata interest earned on the funds held in the trust account (which interest was net of taxes payable, and less up to $0.1 of interest to pay dissolution expenses). Remeasurements to the redemption value of the redeemable NCI were recognized as a deemed dividend and recorded to retained earnings on the balance sheet prior to the PHPC Redemption (as defined below).
In connection with the PHPC IPO, PHPC incurred offering costs of $17.9 , of which $10.7 were deferred underwriting commissions that would have become payable to the underwriters solely in the event that PHPC completed a partnering transaction.
Prior to the PHPC Redemption, the Company beneficially owned 31.0 % of the equity of PHPC and the net earnings and net assets of PHPC were consolidated within the Company’s financial statements. The remaining 69.0 % of the consolidated net earnings and net assets of PHPC, which represented the percentage of economic interest in PHPC held by the public stockholders of PHPC through their ownership of PHPC equity, were allocated to redeemable NCI. All transactions between PHPC and PHPC Sponsor, as well as related financial statement impacts, eliminated in consolidation.
On May 11, 2023, PHPC announced that it would not complete a partnering transaction within the Combination Period and that the entity would liquidate and dissolve in accordance with the terms of its amended and restated certificate of incorporation. Subsequent to the decision to liquidate and dissolve, PHPC completed certain winding-up activities, which included writing-off the deferred underwriting commissions as the underwriters agreed to waive their rights to these amounts should a partnering transaction not occur. The Company recorded a $10.7 gain in connection with this write-off, which was recorded in “Other income, net” on the Condensed Consolidated Statements of Operations during both the three and nine months ended June 30, 2023.
On May 28, 2023, the PHPC Warrants and the PHPC Private Placement Warrants expired worthless, as PHPC had not completed a partnering transaction before the expiration of the Combination Period.
On May 30, 2023, PHPC redeemed all of the outstanding public shares of PHPC Series A Common Stock (the “PHPC Redemption”). Each share of PHPC Series A Common Stock was redeemed for approximately $10.24 per share, representing the per share price equal to the aggregate amount then on deposit in the trust account, including interest earned on the trust account not previously released to pay taxes or dissolution expenses, divided by the number of then outstanding shares of PHPC Series A Common Stock. In connection with the PHPC Redemption, during the three and nine months ended June 30, 2023:
•$353.4 of funds held in the trust account immediately prior to the PHPC Redemption were distributed to redeem all of the outstanding shares of PHPC Series A Common Stock. The Company received $40.9 from the PHPC Redemption related to its ownership of 4.0 shares of PHPC Series A Common Stock; and
•redeemable NCI of $312.5 immediately prior to the PHPC Redemption was reduced to zero.
Subsequent to the PHPC Redemption, PHPC delisted from the New York Stock Exchange and dissolved in June 2023, and all classes of shares of PHPC equity were cancelled, including the PHPC Private Placement Units and the shares of the PHPC Series F Common Stock, which were surrendered by PHPC Sponsor for no consideration. PHPC Sponsor subsequently dissolved in August 2023.
7
The following table summarizes the effects of changes in the Company’s redeemable NCI on the Company’s equity for the three and nine months ended June 30, 2023, which represent the periods ended May 30, 2023, as the Company’s redeemable NCI was reduced to zero upon completion of the PHPC Redemption.
| Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2023 | ||||||||||
| Net earnings attributable to redeemable NCI | $ | $ | |||||||||
| Redemption value adjustment | ( | ( | |||||||||
| PHPC deemed dividend | $ | $ | |||||||||
The following table summarizes the changes to the Company’s redeemable NCI for the three and nine months ended June 30, 2023, which represent the periods ended May 30, 2023, as the Company’s redeemable NCI was reduced to zero upon completion of the PHPC Redemption.
| Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2023 | ||||||||||
| Beginning of period | $ | $ | |||||||||
Redemption of PHPC Series A Common Stock | ( | ( | |||||||||
| Net earnings attributable to redeemable NCI | |||||||||||
| PHPC deemed dividend | ( | ( | |||||||||
| End of period | $ | $ | |||||||||
8th Avenue
The Company has a 60.5 % common equity interest in 8th Avenue Food & Provisions, Inc. (“8th Avenue”) that is accounted for using the equity method. In determining the accounting treatment of the common equity interest, management concluded that 8th Avenue was not a variable interest entity as defined by Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” and as such, 8th Avenue was evaluated under the voting interest model. Based on the terms of 8th Avenue’s governing documents, management determined that the Company does not have a controlling voting interest in 8th Avenue due to substantive participating rights held by third parties associated with the governance of 8th Avenue. However, Post does retain significant influence, and therefore, the use of the equity method of accounting is required.
During fiscal 2022, 8th Avenue’s equity method loss attributable to Post exceeded the Company’s remaining investment in 8th Avenue. As such, in accordance with ASC Topic 323, “Investments—Equity Method and Joint Ventures,” the Company discontinued applying the equity method to the investment after reducing the balance of the investment to zero . The Company’s investment in 8th Avenue was zero
During the three and nine months ended June 30, 2024, the Company had net sales to 8th Avenue of $1.5 and $5.3 , respectively, and purchases from and royalties paid to 8th Avenue of $21.5 and $61.1 , respectively. During the three and nine months ended June 30, 2023, the Company had net sales to 8th Avenue of $1.2 and $6.7 , respectively, and purchases from and royalties paid to 8th Avenue of $16.8 and $65.2 , respectively. Sales and purchases between the Company and 8th Avenue were all made at arm’s-length.
The Company had current payables with 8th Avenue of $15.6 and $13.3 at June 30, 2024 and September 30, 2023, respectively, which were included in “Accounts payable” on the Condensed Consolidated Balance Sheets and primarily related to related party purchases and royalties. Current receivables with 8th Avenue at June 30, 2024 and September 30, 2023 were immaterial. In addition, the Company had a long-term receivable and a long-term liability with 8th Avenue of $12.9 0.7
Weetabix East Africa and Alpen
The Company holds a controlling equity interest in Weetabix East Africa Limited (“Weetabix East Africa”). Weetabix East Africa is a Kenyan-based company that produces ready-to-eat (“RTE”) cereal and muesli. The Company owns 50.1 % of Weetabix East Africa and holds a controlling voting and financial interest through its appointment of management and representation on Weetabix East Africa’s board of directors. Accordingly, Weetabix East Africa is fully consolidated into the Company’s financial statements and its assets and results of operations are reported in the Weetabix segment. The remaining interest in the consolidated net earnings and net assets of Weetabix East Africa is allocated to NCI.
8
The Company holds an equity interest in Alpen Food Company South Africa (Pty) Limited (“Alpen”). Alpen is a South African-based company that produces RTE cereal and muesli. The Company owns 50.0 % of Alpen’s common stock with no other indicators of control, and accordingly, the Company accounts for its investment in Alpen using the equity method. The investment in Alpen was $3.7 and $3.6 at June 30, 2024 and September 30, 2023, respectively, and was included in “Other assets” on the Condensed Consolidated Balance Sheets.
BellRing
Transactions between the Company and BellRing Brands, Inc. (“BellRing”) are considered related party transactions as certain of the Company’s officers and/or directors serve as officers and/or directors of BellRing.
On September 30, 2022, Comet Processing, Inc. (“Comet”), a wholly-owned subsidiary of the Company, entered into a co-packing agreement with Premier Nutrition Company, LLC (“Premier Nutrition”), a subsidiary of BellRing (the “Co-Packing Agreement”). Under the Co-Packing Agreement, Premier Nutrition procures certain packaging materials for Comet that Comet utilizes in the production of ready-to-drink (“RTD”) shakes for Premier Nutrition. In December 2023, in accordance with the terms of the Co-Packing Agreement, Comet began manufacturing RTD shakes for Premier Nutrition. Sales of RTD shakes to Premier Nutrition during the three and nine months ended June 30, 2024 were immaterial and there were no sales of RTD shakes to Premier Nutrition during fiscal 2023. Other related party transactions and balances between the Company and BellRing were immaterial as of and for the three and nine months ended June 30, 2024 and 2023.
NOTE 4 — BUSINESS COMBINATIONS
The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company’s financial statements reflect the operations of an acquired business starting from the date of acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition based on Level 3 inputs. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Any excess of the estimated fair values of the identifiable net assets acquired over the purchase price is recorded as a gain on bargain purchase. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies, the expansion of the business into new or growing segments of the industry and the addition of new employees.
Fiscal 2024
On December 1, 2023, the Company completed its acquisition of substantially all of the assets of Perfection Pet Foods, LLC (“Perfection”) for $235.0 , subject to working capital adjustments and other adjustments, resulting in a payment at closing of $238.8 . Perfection is a manufacturer and packager of private label and co-manufactured pet food and baked treat products and is reported in the Post Consumer Brands segment. The acquisition was completed using cash on hand, including borrowings under the Revolving Credit Facility (as defined in Note 13). During the third quarter of fiscal 2024, the Company reached a final settlement of net working capital, resulting in an amount received by the Company of $4.6 .
Based upon the preliminary purchase price allocation, the Company recorded $81.0 of customer relationships, which is being amortized over a weighted-average useful life of 16 years. Net sales and operating profit included in the Condensed Consolidated Statements of Operations attributable to Perfection were $62.1 and $4.2 , respectively, for the three months ended June 30, 2024 and $146.7 and $9.1 , respectively, for the nine months ended June 30, 2024.
Preliminary values of Perfection are measured as of the date of the acquisition, are not yet finalized pending the final purchase price allocation and are subject to change. The goodwill generated by the Company’s Perfection acquisition is expected to be deductible for U.S. income tax purposes.
9
The following table presents the preliminary purchase price allocation, including immaterial measurement period adjustments, related to the Perfection acquisition based upon the fair values of assets acquired and liabilities assumed as of June 30, 2024.
| Cash and cash equivalents | $ | ||||
Receivables, net | |||||
| Inventories | |||||
| Prepaid expenses and other current assets | |||||
| Property, net | |||||
| Other intangible assets, net | |||||
| Other assets | |||||
| Accounts payable | ( | ||||
| Other current liabilities | ( | ||||
| Other liabilities | ( | ||||
| Total identifiable net assets | |||||
| Goodwill | |||||
| Fair value of total consideration transferred | $ | ||||
Also on December 1, 2023, the Company completed its acquisition of Deeside Cereals I Ltd (“Deeside”) for £11.3 (approximately $14.3 ). The acquisition was completed using cash on hand. Deeside is a producer of private label cereals in the United Kingdom (the “U.K.”) and is reported in the Weetabix segment. Based upon the preliminary purchase price allocation, the Company identified and recorded $20.5 of net assets, which exceeded the purchase price paid for Deeside. As a result, the Company recorded an initial gain on bargain purchase of $6.2 during the first quarter of fiscal 2024. During the third quarter of fiscal 2024, the Company recorded measurement period adjustments related to Deeside’s defined benefit pension plan and deferred taxes, which reduced the acquired Deeside net assets by $0.4 . As a result, the Company recorded an adjustment to (gain) on bargain purchase of $0.4 and $ during the three and nine months ended June 30, 2024, respectively, which was included in “Other operating expense (income), net” in the Condensed Consolidated Statements of Operations. Net sales and operating loss included in the Condensed Consolidated Statements of Operations attributable to Deeside were $7.5 and $0.3 , respectively, for the three months ended June 30, 2024 and $17.0 and $1.2 , respectively, for the nine months ended June 30, 2024. Preliminary values of Deeside are measured as of the date of the acquisition, are not yet finalized pending the final purchase price allocation and are subject to change.
Acquisition-related costs for fiscal 2024 acquisitions were immaterial during the three and nine months ended June 30, 2024.
Fiscal 2023
On April 28, 2023, the Company completed its acquisition of a portion of The J. M. Smucker Company’s (“Smucker”) pet food business, including brands such as Rachael Ray Nutrish, Nature’s Recipe, 9Lives, Kibbles ’n Bits and Gravy Train, private label pet food assets and certain manufacturing and distribution facilities (collectively, “Pet Food”), facilitating the Company’s entry into the pet food category. The purchase price of the Pet Food acquisition was $1,207.5 which included (i) $700.0 in cash, subject to inventory adjustments, resulting in a payment at closing of $715.5 , (ii) 5.4 shares of Post common stock, or $492.3 , and (iii) immaterial working capital adjustments. The cash payment was made using cash on hand, including proceeds from the Fourth Incremental Term Loan (as defined in Note 13). Pet Food is reported in the Post Consumer Brands segment.
In connection with the Pet Food acquisition, the Company and Smucker entered into a transition services agreement (the “TSA”) pursuant to which Smucker provides certain Pet Food support services to Post for a transition period of 18 months (or up to 24 months at Post’s election) following the close of the acquisition based on the terms set forth in the TSA. Pet Food support services include, but are not limited to, certain sales, marketing, finance, information technology, procurement and supply chain services. TSA fees were $3.5 and $13.0 during the three and nine months ended June 30, 2024, respectively, and $4.0 39.1 and $35.5 , respectively, which was recorded within “Receivables, net” on the Condensed Consolidated Balance Sheets.
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Unaudited Pro Forma Information
The following unaudited pro forma information presents a summary of the results of operations of the Company combined with the results of the fiscal 2024 Perfection acquisition and the fiscal 2023 Pet Food acquisition for the periods presented as if the fiscal 2024 Perfection acquisition had occurred on October 1, 2022 and the fiscal 2023 Pet Food acquisition had occurred on October 1, 2021, along with certain pro forma adjustments. The results of operations for the fiscal 2024 Deeside acquisition were immaterial for presentation within the following unaudited pro forma information. These pro forma adjustments give effect to the amortization of certain definite-lived intangible assets, adjusted depreciation expense based upon the fair value of assets acquired, acquisition-related costs, inventory revaluation adjustments, interest expense, TSA fees and related income taxes. The following unaudited pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the Perfection and Pet Food acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Pro forma net sales | $ | $ | $ | $ | |||||||||||||||||||
| Pro forma net earnings | $ | $ | $ | $ | |||||||||||||||||||
| Pro forma basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Pro forma diluted earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
NOTE 5 — RESTRUCTURING
In November 2023, the Company finalized its plan to close its Post Consumer Brands cereal manufacturing facility in Lancaster, Ohio (the “Lancaster Facility”). The transfer of production capabilities to other Company locations and closure of the Lancaster Facility are expected to be completed in the first quarter of fiscal 2025.
Restructuring charges and the associated liabilities for employee-related expenses related to the closure of the Lancaster Facility are shown in the following table.
Balance, September 30, 2023 | $ | ||||
| Charge to expense | |||||
| Cash payments | ( | ||||
| Non-cash charges | |||||
| Balance, June 30, 2024 | $ | ||||
| Total expected restructuring charges | $ | ||||
| Cumulative restructuring charges incurred to date | |||||
| Remaining expected restructuring charges | $ | ||||
NOTE 6 — EARNINGS PER SHARE
Basic earnings per share is based on the average number of shares of common stock outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, stock appreciation rights and restricted stock units using the “treasury stock” method and convertible senior notes using the “if converted” method.
Remeasurements to the redemption value of the redeemable NCI prior to the PHPC Redemption were recognized as a deemed dividend (see Note 3). The Company made an election to treat the portion of the deemed dividend that exceeded fair value as an adjustment to income available to common shareholders for basic and diluted earnings per share. In addition, dilutive net earnings was adjusted for interest expense, net of tax, related to the Company’s convertible senior notes.
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The following table sets forth the computation of basic and diluted earnings per share.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Net earnings | $ | $ | $ | $ | |||||||||||||||||||
| Impact of redeemable NCI | |||||||||||||||||||||||
Net earnings for basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Impact of interest expense, net of tax, related to convertible senior notes | |||||||||||||||||||||||
Net earnings for diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
Weighted-average shares for basic earnings per share | |||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Market-based performance restricted stock units | |||||||||||||||||||||||
| Earnings-based performance restricted stock units | |||||||||||||||||||||||
| Shares issuable upon conversion of convertible senior notes | |||||||||||||||||||||||
| Total dilutive securities | |||||||||||||||||||||||
Weighted-average shares for diluted earnings per share | |||||||||||||||||||||||
Earnings per Common Share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
The following table presents the securities that have been excluded from the calculation of weighted-average shares for diluted earnings per share as they were anti-dilutive.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Market-based performance restricted stock units | |||||||||||||||||||||||
NOTE 7 — INVENTORIES
| June 30, 2024 | September 30, 2023 | ||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished products | |||||||||||
| Flocks | |||||||||||
| $ | $ | ||||||||||
NOTE 8 — PROPERTY, NET
| June 30, 2024 | September 30, 2023 | ||||||||||
| Property, at cost | $ | $ | |||||||||
| Accumulated depreciation | ( | ( | |||||||||
| $ | $ | ||||||||||
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NOTE 9 — GOODWILL
The changes in the carrying amount of goodwill by segment are noted in the following table.
| Post Consumer Brands | Weetabix | Foodservice | Refrigerated Retail | Total | |||||||||||||||||||||||||
Balance, September 30, 2023 | |||||||||||||||||||||||||||||
| Goodwill (gross) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Accumulated impairment losses | ( | ( | ( | ||||||||||||||||||||||||||
| Goodwill (net) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Goodwill from acquisition | |||||||||||||||||||||||||||||
| Currency translation adjustment | |||||||||||||||||||||||||||||
| Balance, June 30, 2024 | |||||||||||||||||||||||||||||
| Goodwill (gross) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Accumulated impairment losses | ( | ( | ( | ||||||||||||||||||||||||||
| Goodwill (net) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
NOTE 10 — INTANGIBLE ASSETS, NET
| June 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Carrying Amount | Accumulated Amortization | Net Amount | Carrying Amount | Accumulated Amortization | Net Amount | ||||||||||||||||||||||||||||||
| Subject to amortization: | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Trademarks, brands and licensing agreements | ( | ( | |||||||||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||||||||
| Not subject to amortization: | |||||||||||||||||||||||||||||||||||
| Trademarks and brands | — | — | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
NOTE 11 — DERIVATIVE FINANCIAL INSTRUMENTS
In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and supplies, interest rate risks and foreign currency exchange rate risks. The Company utilizes derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The Company does not hold or issue financial instruments for speculative or trading purposes.
Cash flows associated with all derivatives are reported as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows, unless the derivative contains an other-than-insignificant financing element, in which case its cash flows are reported as cash flows from financing activities.
At June 30, 2024, the Company’s derivative instruments, none of which were designated as hedging instruments under ASC Topic 815, “Derivatives and Hedging,” consisted of:
•commodity and energy futures, swaps and option contracts which relate to inputs that generally will be utilized within the next two years;
•foreign currency forward contracts (the “FX contracts”) maturing in the next 12 months that have the effect of hedging currency fluctuations between the Euro and the Pound Sterling; and
•pay-fixed, receive-variable interest rate swaps maturing in June 2033 that require monthly settlements and have the effect of hedging interest payments on debt expected to be issued but not yet priced.
During the nine months ended June 30, 2024, the Company received cash proceeds of $5.2 in connection with the termination of its interest rate swap contracts with a $400.0 notional value.
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During the nine months ended June 30, 2023, the Company paid $55.1 in connection with the termination of $849.3 notional value of its rate-lock swap contracts, of which $43.5 related to the termination of rate-lock swap contracts that contained other-than-insignificant financing elements and were reported as cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows. The Company also paid $2.1 in connection with the termination of $332.6 notional value of its interest rate swap option, and received cash proceeds of $6.7 in connection with the termination of its interest rate swap contract with a $200.0 notional value.
The following table presents the notional amounts of derivative instruments held.
| June 30, 2024 | September 30, 2023 | |||||||||||||
Commodity and energy contracts | $ | $ | ||||||||||||
| FX contracts | $ | $ | ||||||||||||
| Interest rate swaps | $ | $ | ||||||||||||
The following table presents the balance sheet location and fair value of the Company’s derivative instruments. The Company does not offset derivative assets and liabilities within the Condensed Consolidated Balance Sheets.
| Balance Sheet Location | June 30, 2024 | September 30, 2023 | ||||||||||||||||||
| Asset Derivatives: | ||||||||||||||||||||
Commodity and energy contracts | Prepaid expenses and other current assets | $ | $ | |||||||||||||||||
| FX contracts | Prepaid expenses and other current assets | |||||||||||||||||||
| Interest rate swaps | Prepaid expenses and other current assets | |||||||||||||||||||
Commodity and energy contracts | Other assets | |||||||||||||||||||
| Interest rate swaps | Other assets | |||||||||||||||||||
| $ | $ | |||||||||||||||||||
| Liability Derivatives: | ||||||||||||||||||||
Commodity and energy contracts | Other current liabilities | $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||||
The following table presents the statement of operations location and loss (gain) recognized related to the Company’s derivative instruments.
| Derivative Instruments | Statement of Operations Location | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
Commodity and energy contracts | Cost of goods sold | $ | $ | $ | $ | |||||||||||||||||||||||||||
FX contracts | Selling, general and administrative expenses | |||||||||||||||||||||||||||||||
| Interest rate swaps | (Income) expense on swaps, net | ( | ( | ( | ||||||||||||||||||||||||||||
| PHPC Warrants | Other income, net | |||||||||||||||||||||||||||||||
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NOTE 12 — FAIR VALUE MEASUREMENTS
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820, “Fair Value Measurement.”
| June 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | ||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Deferred compensation investments | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Derivative assets | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Deferred compensation liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Deferred Compensation
The deferred compensation investments are primarily invested in mutual funds, and their fair value is measured using the market approach. These investments are in the same funds, or funds that employ a similar investment strategy, and are purchased in substantially the same amounts, as the participants’ selected notional investment options (excluding Post common stock equivalents), which represent the underlying liabilities to participants in the Company’s deferred compensation plans. Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants’ selected notional investment options (excluding certain Post common stock equivalents to be distributed in shares) using the market approach.
Derivatives
The Company utilizes the income approach to measure fair value for its commodity and energy derivatives. The income approach uses pricing models that rely on market observable inputs such as yield curves and forward prices. FX contracts are valued using the spot rate less the forward rate multiplied by the notional amount. The Company’s calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve. Refer to Note 11 for the classification of changes in fair value of derivative assets and liabilities measured at fair value on a recurring basis within the Condensed Consolidated Statements of Operations.
Equity Securities and Other Fair Value Measurements
The Company uses the market approach to measure the fair value of its equity securities, which were immaterial as of both June 30, 2024 and September 30, 2023. The Company’s financial assets and liabilities also include cash and cash equivalents, receivables and accounts payable for which the carrying value approximates fair value due to their short maturities (less than 12 months). The Company does not record its current portion of long-term debt and long-term debt at fair value on the Condensed Consolidated Balance Sheets. The fair values of any outstanding borrowings under the municipal bond and the Revolving Credit Facility (as defined in Note 13) as of June 30, 2024 and September 30, 2023 approximated their carrying values. Based on current market rates, the fair value (Level 2) of the Company’s debt, excluding any outstanding borrowings under the municipal bond and the Revolving Credit Facility, was $5,904.7 and $5,491.5 as of June 30, 2024 and September 30, 2023, respectively, which included $632.8 and $572.6 related to the Company’s convertible senior notes, respectively.
Certain assets and liabilities, including property, goodwill and other intangible assets, are measured at fair value on a non-recurring basis using Level 3 inputs.
15
NOTE 13 — LONG-TERM DEBT
The components of “Long-term debt” on the Condensed Consolidated Balance Sheets are presented in the following table.
| June 30, 2024 | September 30, 2023 | ||||||||||
| 2.50% convertible senior notes maturing August 2027 | $ | $ | |||||||||
| 4.50% senior notes maturing September 2031 | |||||||||||
| 4.625% senior notes maturing April 2030 | |||||||||||
| 5.50% senior notes maturing December 2029 | |||||||||||
| 5.625% senior notes maturing January 2028 | |||||||||||
| 5.75% senior notes maturing March 2027 | |||||||||||
6.25% senior secured notes maturing February 2032 | |||||||||||
| Fourth Incremental Term Loan | |||||||||||
| Revolving Credit Facility | |||||||||||
| Municipal bond | |||||||||||
| $ | $ | ||||||||||
| Less: Current portion of long-term debt | |||||||||||
| Debt issuance costs, net | |||||||||||
| Plus: Unamortized premium, net | |||||||||||
| Total long-term debt | $ | $ | |||||||||
6.25% Senior Notes
On February 20, 2024, the Company issued $1,000.0 principal value of 6.25 % senior secured notes (the “6.25% senior notes”) maturing in February 2032. The 6.25 % senior notes were issued at par, and the Company received $986.7 after incurring underwriting fees and other fees and expenses of $13.3 , which were deferred and are being amortized to interest expense over the term of the 6.25 % senior notes. Interest payments on the 6.25 % senior notes are due semi-annually each August 15 and February 15, and the maturity date of the 6.25 % senior notes is February 15, 2032.
The 6.25 % senior notes and the related guarantees are secured by first-priority security interests, subject to permitted liens, in collateral that generally includes most of the Company’s and the subsidiary guarantors’ property except for real property and certain other excluded assets. The assets that secure the 6.25 % senior notes also secure (and will continue to secure) the Credit Agreement (as defined below) on a pari passu basis.
The 6.25 % senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of the Company’s existing and subsequently acquired or organized wholly-owned domestic subsidiaries that guarantee the Credit Agreement or certain of the Company’s other indebtedness, other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries the Company designates as unrestricted subsidiaries, which such unrestricted subsidiaries include 8th Avenue and its subsidiaries. These guarantees are subject to release in certain circumstances.
With a portion of the net proceeds received from the 6.25 % senior notes issuance, borrowings under the New Revolving Credit Facility (as defined below) and cash on hand, the Company repaid the outstanding principal balance of the Fourth Incremental Term Loan (as defined below) and all accrued, unpaid interest thereon, redeemed the remainder of the outstanding 5.75% senior notes maturing in March 2027 and all accrued, unpaid interest to the redemption date and repaid the outstanding borrowings under the Old Revolving Credit Facility (as defined below) and all accrued, unpaid interest thereon. For additional information, see the “Credit Agreement,” “Fourth Incremental Term Loan” and “Repayments of Debt” sections below.
Convertible Senior Notes
On August 12, 2022, the Company issued $575.0 principal value of 2.50 % convertible senior notes maturing in August 2027. The initial conversion rate of the 2.50 % convertible senior notes is 9.4248 shares of the Company’s common stock per one thousand dollars principal amount of the 2.50 % convertible senior notes, which represents an initial conversion price of approximately $106.10 per share of common stock. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture governing the 2.50 % convertible senior notes (the “Convertible Notes Indenture”). The Company may settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. If a “make-whole fundamental change” (as
16
defined in the Convertible Notes Indenture) occurs, then the Company must in certain circumstances increase the conversion rate for a specified period of time.
The 2.50 % convertible senior notes may be converted at the holder’s option up to the second scheduled trading day immediately before the maturity date of August 15, 2027 under the following circumstances:
•during any calendar quarter (and only during such calendar quarter) if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “Measurement Period”) in which the trading price per one thousand dollars principal amount of the 2.50 % convertible senior notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;
•upon the occurrence of certain corporate events or distributions on the Company’s common stock described in the Convertible Notes Indenture;
•if the Company calls the 2.50 % convertible senior notes for redemption; and
•at any time from, and including, May 15, 2027 until the close of business on the second scheduled trading day immediately before the August 15, 2027 maturity date.
If a “fundamental change” (as defined in the Convertible Notes Indenture) occurs, then, except as described in the Convertible Notes Indenture, holders of the 2.50 % convertible senior notes may require the Company to repurchase their 2.50 % convertible senior notes at a cash repurchase price equal to the principal amount of the 2.50 % convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the “fundamental change repurchase date” (as defined in the Convertible Notes Indenture).
The 2.50 % convertible senior notes may be redeemed, in whole or in part (subject to the partial redemption limitation described in the Convertible Notes Indenture), at the Company’s option at any time, and from time to time, on or after August 20, 2025 and on or before the 35th scheduled trading day immediately before August 15, 2027, at a cash redemption price equal to the principal amount of the 2.50 % convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (ii) the trading day immediately before the date the Company sends such notice.
As of both June 30, 2024 and September 30, 2023, none of the conditions permitting holders to convert their 2.50 % convertible senior notes had been satisfied, and no shares of the Company’s common stock had been issued in connection with any conversions of the 2.50 % convertible senior notes.
The 2.50 % convertible senior notes had no embedded features that required separate bifurcation under ASC Topic 815 as of June 30, 2024 or September 30, 2023. As such, the 2.50 % convertible senior notes were recorded at the principal amount, net of unamortized issuance costs, on the Condensed Consolidated Balance Sheets as of both June 30, 2024 and September 30, 2023.
Credit Agreement
On March 18, 2020, the Company entered into a second amended and restated credit agreement (as amended, including by Joinder Agreement No. 1, Joinder Agreement No. 2, the Third Joinder Agreement (as defined below), the Fourth Joinder Agreement (as defined below) and the Third Amendment (as defined below), as amended, restated or amended and restated, the “Credit Agreement”). Prior to the effective date of the Third Amendment, the Credit Agreement provided for a revolving credit facility in an aggregate principal amount of $750.0 (the “Old Revolving Credit Facility”), with the commitments thereunder to be made available to the Company in U.S. Dollars, Canadian Dollars, Euros and Pounds Sterling. Letters of credit are available under the Credit Agreement in an aggregate amount of up to $75.0
On February 20, 2024, the Company entered into a third amendment to the Credit Agreement (the “Third Amendment”) by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, Barclays Bank PLC (“Barclays”), as administrative agent under the Credit Agreement prior to the effective date of the Third Amendment, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent under the Credit Agreement from and after the effective date of the Third Amendment, the institutions constituting the 2024 Revolving Credit Lenders, the L/C Issuers and the Swing Line Lender (as
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each such term is defined in the Third Amendment). The Company incurred $6.6 of financing fees in connection with the Third Amendment, which were deferred and are being amortized to interest expense over the remaining term of the Credit Agreement.
The Third Amendment to the Credit Agreement (i) replaced the Old Revolving Credit Facility with a new revolving credit facility in an aggregate principal amount of $1,000.0 (the “New Revolving Credit Facility”), (ii) extended the maturity date of the New Revolving Credit Facility to February 20, 2029, provided that if on October 16, 2027 the Company’s 5.625% senior notes maturing in January 2028 have not been redeemed in full in cash or refinanced and replaced in full with notes and/or loans maturing at least 91 days after February 20, 2029, then the maturity date of the New Revolving Credit Facility will be October 16, 2027 and (iii) modified certain other terms, conditions and provisions of the Credit Agreement, including transferring the administrative agent role from Barclays to JPMorgan Chase. The term “Revolving Credit Facility” used herein generally refers to the Old Revolving Credit Facility prior to the Third Amendment and the New Revolving Credit Facility subsequent to the Third Amendment.
Borrowings in U.S. Dollars under the New Revolving Credit Facility bear interest, at the option of the Company, at an annual rate equal to either (a) the adjusted term SOFR rate (as defined in the Credit Agreement) or (b) the base rate determined by reference to the highest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50 % per annum and (iii) the one-month adjusted term SOFR rate plus 1.00 % per annum, in each case plus an applicable margin, which is determined by reference to the secured net leverage ratio (as defined in the Credit Agreement), with the applicable margin for adjusted term SOFR rate loans and base rate loans being (i) 2.00 % and 1.00 %, respectively, if the secured net leverage ratio is greater than or equal to 3.00 :1.00, (ii) 1.75 % and 0.75 %, respectively, if the secured net leverage ratio is less than 3.00 :1.00 and greater than or equal to 1.50 :1.00 or (iii) 1.50 % and 0.50 %, respectively, if the secured net leverage ratio is less than 1.50 :1.00. Commitment fees on the daily unused amount of commitments under the Revolving Credit Facility accrue at a rate of 0.375 % if the Company’s secured net leverage ratio is greater than or equal to 3.00 :1.00, and accrue at a rate of 0.25 % if the Company’s secured net leverage ratio is less than 3.00 :1.00.
During the nine months ended June 30, 2024, the Company borrowed $645.0 and repaid $345.0 under the Revolving Credit Facility. There were no 300.0 , outstanding letters of credit of $20.0 and an available borrowing capacity of $680.0 . As of September 30, 2023, the Revolving Credit Facility had no outstanding borrowings, outstanding letters of credit of $19.7 and an available borrowing capacity of $730.3 . As of June 30, 2024, the interest rate on the outstanding borrowings under the Revolving Credit Facility was 6.93 %.
The Credit Agreement provides for potential incremental revolving and term facilities at the request of the Company and at the discretion of the lenders or other persons providing such incremental facilities, in each case on terms to be determined, and also permits the Company to incur other secured or unsecured debt, in all cases subject to conditions and limitations specified in the Credit Agreement.
The Credit Agreement provides for customary events of default, including material breach of representations and warranties, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or default under certain other indebtedness in excess of $125.0 , certain events of bankruptcy and insolvency, inability to pay debts, the occurrence of one or more unstayed or undischarged judgments in excess of $125.0 , attachments issued against all or any material part of the Company’s property, certain events under the Employee Retirement Income Security Act of 1974, a change of control (as defined in the Credit Agreement), the invalidity of any loan document and the failure of the collateral documents to create a valid and perfected first priority lien (subject to certain permitted liens). Upon the occurrence and during the continuance of an event of default, the maturity of the loans under the Credit Agreement may accelerate and the agent and lenders under the Credit Agreement may exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees of the Company’s obligations under the Credit Agreement.
Third Incremental Term Loan
On November 18, 2022, the Company entered into Joinder Agreement No. 3 (the “Third Joinder Agreement”) by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, J.P. Morgan Securities LLC (“J.P. Morgan”), as lender, Barclays, as administrative agent, and JPMorgan Chase, as sub-agent to the administrative agent. The Third Joinder Agreement provided for an incremental term loan (the “Third Incremental Term Loan”) of $130.0 under the Company’s Credit Agreement, which the Company borrowed in full on November 18, 2022.
On November 21, 2022, the Company and J.P. Morgan entered into an exchange agreement pursuant to which the Company transferred the remaining shares of BellRing common stock it held from its previous transactions related to the distribution of a portion of its interest in BellRing, which occurred in fiscal 2022, to J.P. Morgan to repay $99.9 in aggregate principal amount of the Third Incremental Term Loan (such exchange, the “Fiscal 2023 Debt-for-Equity Exchange”). Following the completion of the Fiscal 2023 Debt-for-Equity Exchange, the Company no longer held shares of BellRing
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common stock. On November 25, 2022, the Company repaid the remaining principal balance of $30.1 of the Third Incremental Term Loan using cash on hand. For additional information, see “Repayments of Debt” below.
Fourth Incremental Term Loan
On April 26, 2023, the Company entered into Joinder Agreement No. 4 (the “Fourth Joinder Agreement”) by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, the institutions party to the Fourth Joinder Agreement as lenders and Barclays, as the administrative agent. The Fourth Joinder Agreement provided for an incremental term loan (the “Fourth Incremental Term Loan”) of $400.0 under the Credit Agreement, which the Company borrowed in full on April 26, 2023.
On February 20, 2024, the Company repaid the outstanding principal balance of the Fourth Incremental Term Loan and all accrued, unpaid interest thereon using a portion of the net proceeds from the 6.25 % senior notes issuance. For additional information, see “Repayments of Debt” below.
Interest on the Fourth Incremental Term Loan accrued, at the Company’s option, at the base rate (as defined in the Credit Agreement) plus 1.25 % per annum or the adjusted term SOFR rate plus 2.25 % per annum. Interest was payable quarterly for loans bearing interest based upon the base rate and either monthly or every three months (depending on the applicable interest period) for loans bearing interest based upon the adjusted term SOFR rate. As of September 30, 2023, the interest rate on the Fourth Incremental Term Loan was 7.67 %.
Municipal Bond
In connection with the construction of a filtration system at the Company’s potato plant in Chaska, Minnesota, the Company incurred debt that guarantees the repayment of certain industrial revenue bonds used to finance the construction of the project. Principal payments are due annually on March 1, and interest payments are due semi-annually each March 1 and September 1. The debt matures on March 1, 2028.
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Repayments of Debt
The following table presents the Company’s (i) principal repayments of debt, which, net of discounts, were included in the Condensed Consolidated Statements of Cash Flows, (ii) principal amounts of debt exchanged (refer to the “Third Incremental Term Loan” section above), which were not included in the Condensed Consolidated Statements of Cash Flows and (iii) the associated (gain) loss related to such repayments and exchanges included in “Gain on extinguishment of debt, net” in the Condensed Consolidated Statements of Operations.
| Gain on Extinguishment of Debt, net | ||||||||||||||||||||||||||||||||
| Debt Instrument | Principal Amount Repaid | Principal Amount Exchanged | Debt Discounts (Received) / Premiums Paid | Write-off of Debt Issuance Costs | Write-off of Unamortized Premiums | |||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| 4.50% senior notes | $ | |||||||||||||||||||||||||||||||