POST HOLDINGS, INC. 
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources ofPost Holdings, Inc. and its subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein, our audited consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2022 and the "Cautionary Statement on Forward-Looking Statements" section included below. The terms "our," "we," "us," "Company" and "Post" as used herein refer toPost Holdings, Inc. and its subsidiaries. OnMarch 10, 2022 , we completed the BellRing Spin-off (as defined below), which represented a strategic shift that had a major effect on our operations and consolidated financial results. Accordingly, the historical results ofBellRing Intermediate Holdings, Inc. (formerly known asBellRing Brands, Inc. ) ("Old BellRing") andBellRing Distribution, LLC prior to the BellRing Spin-off have been presented as discontinued operations in our Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows. The following discussion reflects continuing operations only, unless otherwise indicated. See below for additional information. OVERVIEW We are a consumer packaged goods holding company operating in four reportable segments:Post Consumer Brands , Weetabix, Foodservice and Refrigerated Retail. Our products are sold through a variety of channels, including grocery, club and drug stores, mass merchandisers, foodservice, food ingredient and eCommerce.
At
•Post Consumer Brands: North American ready-to-eat ("RTE") cereal and Peter Pan
nut butters;
•Weetabix: primarily United Kingdom (the "U.K.") RTE cereal, muesli and
protein-based ready-to-drink shakes;
•Foodservice: primarily egg and potato products; and
•Refrigerated Retail: primarily side dish, egg, cheese and sausage products.
Transactions
BellRing Brands, Inc.
On March 9, 2022 , pursuant to the Transaction Agreement and Plan of Merger,
dated as of October 26, 2021 (as amended by Amendment No. 1 to the Transaction
Agreement and Plan of Merger, dated as of February 28, 2022 , the "Spin-off
Agreement"), by and among us, Old BellRing, BellRing Brands, Inc. (formerly
known as BellRing Distribution, LLC ) ("BellRing") and BellRing Merger Sub
Corporation , a wholly-owned subsidiary of BellRing ("BellRing Merger Sub"), we
contributed our share of Old BellRing Class B common stock, $0.01 par value per
share, all of our BellRing Brands, LLC non-voting membership units and $550.4
million of cash to BellRing in exchange for certain limited liability company
interests of BellRing and the right to receive $840.0 million in aggregate
principal amount of BellRing's 7.00% senior notes maturing in 2030 (the
"BellRing Notes" and such transactions, collectively, the "BellRing
Contribution").
On March 10, 2022 , BellRing converted into a Delaware corporation and changed
its name to "BellRing Brands, Inc. ", and we distributed an aggregate of 78.1
million, or 80.1%, of our shares of BellRing common stock, $0.01 par value per
share ("BellRing Common Stock"), to our shareholders of record as of the close
of business, Central Time, on February 25, 2022 (the "Record Date") in a
pro-rata distribution (the "BellRing Distribution"). Our shareholders received
1.267788 shares of BellRing Common Stock for every one share of our common stock
held as of the Record Date. No fractional shares of BellRing Common Stock were
issued, and instead, cash in lieu of any fractional shares was paid to our
shareholders.
Upon completion of the BellRing Distribution, BellRing Merger Sub merged with
and into Old BellRing (the "BellRing Merger"), with Old BellRing continuing as
the surviving corporation and becoming a wholly-owned subsidiary of BellRing.
The transactions described above, including the BellRing Contribution, the
BellRing Distribution and the BellRing Merger, and the Debt-for-Debt Exchange
(as defined and described in more detail in Note 15 within "Notes to Condensed
Consolidated Financial Statements"), are collectively referred to as the
"BellRing Spin-off."
Our equity interest in BellRing subsequent to the BellRing Spin-off (our
"Investment in BellRing") was 14.2% immediately following the BellRing Spin-off.
As a result of the BellRing Spin-off, the dual class voting structure in the
BellRing business was eliminated. The BellRing Distribution was structured in a
manner intended to qualify as a tax-free distribution to our shareholders for
United States (the "U.S.") federal income tax purposes, except to the extent of
any cash received in lieu of fractional shares of BellRing Common Stock.
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On
OnNovember 25, 2022 , we transferred the remaining 4.6 million shares of our Investment in BellRing to repay certain outstanding debt obligations as part of the Second Debt-for-Equity Exchange (as defined in "Liquidity and Capital Resources" within this section). We had no ownership of BellRing Common Stock as ofDecember 31, 2022 . We incurred separation-related expenses of$0.1 million and$2.5 million during the three months endedDecember 31, 2022 and 2021, respectively, related to the BellRing Spin-off and the subsequent divestments of our Investment in BellRing. For additional discussion, refer to "Liquidity and Capital Resources" within this section. These expenses generally included third party costs for advisory services, fees charged by other service providers and government filing fees and were included in "Selling, general and administrative expenses" in the Condensed Consolidated Statements of Operations.
For additional information on the BellRing Spin-off and the transactions to subsequently divest of our Investment in BellRing, refer to Notes 3, 4 and 15 within "Notes to Condensed Consolidated Financial Statements."
Acquisitions
We completed the
Divestitures
We completed the sale of the
Market Trends
COVID-19 Pandemic
We continue to monitor the impact of the COVID-19 pandemic on our businesses and the overall economy. Historical impacts of the pandemic on product demand and volumes for products sold through our foodservice and retail channels continued to improve and approached normalized levels during fiscal 2022, which we expect to continue into fiscal 2023. Uncertainty regarding any future impact of the pandemic on our businesses remains, and such impacts will ultimately depend on the length and severity of the pandemic.
Supply Chain
Events such as the COVID-19 pandemic have resulted in certain ongoing impacts to the global economy, including market disruptions, supply chain challenges and inflationary pressures. During the first quarter of fiscal 2023, labor shortages and input availability continued to pressure our supply chain. Raw material, packaging and freight inflation has been widespread, rapid and significant and has put downward pressure on our profit margins. We have largely mitigated these impacts through pricing actions across all segments, cost savings measures and hedging programs. We expect inflationary pressures to continue throughout fiscal 2023. These trends could have a materially adverse impact on our businesses in the future if inflation rates significantly exceed our ability to continue to achieve price increases or cost savings or if such price increases impact demand for our products. Currency Certain sales and costs of our foreign operations are denominated in currencies other than our functional currency, primarily Pounds Sterling and Canadian Dollars. Consequently, profits from these operations are impacted by fluctuations in the value of these currencies relative to theU.S. Dollar. We incur gains and losses within our shareholders' equity due to the translation of our financial statements from foreign currencies intoU.S. Dollars. Our results of operations may be impacted by the translation of the results of operations of our foreign operations intoU.S. Dollars. The exchange rates used to translate our foreign sales intoU.S. Dollars negatively affected net sales by less than 1% during the three months endedDecember 31, 2022 and did not have a material impact to our operating profit or net earnings during the three months endedDecember 31, 2022 . Conflict inUkraine The ongoing conflict inUkraine and the subsequent economic sanctions imposed by some countries have had, and may continue to have, an adverse impact on fuel, transportation and commodity costs and may cause supply and demand disruptions in the markets we serve, includingEurope . While we do not have operations inRussia ,Ukraine orBelarus and do not have significant direct exposure to customers or suppliers in those countries, our businesses and operations have been negatively impacted by increased inflation, escalating energy and fuel prices and constrained availability, and thus increasing costs, of certain raw materials and other commodities, and declarations of force majeure by certain suppliers during fiscal 2022. We expect certain energy costs and raw material costs to remain elevated in fiscal 2023 as a result of the ongoing conflict. To date, 27
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the economic sanctions imposed on Russian businesses have not had a direct impact on our procurement of energy and raw materials, however, there can be no assurance that additional sanctions will not be implemented. If our energy and raw materials purchases are directly impacted by sanctions, we may incur additional costs to procure such commodities. Our ability to procure energy and raw materials in the quantities necessary for the normal operations of our business may be limited. In addition, theU.K. government has established an energy price cap, which is currently keeping ourU.K. -based business energy costs below prevailing market rates. The price cap is set to expire inApril 2023 , after which energy costs to operate ourU.K. -based facilities could increase materially.
Avian Influenza
During fiscal 2022 and continuing into fiscal 2023, our Foodservice and
Refrigerated Retail segments were impacted by outbreaks of avian influenza
("AI"). As a result of AI, we have incurred, and anticipate will continue to
incur, increased costs related to production inefficiencies, egg supply
constraints and higher market-based egg prices due to the decreased availability
of eggs on the open market. We have mitigated, and plan to continue to mitigate,
these increased costs through the management of volume needs with customers and
pricing actions to cover the higher cost structure. Through these actions, we
anticipate we will continue to mitigate the impact of AI on the profitability of
our egg business. However, these actions may not be effective if there are
further AI outbreaks, and the impact of such further outbreaks could be material
to our egg business.
RESULTS OF OPERATIONS
Three Months Ended December
31,
favorable/(unfavorable)
$
dollars in millions 2022 2021 Change % Change
Net Sales $ 1,566.3 $ 1,337.5 $ 228.8 17 %
Operating Profit $ 149.9 $ 78.2 $ 71.7 92 %
Interest expense, net 65.9 82.8 16.9 20 %
Gain on extinguishment of debt, net (8.7) - 8.7 n/a
(Income) expense on swaps, net (12.3) 36.9 49.2 133 % Gain on investment in BellRing (5.1) - 5.1 n/a Other income, net (8.3) (2.9) 5.4 186 % Income tax expense (benefit) 24.7 (12.8) (37.5) (293) % Equity method loss, net of tax - 18.6 18.6 100 % Less: Net earnings attributable to noncontrolling interests from continuing operations 1.8 0.3 (1.5) (500) % Net earnings from discontinued operations, net of tax and noncontrolling interest - 23.9 (23.9) (100) % Net Earnings (Loss)$ 91.9 $ (20.8) $ 112.7 542 % Net Sales
Net sales increased
Operating Profit
Operating profit increased$71.7 million , or 92%, during the three months endedDecember 31, 2022 , compared to the prior year period, due to higher segment profit within our Foodservice,Post Consumer Brands and Refrigerated Retail segments and decreased general corporate expenses, partially offset by lower segment profit within our Weetabix segment. For further discussion, refer to "Segment Results" within this section.
Interest Expense, Net
Interest expense, net decreased$16.9 million , or 20%, during the three months endedDecember 31, 2022 , compared to the prior year. The decrease was driven by lower average outstanding principal amounts of debt and a lower weighted-average interest rate compared to the prior year period. Our weighted-average interest rate on our total outstanding debt was 4.8% and 5.1% for the three months endedDecember 31, 2022 and 2021, respectively.
For additional information on our debt, refer to Note 15 within "Notes to Condensed Consolidated Financial Statements."
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Gain on Extinguishment of Debt, Net
During the three months endedDecember 31, 2022 , we recognized a net gain of$8.7 million primarily related to the partial repurchase of our 4.50% senior notes. The net gain included debt discounts received of$10.4 million , partially offset by the write-off of debt issuance costs of$0.6 million related to our 4.50% senior notes and the write-off of debt issuance costs of$1.1 million related to our Third Incremental Term Loan (as defined in "Liquidity and Capital Resources" within this section).
For additional information on our debt, refer to Note 15 within "Notes to Condensed Consolidated Financial Statements."
(Income) Expense on Swaps, Net
During the three months ended
For additional information on our interest rate swap contracts and exposure to risk related to interest rate swaps, refer to Note 13 within "Notes to Condensed Consolidated Financial Statements" and "Quantitative and Qualitative Disclosures About Market Risk," respectively.
Gain on Investment in BellRing
During the three months endedDecember 31, 2022 , we recorded a gain of$5.1 million related to our Investment in BellRing, which was accounted for as an equity security. As ofDecember 31, 2022 , we did not hold an equity interest in BellRing.
For additional information on our Investment in BellRing, refer to Notes 3, 4 and 14 within "Notes to Condensed Consolidated Financial Statements."
Income Tax Expense (Benefit)
The effective income tax rate was 20.9% and 33.2% for the three months endedDecember 31, 2022 and 2021, respectively. In accordance with Accounting Standards Codification Topic 740, "Income Taxes," we record income taxes for interim periods using the estimated annual effective income tax rate for the full fiscal year adjusted for the impact of discrete items occurring during the interim periods.
In the three months ended
In the three months endedDecember 31, 2021 , the effective income tax rate differed from the statutory rate primarily as a result of$4.6 million of discrete tax benefit items related to our equity method loss attributable to8th Avenue Food & Provisions, Inc. ("8th Avenue") and$2.0 million of discrete tax benefit items related to excess tax benefits for share-based payments.
For additional information on our 8th Avenue equity method loss, refer to Note 4 within "Notes to Condensed Consolidated Financial Statements."
Discontinued Operations
The BellRing Spin-off represented a strategic shift that had a major effect on our operations and consolidated financial results. Accordingly, the historical results ofOld BellRing and BellRing Distribution, LLC prior to the BellRing Spin-off were presented as discontinued operations in the Condensed Consolidated Statement of Operations. For additional information on the BellRing Spin-off, refer to Notes 3 and 15 within "Notes to Condensed Consolidated Financial Statements." SEGMENT RESULTS We evaluate each segment's performance based on its segment profit, which for all segments is its earnings/loss before income taxes and equity method earnings/loss before impairment of property, goodwill and other intangible assets, facility closure related costs, restructuring expenses, gain/loss on assets and liabilities held for sale, gain/loss on sale of businesses and facilities, gain on/adjustment to bargain purchase, interest expense and other unallocated corporate income and expenses. 29
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Table of ContentsPost Consumer Brands Three Months Ended December 31, favorable/(unfavorable) $ dollars in millions 2022 2021 Change % Change Net Sales$ 554.7 $ 507.3 $ 47.4 9 % Segment Profit$ 79.3 $ 71.3 $ 8.0 11 % Segment Profit Margin 14 % 14 % Net sales for thePost Consumer Brands segment increased$47.4 million , or 9%, for the three months endedDecember 31, 2022 , when compared to the prior year period. Net sales for the three months endedDecember 31, 2022 were positively impacted by increased average net selling prices as a result of increased pricing taken to mitigate inflation. Volumes declined 1%, primarily driven by volume decreases in Honey Bunches of Oats and Malt-O-Meal bag cereal, partially offset by volume increases in Peter Pan nut butters and private label cereal. Segment profit for the three months endedDecember 31, 2022 increased$8.0 million , or 11%, when compared to the prior year period. Segment profit for the three months endedDecember 31, 2022 was positively impacted by higher net sales, as previously discussed, and lower advertising expenses of$2.9 million . These positive impacts were partially offset by raw material inflation of$33.0 million , higher manufacturing costs of$8.1 million and a shift in product mix towards private label products when compared to the prior year period. Weetabix Three Months Ended December 31, favorable/(unfavorable) $ dollars in millions 2022 2021 Change % Change Net Sales$ 118.1 $ 118.6 $ (0.5) - % Segment Profit$ 21.5 $ 27.2 $ (5.7) (21) % Segment Profit Margin 18 % 23 % Net sales for the Weetabix segment decreased$0.5 million , or less than 1%, for the three months endedDecember 31, 2022 , when compared to the prior year period. Excluding the impact of unfavorable foreign exchange rates and three incremental months of net sales of$6.5 million attributable to our prior year acquisition ofLacka Foods , net sales increased$9.6 million , or 8%, on 1% lower volumes, driven by higher average net selling prices primarily due to list price increases. Segment profit for the three months endedDecember 31, 2022 decreased$5.7 million , or 21%, when compared to the prior year period, including the impact of unfavorable foreign currency exchange rates. Excluding the impact of unfavorable foreign currency exchange rates, segment profit decreased$2.5 million , or 9%. This decrease was driven by raw material inflation of$6.5 million and a shift in product mix towards private label products, partially offset by higher net sales, as previously discussed. Foodservice Three Months Ended December 31, favorable/(unfavorable) $ dollars in millions 2022 2021 Change % Change Net Sales$ 600.5 $ 438.6 $ 161.9 37 % Segment Profit$ 79.1 $ 15.1 $ 64.0 424 % Segment Profit Margin 13 % 3 % Net sales for the Foodservice segment increased$161.9 million , or 37%, for the three months endedDecember 31, 2022 , when compared to the prior year period. The increase in net sales was primarily driven by higher average net selling prices during the current year period and the lapping of lower product demand as a result of the COVID-19 pandemic in the prior year period. Egg product sales were up$146.8 million , or 39%, with volume up 4%, driven by higher average net selling prices resulting from pricing increases taken to mitigate cost inflation as well as the pass-through of increased grain and egg markets. Egg volumes increased due to higher volume in the foodservice channel, partially offset by lower food ingredient volumes. 30
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Sales of side dishes were up
Segment profit for the three months endedDecember 31, 2022 increased$64.0 million , or 424%, when compared to the prior year period, driven by higher net sales, as previously discussed, partially offset by raw material inflation, primarily driven by higher egg raw material costs due to increased grain and egg markets, of$90.9 million . Refrigerated Retail Three Months Ended December 31, favorable/(unfavorable) $ dollars in millions 2022 2021 Change % Change Net Sales$ 293.0 $ 273.4 $ 19.6 7 % Segment Profit$ 21.0 $ 13.6 $ 7.4 54 % Segment Profit Margin 7 % 5 % Net sales for the Refrigerated Retail segment increased$19.6 million , or 7%, for the three months endedDecember 31, 2022 , when compared to the prior year period. Net sales for the three months endedDecember 31, 2022 were impacted by the absence of net sales as a result of the WEF Transaction. Excluding this impact, net sales increased$26.7 million , or 10%, on 1% higher volumes, driven by higher average net selling prices. Average net selling prices increased primarily due to price increases taken to mitigate input cost inflation. Sales of side dishes increased$22.0 million , or 19%, with volume up 12%, driven by the lapping of lower volumes in the prior year period resulting from supply constraints and higher average net selling prices. Sausage sales increased$6.6 million , or 16%, with volume up 10%, driven by volume increases from distribution gains and higher average net selling prices. Egg product sales were up$5.6 million , or 13%, driven by higher average net selling prices. This positive impact was partially offset by volume decreases of 13%, primarily due to AI-related supply constraints and elasticities resulting from inflation-driven price increases. Cheese and other dairy product sales were down$6.5 million , or 11%, with volume down 22%, primarily driven by distribution losses. This negative impact was partially offset by higher average net selling prices. Sales of other products were down$1.0 million . Segment profit for the three months endedDecember 31, 2022 increased$7.4 million , or 54%, when compared to the prior year period, driven by higher net sales, as previously discussed, partially offset by raw material inflation of$12.3 million and higher manufacturing costs of$6.3 million .
Other Items
General Corporate Expenses and Other
Three Months Ended December
31,
favorable/(unfavorable)
$
dollars in millions 2022 2021 Change % Change
General corporate expenses and other $ 42.7 $ 46.1 $ 3.4 7 %
General corporate expenses and other decreased$3.4 million , or 7%, for the three months endedDecember 31, 2022 , when compared to the prior year period. The prior year period included a loss on sale of business of$6.7 million related to the WEF Transaction,$5.4 million of restructuring and facility closure costs incurred by ourPost Consumer Brands segment and a gain on assets held for sale of$9.8 million related to the sale of equipment inKlingerstown, Pennsylvania within our Foodservice segment. Excluding these impacts, general corporate expenses and other decreased$1.1 million . This decrease was primarily driven by increased net gains related to mark-to-market adjustments on equity securities of$6.1 million (compared to losses in the prior year period) partially offset by higher employee-related expenses of$4.3 million . For additional information on loss on sale of business and our assets held for sale, see Note 6 within "Notes to Condensed Consolidated Financial Statements." LIQUIDITY AND CAPITAL RESOURCES We completed the following activities during the three months endedDecember 31, 2022 (for additional information, see Notes 4, 13, 15 and 18 within "Notes to Condensed Consolidated Financial Statements") impacting our liquidity and capital resources: •entered into a Joinder Agreement No. 3 (the "Third Joinder Agreement"), which provided for an incremental term loan (the "Third Incremental Term Loan") of$130.0 million under our second amended and restated credit agreement (the "Credit Agreement"), which we borrowed in full onNovember 18, 2022 ; 31
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•transferred our remaining 4.6 million shares of BellRing Common Stock to the lender under the Third Joinder Agreement to repay$99.9 million in aggregate principal amount of the Third Incremental Term Loan (the "Second Debt-for-Equity Exchange") onNovember 25, 2022 ;
•repaid the remaining principal amount of
•$71.0 million principal value of our 4.50% senior notes repurchased at a
discount of
•$16.3 million paid related to the termination of certain of our rate-lock interest rate swap contracts, which contained non-cash, off-market financing elements; and
•0.3 million shares of our common stock repurchased at an average share price of
The following table presents select cash flow data, which is discussed below.
Three Months Ended
December 31,
dollars in millions 2022 2021
Cash provided by (used in):
Operating activities - continuing operations $ 98.3 $ 115.2
Investing activities - continuing operations (53.0) 3.8
Financing activities - continuing operations (28.3) 339.9
Net cash used in discontinued operations - (122.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
2.8 (0.8)
Net increase in cash, cash equivalents and restricted cash
$ 335.9 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 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. We believe that we have sufficient liquidity and cash on hand to satisfy our cash needs. 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 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 15 within "Notes to Condensed Consolidated Financial Statements." Short-term financing needs primarily consist of working capital requirements, interest payments on our long-term debt and required repurchases of long-term debt in connection with our intent to structure the BellRing Distribution as a tax-free distribution to our shareholders. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and 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 seek to repurchase shares of our 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 subsidiaries (other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries we designate as unrestricted subsidiaries, which include 8th Avenue and its subsidiaries, Post Holdings Partnering Corporation, a special purpose acquisition company ("PHPC"), andPHPC Sponsor, LLC , our wholly-owned subsidiary ("PHPC Sponsor")) and 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. 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, PHPC and PHPC Sponsor. These guarantees are subject to release in certain circumstances.
Our 2.50% convertible senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing domestic subsidiaries that have guaranteed our other senior notes, which excludes certain
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immaterial subsidiaries, certain excluded subsidiaries and subsidiaries we designate as unrestricted subsidiaries under our senior note indentures, which include 8th Avenue and its subsidiaries, PHPC and PHPC Sponsor. If, after the date our 2.50% convertible senior notes were issued, any domestic wholly-owned subsidiary guarantees any of our existing senior notes or any other debt securities we may issue in the form of senior unsecured notes or convertible or exchangeable notes, then we must cause such subsidiary to become a guarantor under the 2.50% convertible senior notes as well.
8th Avenue and its subsidiaries, PHPC and PHPC Sponsor are not obligors or guarantors under our Credit Agreement or senior notes.
Operating Activities - Continuing Operations
Cash provided by operating activities for the three months endedDecember 31, 2022 decreased$16.9 million compared to the prior year period, primarily driven by higher tax payments (net of refunds) of$24.0 million and higher interest payments of$10.8 million , partially offset by higher net proceeds on our interest rate swaps of$7.9 million (compared to net payments in the prior year period).
Investing Activities - Continuing Operations
Three months ended
Cash used in investing activities for the three months endedDecember 31, 2022 was$53.0 million , primarily driven by capital expenditures of$52.3 million . Capital expenditures in the period primarily related to ongoing projects in our Foodservice andPost Consumer Brands segments.
Three months ended
Cash provided by investing activities for the three months endedDecember 31, 2021 was$3.8 million , primarily driven by proceeds from the sale of a business and property and assets held for sale of$50.1 million and$14.4 million , respectively, partially offset by capital expenditures of$57.3 million and investments in partnerships of$3.3 million . Capital expenditures in the period primarily related to ongoing projects in ourPost Consumer Brands , Foodservice and Refrigerated Retail segments.
Financing Activities - Continuing Operations
Three months ended
Cash used in financing activities for the three months endedDecember 31, 2022 was$28.3 million . We received proceeds of$130.0 million from our Third Incremental Term Loan. The Third Incremental Term Loan was partially repaid through the Second Debt-for-Equity Exchange and the remaining principal balance of$30.1 million was repaid using cash on hand. In addition, we repaid$71.0 million principal value of our 4.50% senior notes, net of a$10.4 million discount. We paid$1.1 million in debt issuance costs in connection with our Third Incremental Term Loan. We paid$22.0 million , including broker's commissions, for the repurchase of shares of our common stock and$16.3 million related to the termination of certain of our rate-lock interest rate swap contracts, which contained non-cash, off-market financing elements.
Three months ended
Cash provided by financing activities for the three months endedDecember 31, 2021 was$339.9 million . We received proceeds of$500.0 million and a premium of$17.5 million from the additional issuance of our 5.50% senior notes. We paid$3.6 million in debt issuance costs and deferred financing fees in connection with the issuance of our 5.50% senior notes issuance and an amendment to our Credit Agreement. We paid$159.0 million , including broker's commissions, for the repurchase of shares of our common stock, which included repurchases of shares of our common stock that were accrued atSeptember 30, 2021 and did not settle until fiscal 2022. Debt Covenants 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 4.25:1.00, 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 ofDecember 31, 2022 , we were not required to comply with such financial covenant as the aggregate amount of the aforementioned obligations did not exceed 30% of our 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. 33
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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, 2022 , as filed with
the Securities and Exchange Commission (the "SEC") on November 17, 2022 . There
have been no significant changes to our critical accounting policies and
estimates since September 30, 2022 .
RECENTLY ISSUED ACCOUNTING STANDARDS
We considered all new accounting pronouncements and have concluded there are no
new pronouncements that had or will have a material impact on our results of
operations, comprehensive income, financial condition, cash flows, shareholders'
equity or related disclosures based on current information.
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. 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 the
forward-looking statements in this report. 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:
•significant volatility in the cost or availability of inputs to our businesses (including freight, raw materials, energy and other supplies);
•our ability to increase our prices to offset cost increases and the potential for such price increases to impact demand for our products;
•disruptions or inefficiencies in our supply chain, including as a result of inflation, labor shortages, insufficient product or raw material availability, limited freight carrier availability, our reliance on third parties for the supply of materials for or the manufacture of many of our products, public health crises (including the COVID-19 pandemic), climatic events, agricultural diseases and pests, fires and evacuations related thereto and other events beyond our control;
•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 businesses) and a downgrade or potential downgrade in our credit ratings;
•our ability to hire and retain talented personnel, increases in labor-related costs, the ability of our employees to safely perform their jobs, including the potential for physical injuries or illness, employee absenteeism, labor strikes, work stoppages and unionization efforts; •changes in economic conditions, the occurrence of a recession, disruptions in theU.S. and global capital and credit markets, changes in interest rates and fluctuations in foreign currency exchange rates;
•our ability to continue to compete in our product categories and our ability to retain our market position and favorable perceptions of our brands;
•the impacts of public health crises (including the COVID-19 pandemic), such as negative impacts on demand for our foodservice and on-the-go products, our ability to manufacture and deliver our products, workforce availability, the health and safety of our employees, operating costs, the global economy and capital markets and our operations generally;
•our ability to anticipate and respond to changes in consumer and customer preferences and behaviors and introduce new products;
•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;
•risks related to the intended tax treatment of the transactions we undertook related to divestitures of our interest in BellRing;
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•the possibility that PHPC, a publicly-traded special purpose acquisition company in which we indirectly own an interest (through PHPC Sponsor, our wholly-owned subsidiary), 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; •conflicting interests or the appearance of conflicting interests resulting from several of our directors and officers also serving as directors or officers of one or more other companies;
•our ability to successfully implement business strategies to reduce costs;
•impairment in the carrying value of goodwill or other intangibles;
•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 businesses, including current and future laws and regulations regarding tax matters, food safety, advertising and labeling, animal feeding and housing operations, data privacy and climate change and other environmental matters;
•the loss of, a significant reduction of purchases by or the bankruptcy of a major customer;
•costs, business disruptions and reputational damage associated with information technology failures, cybersecurity incidents or information security breaches;
•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;
•costs associated with the obligations ofBob Evans Farms, Inc. ("Bob Evans") in connection with the sale and separation of its restaurants business inApril 2017 , 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' private brand products to compete with nationally branded products;
•the impact of national or international disputes, political instability, terrorism, war or armed hostilities, such as the ongoing conflict inUkraine , including on the global economy, capital markets, our supply chain, commodity, energy and freight availability and costs and information security;
•risks associated with our international businesses;
•changes in critical accounting estimates;
•losses or increased funding and expenses related to our qualified pension or other postretirement plans;
•significant differences in our actual operating results from any of our guidance regarding our future performance;
•our 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" in Item 1A of Part
II of this report and in our Annual Report on Form 10-K for the fiscal year
ended
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.
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