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 consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein, our audited financial statements and notes thereto found in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 and the "Cautionary Statement on Forward-Looking Statements" section included below. The terms "our," "we," "us," "Company" and "Post" as used herein refer toPost Holdings, Inc. and its consolidated subsidiaries. OVERVIEW We are a consumer packaged goods holding company operating in five reportable segments:Post Consumer Brands , Weetabix, Foodservice, Refrigerated Retail and BellRing Brands. Our products are sold through a variety of channels, including grocery, club and drug stores, mass merchandisers, foodservice, food ingredient and eCommerce. AtJune 30, 2021 , our reportable segments were as follows: •Post Consumer Brands: North American ready-to-eat ("RTE") cereal and Peter Pan nut butters; •Weetabix: primarilyUnited Kingdom (the "U.K.") RTE cereal and muesli; •Foodservice: primarily egg and potato products; •Refrigerated Retail: primarily side dish, egg, cheese and sausage products; and •BellRing Brands: ready-to-drink ("RTD") protein shakes, other RTD beverages, powders and nutrition bars. Transactions Fiscal 2021 OnMay 28, 2021 , we and Post Holdings Partnering Corporation, a newly formed special purpose acquisition company incorporated as aDelaware corporation ("PHPC"), consummated the initial public offering of 30.0 million units of PHPC (the "PHPC Units"). OnJune 3, 2021 , PHPC issued an additional 4.5 million PHPC Units pursuant to the underwriters' exercise in full of their over-allotment option. The term "PHPC IPO" as used herein generally refers to the consummation of the initial public offering onMay 28, 2021 and the underwriters' exercise in full of their over-allotment option onJune 3, 2021 . Each PHPC Unit consists of one share of Series A common stock of PHPC, par value$0.0001 per share ("PHPC Series A Common Stock"), and one-third of one redeemable warrant of PHPC, each whole warrant entitling the holder thereof to purchase one share of PHPC Series A Common Stock at an exercise price of$11.50 per share (the "PHPC Warrants"). The PHPC Units were sold at a price of$10.00 per PHPC Unit, generating gross proceeds to PHPC of$345.0 .PHPC Sponsor, LLC , our wholly owned subsidiary ("PHPC Sponsor"), purchased 4.0 million of the 30.0 million PHPC Units in the initial public offering onMay 28, 2021 for$40.0 . The PHPC Units began trading on theNew York Stock Exchange (the "NYSE") under the ticker symbol "PSPC.U" onMay 26, 2021 . As ofJuly 16, 2021 , holders of the PHPC Units may elect to separately trade their shares of PHPC Series A Common Stock and PHPC Warrants, with the shares of PHPC Series A Common Stock and the PHPC Warrants listed on the NYSE under the symbols "PSPC" and "PSPC WS", respectively. Under the terms of the PHPC IPO, PHPC is required to consummate a partnering transaction within 24 months (or 27 months under certain circumstances) of the completion of the PHPC IPO. Substantially concurrently with the closing of the initial public offering onMay 28, 2021 , PHPC completed the private sale of 1.0 million units of PHPC (the "PHPC Private Placement Units"), at a purchase price of$10.00 per PHPC Private Placement Unit, to PHPC Sponsor, and in connection with the underwriters' exercise in full of their option to purchase additional PHPC Units, PHPC Sponsor purchased an additional 0.1 million PHPC Private Placement Units, generating proceeds to PHPC of$10.9 million (the "PHPC Private Placement"). The PHPC Private Placement Units sold in the PHPC Private Placement are identical to the PHPC Units sold in the PHPC IPO, except that, with respect to the warrants underlying the PHPC Private Placement Units (the "PHPC Private Placement Warrants") that are held by PHPC Sponsor or its permitted transferees, such PHPC Private Placement Warrants (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption (except in certain circumstances when the PHPC Warrants are called for redemption and a certain price per share of PHPC Series A Common Stock threshold is met) and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of PHPC's partnering transaction. If the PHPC Private Placement Warrants are held by holders other than PHPC Sponsor or its permitted transferees, the PHPC Private Placement Warrants will be redeemable by PHPC in all redemption scenarios and exercisable by holders on the same basis as the PHPC Warrants. In addition, we, through PHPC Sponsor's ownership of 8.6 million shares of Series F common stock of PHPC, par value$0.0001 per share, have certain governance rights in PHPC. 32
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In connection with the completion of the initial public offering onMay 28, 2021 , PHPC also entered into a forward purchase agreement with PHPC Sponsor (the "Forward Purchase Agreement"), providing for the purchase by PHPC Sponsor, at the election of PHPC, of up to 10.0 million units of PHPC (the "PHPC Forward Purchase Units"), subject to the terms and conditions of the Forward Purchase Agreement, with each PHPC Forward Purchase Unit consisting of one share of PHPC's Series B common stock, par value of$0.0001 per share, and one-third of one warrant to purchase one share of PHPC Series A Common Stock, for a purchase price of$10.00 per PHPC Forward Purchase Unit, in an aggregate amount of up to$100.0 million in a private placement to occur concurrently with the closing of PHPC's partnering transaction. In determining the accounting treatment of our equity interest in PHPC, management concluded that PHPC is a variable interest entity ("VIE") as defined by Accounting Standards Codification ("ASC") Topic 810, "Consolidation." A VIE is an entity in which equity investors at risk lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, the party who has both the power to direct the activities of a VIE that most significantly impact the entity's economic performance, as well as the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity. PHPC Sponsor is the primary beneficiary of PHPC as it has, through its equity interest, the right to receive benefits or the obligation to absorb losses from PHPC, as well as the power to direct a majority of the activities that significantly impact PHPC's economic performance, including target identification. As such, PHPC is fully consolidated into our financial statements. As ofJune 30, 2021 , we beneficially owned 31.0% of the equity of PHPC and the net income and net assets of PHPC were consolidated within our financial statements. The remaining 69.0% of the consolidated net income and net assets of PHPC, representing the percentage of economic interest in PHPC held by the public stockholders of PHPC through their ownership of PHPC equity, were allocated to redeemable noncontrolling interest ("NCI"). All transactions between PHPC and PHPC Sponsor, as well as related financial statement impacts, eliminate in consolidation. Fiscal 2020 OnOctober 21, 2019 , BellRing Brands, Inc. ("BellRing"), our subsidiary, closed its initial public offering (the "BellRing IPO") of 39.4 million shares of its Class A common stock,$0.01 par value per share (the "BellRing Class A Common Stock"). BellRing received net proceeds from the BellRing IPO of$524.4 million , after deducting underwriting discounts and commissions. As a result of the BellRing IPO and certain other transactions completed in connection with the BellRing IPO, BellRing became a publicly-traded company with the BellRing Class A Common Stock being traded on the NYSE under the ticker symbol "BRBR" and the holding company ofBellRing Brands, LLC , aDelaware limited liability company ("BellRing LLC "), owning 28.8% ofBellRing LLC's non-voting membership units (the "BellRing LLC units"), with us owning 71.2% of theBellRing LLC units and one share of BellRing's Class B common stock,$0.01 par value per share (the "BellRing Class B Common Stock" and, collectively with the BellRing Class A Common Stock, the "BellRing Common Stock"). The BellRing Class B Common Stock has voting rights but no rights to dividends or other economic rights. For so long as we or our affiliates (other than BellRing and its subsidiaries) directly own more than 50% of theBellRing LLC units, the BellRing Class B Common Stock represents 67% of the combined voting power of the BellRing Common Stock.BellRing LLC is the holding company for our historical active nutrition business. The term "BellRing" as used herein generally refers to BellRing Brands, Inc.; however, in discussions related to debt facilities, the term "BellRing" refers toBellRing Brands, LLC . BellRing is reported herein as the BellRing Brands segment. As ofJune 30, 2021 andSeptember 30, 2020 , we and our affiliates (other than BellRing and its subsidiaries) owned 71.2% of theBellRing LLC units and the net income and net assets of BellRing and its subsidiaries were consolidated within our financial statements, and the remaining 28.8% of the consolidated net income and net assets of BellRing and its subsidiaries, representing the percentage of economic interest inBellRing LLC held by BellRing (and therefore indirectly held by the public stockholders of BellRing through their ownership of the BellRing Class A Common Stock), were allocated to NCI. Acquisitions We completed the following acquisitions during fiscal 2021 and 2020: Fiscal 2021 •Private label RTE cereal business of TreeHouse Foods, Inc (the "PL RTE Cereal Business"), acquired onJune 1, 2021 and reported in ourPost Consumer Brands segment; •Egg Beaters brand ("Egg Beaters"), acquired onMay 27, 2021 and reported in our Refrigerated Retail segment; •Almark Foods business and related assets ("Almark"), acquired onFebruary 1, 2021 and reported in our Foodservice and Refrigerated Retail segments; and •Peter Pan nut butter brand ("Peter Pan"), acquired onJanuary 25, 2021 and reported in ourPost Consumer Brands segment. Fiscal 2020 •Henningsen Foods, Inc. ("Henningsen"), acquired onJuly 1, 2020 and reported in our Foodservice segment. 33
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We completed the acquisitions of Egg Beaters and Peter Pan onMay 27, 2021 andJanuary 25, 2021 , respectively. The quarter close date for both Egg Beaters and Peter Pan wasJune 27, 2021 . As the amounts associated with the additional three days are immaterial, results of these entities have not been adjusted to conform with our fiscal calendar. Due to the level of integration within our existing Foodservice and Refrigerated Retail businesses, certain discrete financial data for Almark is not available for the Foodservice and Refrigerated Retail segments for the three and nine months endedJune 30, 2021 . Due to the level of integration within our existing Foodservice businesses, certain discrete financial data for Henningsen is not available for the three and nine months endedJune 30, 2021 . COVID-19 The COVID-19 pandemic has caused and continues to cause global economic disruption and uncertainty, including in our business. We continue to closely monitor the impact of the COVID-19 pandemic and developments related thereto and are taking or have taken necessary actions to ensure our ability to safeguard the health of our employees, including their economic health, maintain the continuity of our supply chain to serve customers and consumers and preserve financial liquidity to navigate the uncertainty caused by the pandemic. Examples of actions we have taken in response to the pandemic include: •reinforcing manufacturing facilities with adequate supplies, staffing and support; •enhancing facility safety measures and working closely with public health officials to follow additional health and safety guidelines; •in fiscal 2020, drawing$500.0 million of our$750.0 million revolving credit facility and$65.0 million of BellRing's revolving credit facility to further enhance liquidity inMarch 2020 . Borrowings under both credit facilities were repaid prior to the end of fiscal 2020; •in fiscal 2020, temporarily suspending our share repurchase program, which we resumed inMay 2020 ; and •in fiscal 2020 and in the first half of fiscal 2021, actively managing our foodservice egg supply, including taking measures to reduce internal production, delivering contract suspension notices invoking force majeure clauses with respect to certain of our suppliers in the second quarter of fiscal 2020 (these contract suspensions were provisionally lifted onJuly 1, 2020 ) and repurposing product into our retail channel. Our products sold through retail channels generally experienced an uplift in sales starting inMarch 2020 and continuing through the first half of fiscal 2021 driven by increased at-home consumption in reaction to the COVID-19 pandemic. In addition, most of our retail categories exhibited a mix shift to premium products. In the third quarter of fiscal 2021, most of our retail channel product categories trended toward growth rates in line with their pre-pandemic levels. At the onset of the COVID-19 pandemic, our foodservice business was significantly impacted by lower away-from-home demand resulting from the impact of the COVID-19 pandemic on various channels, including full service restaurants, quick service restaurants, education and travel and lodging. Since then, the recovery of our foodservice volumes has been closely tracking with changes in the degree of restrictions on mobility and gathering. Volumes have nearly fully recovered to pre-pandemic levels in certain channels and product categories, and volumes in other channels impacted by the COVID-19 pandemic continue to show meaningful improvement sequentially and when compared to the prior year period. However, our overall foodservice business volumes remain below pre-pandemic levels. Supply chain performance for our cereal businesses has stabilized, following disruptions during fiscal 2020 and the first half of fiscal 2021 that resulted from the impact of the COVID-19 pandemic. As the overall economy continues to recover from the impact of the COVID-19 pandemic, labor and freight shortages and other disruptions are pressuring our foodservice and refrigerated retail supply chain. As a result, service levels and fill rates have declined, costs have increased and certain products have been placed on allocation. We anticipate our foodservice and refrigerated retail supply chain performance will be dependent upon our ability to adequately hire, train and retain manufacturing staff. Volume recovery in our foodservice business is now two-fold dependent not only on changes in the degree of restrictions on mobility and gathering, but also on stabilization of supply chain performance. Volume growth in our refrigerated retail business, most notably for side dish products, is expected to be constrained until supply chain performance has stabilized. BellRing's primary categories returned to growth rates in line with their pre-pandemic levels in the fourth quarter of fiscal 2020 and have remained strong in subsequent periods. For additional discussion, refer to "Liquidity and Capital Resources" and "Cautionary Statement on Forward-Looking Statements" within this section. 34
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RESULTS OF OPERATIONS
Three Months Ended June 30 , Nine Months Ended June 30 ,
favorable/(unfavorable) favorable/(unfavorable)
dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net Sales $ 1,589.8 $ 1,336.4 $ 253.4 19 % $ 4,531.1 $ 4,287.4 $ 243.7 6 %
Operating Profit $ 206.5 $ 172.1 $ 34.4 20 % $ 517.9 $ 521.6 $ (3.7) (1) %
Interest expense, net 91.9 96.4 4.5 5 % 283.3 293.3 10.0 3 %
Loss on extinguishment and refinancing of
debt, net 0.1 - (0.1) n/a 94.8 72.9 (21.9) (30) %
Expense (income) on swaps, net 121.6 29.2 (92.4) (316) % (105.6) 192.4 298.0 155 %
Other income, net (2.9) (3.1) (0.2) (6) % (19.8) (9.6) 10.2 106 %
Income tax expense (benefit) 28.5 5.0 (23.5) (470) % 81.2 (11.7) (92.9) (794) %
Equity method loss, net of tax 11.6 4.2 (7.4) (176) % 26.5 22.6 (3.9) (17) %
Less: Net earnings attributable to
noncontrolling interests 10.0 4.4 (5.6) (127) % 20.7 17.9 (2.8) (16) %
Net (Loss) Earnings $ (54.3) $ 36.0 $ (90.3) (251) % $ 136.8 $ (56.2) $ 193.0 343 %
Net Sales
Net sales increased $253.4 million , or 19%, during the three months ended
June 30, 2021 , compared to the corresponding period in the prior year, as a
result of growth in our Foodservice, BellRing Brands and Weetabix segments, as
well as incremental contributions from our current year and prior year
acquisitions. These positive impacts were partially offset by declines in our
Post Consumer Brands and Refrigerated Retail segments.
Net sales increased $243.7 million , or 6%, during the nine months ended June 30,
2021 , compared to the corresponding period in the prior year, as a result of
growth in our BellRing Brands, Foodservice and Weetabix segments, as well as
incremental contributions from our current year and prior year acquisitions.
These positive impacts were partially offset by declines in our Post Consumer
Brands and Refrigerated Retail segments.
For further discussion, refer to "Segment Results" within this section.
Operating Profit
Operating profit increased $34.4 million , or 20%, during the three months ended
June 30, 2021 , compared to the corresponding period in the prior year, driven by
higher segment profit within our Foodservice and BellRing Brands segments and
decreased general corporate expenses and other, partially offset by lower
segment profit in our Post Consumer Brands , Refrigerated Retail and Weetabix
segments.
Operating profit decreased $3.7 million , or 1%, during the nine months ended
June 30, 2021 , compared to the corresponding period in the prior year, due to
lower segment profit within our Post Consumer Brands , Refrigerated Retail and
Weetabix segments, partially offset by decreased general corporate expenses and
other and higher segment profit within our Foodservice segment.
For further discussion, refer to "Segment Results" within this section.
Interest Expense, Net
Interest expense, net decreased $4.5 million , or 5%, during the three months
ended June 30, 2021 , compared to the corresponding period in the prior year,
driven by a lower weighted-average interest rate when compared to the prior year
period and decreased losses of $1.4 million on interest rate swap contracts. Our
weighted-average interest rate on our total outstanding debt decreased to 5.0%
for the three months ended June 30, 2021 from 5.2% for the three months ended
June 30, 2020 , driven by refinancing debt at lower interest rates.
Interest expense, net decreased $10.0 million , or 3%, during the nine months
ended June 30, 2021 , compared to the corresponding period in the prior year,
driven by decreased losses of $7.4 million on interest rate swap contracts, a
lower weighted-average interest rate when compared to the prior year period,
increased amortization of debt premium of $1.5 million and decreased
amortization of debt issuance costs, deferred financing fees and debt discount
of $1.3 million . These positive
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impacts were partially offset by lower interest income of$5.6 million on our cash balances. Our weighted-average interest rate on our total outstanding debt decreased to 5.2% for the nine months endedJune 30, 2021 from 5.4% for the nine months endedJune 30, 2020 , driven by refinancing debt at lower interest rates. For additional information on our interest rate swap contracts, refer to Note 13 within "Notes to Condensed Consolidated Financial Statements." For additional information on our debt, refer to Note 17 within "Notes to Condensed Consolidated Financial Statements" and "Quantitative and Qualitative Disclosures About Market Risk" within Item 3. Loss on Extinguishment and Refinancing of Debt, Net Fiscal 2021 During the nine months endedJune 30, 2021 , we recognized a loss of$94.8 million related to the repayment of the outstanding principal balance of our 5.00% senior notes, as well as BellRing's amendment of its credit agreement (as amended, the "BellRing Credit Agreement"). The loss included debt premiums and refinancing fees paid of$75.9 million and write-offs of debt issuance costs of$18.9 million . Fiscal 2020 During the nine months endedJune 30, 2020 , we recognized a net loss of$72.9 million related to the repayments of the outstanding principal balances of our 2020 bridge loan (the "2020 Bridge Loan") by BellRing, our term loan, our 5.50% senior notes maturing inMarch 2025 and our 8.00% senior notes, as well as the amendment and restatement of our credit agreement. The loss included debt premiums paid of$49.8 million and write-offs of debt issuance costs and deferred financing fees of$23.1 million . For additional information on our debt, refer to Note 17 within "Notes to Condensed Consolidated Financial Statements." Expense (Income) on Swaps, Net Fiscal 2021 During the three and nine months endedJune 30, 2021 , we recognized net losses (gains) of$121.6 million and$(105.6) million , respectively, related to mark-to-market adjustments on our interest rate swaps that were not designated as hedging instruments. Fiscal 2020 During the three and nine months endedJune 30, 2020 , we recognized net losses of$29.2 million and$192.4 million , respectively, related to mark-to-market adjustments on our interest rate swaps that were not designated as hedging instruments. For additional information on our interest rate swap contracts, refer to Note 13 within "Notes to Condensed Consolidated Financial Statements" and "Quantitative and Qualitative Disclosures About Market Risk" within Item 3. Income Tax Expense (Benefit) Our effective income tax rate was (678.6)% and 30.6% for the three and nine months endedJune 30, 2021 , respectively. Our effective income tax rates differed significantly from the statutory rates in both current year periods, primarily due to enacted tax law changes in theU.K. , which included a provision to increase theU.K.'s corporate income tax rate from 19% to 25%, effectiveApril 1, 2023 . During the three and nine months endedJune 30, 2021 , we remeasured our existing deferred tax assets and liabilities considering the 25%U.K. corporate income tax rate for future periods and recorded tax expense of$39.3 million . Other changes made to theU.K.'s tax law did not have a material impact on our financial statements during the three or nine months endedJune 30, 2021 . Our effective income tax rate was 10.1% and 42.7% for the three and nine months endedJune 30, 2020 , respectively. Our effective income tax rates differed significantly from the statutory rates in both prior year periods, primarily due to a rate differential on foreign income and net discrete tax benefits of$3.9 million and$8.7 million in the three and nine months endedJune 30, 2020 , respectively, which largely related to our equity method investment in8th Avenue Food & Provisions, Inc. ("8th Avenue"). SEGMENT RESULTS We evaluate each segment's performance based on its segment profit, which for all segments excluding BellRing Brands is its earnings/loss before income taxes and equity method earnings/loss before impairment of property, goodwill and other intangible assets, facility closure related costs, restructuring expenses, gain/loss on assets and liabilities held for sale, gain/loss on sale of businesses and facilities, gain on/adjustment to bargain purchase, interest expense and other unallocated corporate income and expenses. Segment profit for BellRing Brands, as it is a publicly-traded company, is its operating profit. 36
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Three Months Ended June 30 , Nine Months Ended June 30 ,
favorable/(unfavorable) favorable/(unfavorable)
dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net Sales $ 468.7 $ 528.1 $ (59.4) (11) % $ 1,393.6 $ 1,477.2 $ (83.6) (6) %
Segment Profit $ 87.8 $ 127.6 $ (39.8) (31) % $ 250.1 $ 300.6 $ (50.5) (17) %Segment Profit Margin 19 % 24 % 18 % 20 % Net sales for thePost Consumer Brands segment decreased$59.4 million , or 11%, for the three months endedJune 30, 2021 , when compared to the prior year period. Net sales for the three months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$38.4 million attributable to our current year acquisitions of Peter Pan and the PL RTE Cereal Business. Excluding this impact, net sales decreased$97.8 million , or 19%, driven by 19% lower volume. This volume decrease was primarily due to the lapping of increased purchases in the prior year period driven by increased at-home consumption in reaction to the COVID-19 pandemic, continuing broader softness across value and private label cereal products and the decision to exit certain low-margin private label business. Volume declines in Malt-O-Meal bag cereal, private label cereal, Honey Bunches of Oats and adult classic and licensed brands were partially offset by increased Pebbles and Grape Nuts volumes. Net sales for thePost Consumer Brands segment decreased$83.6 million , or 6%, for the nine months endedJune 30, 2021 , when compared to the prior year period. Net sales for the nine months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$55.8 million attributable to our current year acquisitions of Peter Pan and the PL RTE Cereal Business. Excluding this impact, net sales decreased$139.4 million , or 9%, primarily due to 12% lower volume, partially offset by higher average net selling prices. This decrease in volume was primarily due to the lapping of increased purchases in the prior year period driven by consumer pantry loading and increased at-home consumption in reaction to the COVID-19 pandemic, continuing broader softness across value and private label cereal products and the decision to exit certain low-margin private label business. Volume declines in private label cereal, Malt-O-Meal bag cereal, Honey Bunches of Oats and licensed and adult classic brands were partially offset by increased Pebbles volume and incremental volumes from new product innovations. Average net selling prices increased as a result of a favorable product mix, partially offset by increased trade spending. Additionally, net sales for the nine months endedJune 30, 2021 were negatively impacted by an estimated$9.8 million in lost revenue, resulting from COVID-19 related production shutdowns and employee absences at ourBattle Creek, Michigan RTE cereal facility. Segment profit for the three months endedJune 30, 2021 decreased$39.8 million , or 31%, when compared to the prior year period, primarily driven by lower net sales, as previously discussed, higher manufacturing costs of$12.5 million (primarily due to unfavorable fixed cost absorption, partially offset by manufacturing cost efficiencies) and increased freight costs of$4.7 million (excluding volume-driven impacts). These negative impacts were partially offset by lower employee-related expenses and decreased advertising and consumer spending of$1.6 million . Segment profit for the nine months endedJune 30, 2021 decreased$50.5 million , or 17%, when compared to the prior year period. Segment profit for the nine months endedJune 30, 2021 was positively impacted by the inclusion of incremental segment profit of$3.6 million attributable to our current year acquisitions of Peter Pan and the PL RTE Cereal Business. Excluding this impact, segment profit decreased$54.1 million , or 18%, primarily driven by lower net sales, as previously discussed, a provision for legal settlement of$15.0 million , higher manufacturing costs of$23.0 million (primarily due to unfavorable fixed cost absorption and increased costs related to the COVID-19 pandemic, partially offset by manufacturing cost efficiencies), increased freight costs of$16.3 million (excluding volume-driven impacts) and increased raw material costs of$2.4 million . These negative impacts were partially offset by lower advertising and consumer spending of$4.0 million , gains on sale of property of$3.9 million , lower employee-related expenses, favorable foreign exchange rates when compared to the prior year period and decreased warehousing expenses of$1.1 million . Additionally, segment profit for the nine months endedJune 30, 2021 was negatively impacted by lost revenue at ourBattle Creek, Michigan RTE cereal facility, as previously discussed, resulting in an estimated$5.6 million in lost profit contribution. 37
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Weetabix
Three Months Ended June 30 , Nine Months Ended June 30 ,
favorable/(unfavorable) favorable/(unfavorable)
dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net Sales $ 123.4 $ 111.8 $ 11.6 10 % $ 350.3 $ 326.7 $ 23.6 7 %
Segment Profit $ 28.6 $ 32.6 $ (4.0) (12) % $ 82.6 $ 84.3 $ (1.7) (2) %Segment Profit Margin 23 % 29 % 24 % 26 % Net sales for the Weetabix segment increased$11.6 million , or 10%, for the three months endedJune 30, 2021 , when compared to the prior year period. Excluding the impact of favorable foreign exchange rates, net sales decreased approximately 2%, driven by 2% lower volume. The decrease in volume was driven by declines in RTE cereal products as a result of the lapping of increased purchases in the prior year period driven by increased at-home consumption in reaction to the COVID-19 pandemic, as well as lapping the benefit in the prior year of our participation in a government-backed parcel initiative. These negative impacts were partially offset by private label cereal distribution gains, new product introductions and volume increases in Weetabix On the Go drinks. Net sales for the Weetabix segment increased$23.6 million , or 7%, for the nine months endedJune 30, 2021 , when compared to the prior year period, primarily driven by favorable foreign exchange rates. Excluding this impact, net sales decreased$1.0 million , on 1% lower volume. This decrease in volume was driven by declines in RTE cereal products as a result of the lapping of increased purchases in the prior year period driven by consumer pantry loading and increased at-home consumption in reaction to the COVID-19 pandemic and declines in on-the-go consumption of cereal bars and Weetabix On the Go drinks, partially offset by private label distribution gains and new product introductions. Average net selling prices increased primarily due to targeted price increases that went into effect inMarch 2020 , partially offset by an unfavorable product mix. Segment profit for the three months endedJune 30, 2021 decreased$4.0 million , or 12%, when compared to the prior year period. This decrease was driven by lower net sales when excluding the impact of favorable foreign exchange rates, as previously discussed, unfavorable manufacturing and raw material costs of$1.4 million and higher advertising and consumer spending of$1.3 million , partially offset by favorable foreign exchange rates and lower employee-related expenses. Segment profit for the nine months endedJune 30, 2021 decreased$1.7 million , or 2%, when compared to the prior year period. This decrease was driven by lower net sales when excluding the impact of favorable foreign exchange rates, as previously discussed, unfavorable manufacturing and raw material costs of$2.3 million , higher advertising and consumer spending of$1.0 million and increased warehousing costs of$1.0 million , partially offset by favorable foreign exchange rates and lower employee-related expenses. Foodservice Three Months EndedJune 30 , Nine Months EndedJune 30 , favorable/(unfavorable) favorable/(unfavorable) dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % ChangeNet Sales $ 435.1 $ 242.3 $ 192.8 80 %$ 1,158.8 $ 1,041.3 $ 117.5 11 % Segment Profit (Loss)$ 27.9 $ (40.3) $ 68.2 169 %$ 47.5 $ 30.5 $ 17.0 56 % Segment Profit (Loss) Margin 6 % (17) % 4 % 3 % Net sales for the Foodservice segment increased$192.8 million , or 80%, for the three months endedJune 30, 2021 , when compared to the prior year period. Net sales for the three months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$18.3 million attributable to our current year acquisition of Almark. Excluding this impact, net sales increased$174.5 million , or 72%, on 53% higher volume. Volume growth was negatively impacted in the current year period by reduced service levels (driven by labor shortages). Egg product sales were up$140.2 million , or 65%, with volume up 43%, driven by the lapping of lower foodservice product demand in the prior year period as a result of the COVID-19 pandemic, higher average net selling prices resulting from the pass-through of higher input costs due to increased grain markets and incremental volumes in the food ingredient channel attributable to our prior year acquisition of Henningsen. Sales of side dishes were up$22.6 million , or 104%, with volume up 99%, driven by the lapping of lower product demand in the prior year period as a result of the COVID-19 pandemic, as well as distribution gains. Sausage sales were up$3.9 million , or 160%, driven by 126% higher volume and higher average net selling prices resulting from the pass-through of higher input costs due to increased sow costs. Other product sales were up$7.8 million , or 206%, with volume up 99%, primarily due to the inclusion of 38
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incremental results attributable to our prior year acquisition of Henningsen and higher average net selling prices resulting from the decision to exit certain low-margin business. Net sales for the Foodservice segment increased$117.5 million , or 11%, for the nine months endedJune 30, 2021 , when compared to the prior year period. Net sales for the nine months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$32.7 million attributable to our current year acquisition of Almark. Excluding this impact, net sales increased$84.8 million , or 8%, on 1% lower volume. Volume growth was negatively impacted in the current year period by reduced service levels (driven by labor shortages). Egg product sales were up$65.0 million , or 7%, driven by higher average net selling prices resulting from the pass-through of higher input costs due to increased grain markets. Egg volume was flat as lower volume in the foodservice channel was offset by increased volume in the food ingredient channel, which was positively impacted by incremental volumes attributable to our prior year acquisition of Henningsen. Egg volumes were impacted in both periods by lower foodservice product demand in the prior year period as a result of the COVID-19 pandemic. Sales of side dishes were down$2.8 million , or 2%, with volume down 7%, driven by lower product demand as a result of the COVID-19 pandemic, partially offset by higher average net selling prices resulting from targeted price increases. Sausage sales were up$3.4 million , or 31%, driven by 21% higher volume and higher average net selling prices resulting from the pass-through of higher input costs due to increased sow costs. Other product sales were up$19.2 million , or 143%, with volume up 54%, primarily due to the inclusion of incremental results attributable to our prior year acquisition of Henningsen and higher average net selling prices resulting from the decision to exit certain low-margin business. Segment profit for the three months endedJune 30, 2021 increased$68.2 million , or 169%, when compared to the prior year period, driven by higher net sales, as previously discussed, lower manufacturing costs of$10.8 million (primarily due to favorable fixed cost absorption and decreased expense for donated and obsolete inventory on short-dated products) and insurance recovery of$6.1 million related to previously incurred business interruption losses as a result of a fire at ourBloomfield, Nebraska laying facility in the second quarter of fiscal 2020. These positive impacts were partially offset by increased raw material costs of$21.2 million (primarily driven by higher egg input costs due to increased grain markets) and higher freight costs of$2.1 million (excluding volume-driven impacts). Segment profit for the nine months endedJune 30, 2021 increased$17.0 million , or 56%, when compared to the prior year period, driven by higher net sales, as previously discussed, insurance recovery of$6.1 million related to previously incurred business interruption losses as a result of a fire at ourBloomfield, Nebraska laying facility in the second quarter of fiscal 2020 and decreased expense for donated and obsolete inventory on short-dated products, partially offset by higher raw material costs of$41.0 million (primarily driven by higher egg input costs due to increased grain markets), increased expenses attributable to the COVID-19 pandemic, including increased employee wages and paid absences, COVID-19 screening expenses and additional cleaning costs, higher freight costs of$5.3 million (excluding volume-driven impacts) and increased employee-related costs (in addition to amounts previously discussed). Prior year segment profit also was negatively impacted by a$2.5 million insurance deductible and$0.4 million of repair and clean-up expenses due to a fire at ourBloomfield, Nebraska laying facility in the second quarter of fiscal 2020. Refrigerated Retail Three Months EndedJune 30 , Nine Months EndedJune 30 , favorable/(unfavorable)
favorable/(unfavorable)
dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % ChangeNet Sales $ 220.8 $ 250.3 $ (29.5) (12) %$ 723.4 $ 737.8 $ (14.4) (2) % Segment Profit$ 14.3 $ 42.3 $ (28.0) (66) %$ 72.2 $ 98.5 $ (26.3) (27) %
Segment Profit Margin 6 % 17 % 10 % 13 % Net sales for the Refrigerated Retail segment decreased$29.5 million , or 12%, for the three months endedJune 30, 2021 , when compared to the prior year period. Net sales for the three months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$8.9 million attributable to our current year acquisitions of Almark and Egg Beaters. Excluding this impact, net sales decreased$38.4 million , or 15%, driven by 13% lower volume, primarily due to reduced side dish and sausage service levels (driven by labor shortages) and lapping of increased purchases of side dishes, cheese and other dairy products and sausage in the prior year period driven by increased at-home consumption in response to the COVID-19 pandemic. Sales of side dishes decreased$6.1 million , or 6%, driven by 10% lower volume. Side dish average net selling prices increased primarily due to targeted price increases that went into effect inJune 2021 and a favorable product mix. Cheese and other dairy case product sales were down$20.7 million , or 29%, with volume down 31%. Sausage sales decreased$9.1 million , or 23%, with volume down 26%. Egg product sales were up$0.5 million , or 2%, with volume up 4%, driven by distribution gains. Sales of other products were down$3.0 million . 39
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Net sales for the Refrigerated Retail segment decreased$14.4 million , or 2%, for the nine months endedJune 30, 2021 , when compared to the prior year period. Net sales for the nine months endedJune 30, 2021 were positively impacted by the inclusion of incremental net sales of$8.9 million attributable to our current year acquisitions of Almark and Egg Beaters. Excluding this impact, net sales decreased$23.3 million , or 3%, with volume down 5%. Sales of side dishes increased$21.6 million , or 7%, driven by increased average net selling prices and 1% higher volume. The increase in average net selling prices was primarily due to targeted price increases that went into effect inFebruary 2020 andJune 2021 and a favorable product mix. The increase in volume was driven by higher branded dinner and breakfast sides volume, partially offset by lower private label dinner sides volume resulting from the decision to exit certain low-margin business and reduced service levels (driven by labor shortages). Cheese and other dairy case product sales were down$27.5 million , or 14%, with volume down 15%, driven by the lapping of increased purchases in the prior year period driven by increased at-home consumption in response to the COVID-19 pandemic. Sausage sales decreased$7.5 million , or 6%, with volume down 8%, driven by the lapping of increased purchases in the prior year period driven by increased at-home consumption in response to the COVID-19 pandemic and reduced service levels (driven by labor shortages), Egg product sales were down$5.3 million , or 5%, with volume down 4%, driven by the decision to exit certain low-margin business. Sales of other products were down$4.6 million . Segment profit decreased$28.0 million , or 66%, for the three months endedJune 30, 2021 , when compared to the prior year period. This decrease was driven by lower net sales, as previously discussed, higher raw material costs of$18.1 million for sows, cheese and eggs, increased manufacturing costs of$4.6 million , higher freight costs of$2.5 million (excluding volume-driven impacts) and increased advertising and consumer spending of$2.1 million . These negative impacts were partially offset by lower employee-related expenses. Segment profit decreased$26.3 million , or 27%, for the nine months endedJune 30, 2021 , when compared to the prior year period. This decrease was driven by higher raw material costs of$29.6 million for sows, cheese and eggs, lower net sales, as previously discussed, increased manufacturing costs of$12.9 million and higher freight costs of$5.7 million (excluding volume-driven impacts). These negative impacts were partially offset by lower employee-related expenses and decreased advertising and consumer spending of$1.2 million . BellRing Brands Three Months EndedJune 30 , Nine Months EndedJune 30 , favorable/(unfavorable) favorable/(unfavorable) dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % ChangeNet Sales $ 342.6 $ 204.2 $ 138.4 68 %$ 907.1 $ 705.7 $ 201.4 29 % Segment Profit$ 51.5 $ 30.6 $ 20.9 68 %$ 114.9 $ 115.0 $ (0.1) - % Segment Profit Margin 15 % 15 % 13 % 16 % Net sales for the BellRing Brands segment increased$138.4 million , or 68%, for the three months endedJune 30, 2021 , when compared to the prior year period, driven by increased volume and the lapping of prior year negative impacts of the COVID-19 pandemic. Sales of Premier Protein products were up$111.8 million , or 65%, with volume up 60%. Volume increases were driven by higher RTD protein shake product volumes in the club, food, drug and mass ("FDM") and eCommerce channels. Average net selling prices increased in the three months endedJune 30, 2021 due to targeted price increases, partially offset by increased promotional spending. Sales ofDymatize products were up$21.6 million , or 99%, with volume up 77%. Average net selling prices increased in the three months endedJune 30, 2021 due to a favorable product mix and decreased promotional spending. Sales of all other products were up$5.0 million . Net sales for the BellRing Brands segment increased$201.4 million , or 29%, for the nine months endedJune 30, 2021 , when compared to the prior year period. Sales of Premier Protein products were up$164.9 million , or 28%, with volume up 28%. Volume increases were driven by higher RTD protein shake product volumes in the FDM, club and eCommerce channels. Sales ofDymatize products were up$34.0 million , or 44%, with volume up 25%. Average net selling prices increased in the nine months endedJune 30, 2021 due to a favorable product mix. Sales of all other products were up$2.5 million . Segment profit increased$20.9 million , or 68%, for the three months endedJune 30, 2021 , when compared to the prior year period. This increase was primarily driven by higher net sales, as previously discussed, partially offset by accelerated amortization expense of$11.8 million related to the discontinuance of the Supreme Protein brand, higher net product costs of$10.5 million , due to unfavorable freight, manufacturing and raw material costs, increased advertising and consumer spending of$3.4 million and increased employee-related expenses. Segment profit decreased$0.1 million , or less than 1%, for the nine months endedJune 30, 2021 , when compared to the prior year period. This decrease was primarily driven by accelerated amortization expense of$29.9 million related to the discontinuance of the Supreme Protein brand, higher net product costs of$20.7 million , due to unfavorable raw material and freight costs, restructuring and facility closure costs, including accelerated depreciation, of$5.6 million , increased advertising 40
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and consumer spending of$5.9 million and increased employee-related expenses. These negative impacts were partially offset by higher net sales, as previously discussed, and lower BellRing IPO-related transaction costs of$1.9 million . General Corporate Expenses and Other Three Months EndedJune 30 , Nine Months EndedJune 30 , favorable/(unfavorable) favorable/(unfavorable) dollars in millions 2021 2020 $ Change % Change 2021 2020 $ Change % Change General corporate expenses and other$ 0.7 $ 17.6 $ 16.9 96 %$ 29.6 $ 97.7 $ 68.1 70 % General corporate expenses and other decreased$16.9 million , or 96%, for the three months endedJune 30, 2021 , when compared to the prior year period, primarily driven by a gain on bargain purchase of$12.7 related to our acquisition of the PL RTE Cereal Business, increased net gains related to mark-to-market adjustments on economic hedges and warrant liabilities of$7.4 million and gains related to mark-to-market adjustments on equity securities of$1.4 million . These positive impacts were partially offset by higher stock-based compensation of$1.6 million and increased third party transaction costs of$2.5 million . General corporate expenses and other decreased$68.1 million , or 70%, for the nine months endedJune 30, 2021 , when compared to the prior year period, primarily driven by increased net gains related to mark-to-market adjustments on economic hedges and warrant liabilities of$58.6 million (compared to losses in the prior year period), a net gain on bargain purchase of$12.6 million related to our acquisitions of the PL RTE Cereal Business and Henningsen, gains related to mark-to-market adjustments on equity securities of$12.3 million and a net gain on assets held for sale of$0.5 million . These positive impacts were partially offset by increased losses related to mark-to-market adjustments on deferred compensation of$7.9 million (compared to gains in the prior year period), higher stock-based compensation of$5.1 million and increased third party transaction costs of$4.3 million . Restructuring and Facility Closure The table below shows the amount of restructuring and facility closure costs, including accelerated depreciation, attributable to each segment. These amounts are excluded from the measure of segment profit, except for the BellRing Brands segment, as it is a publicly-traded company, and are included in general corporate expenses and other. Restructuring and facility closure costs related to the BellRing Brands segment are included in its segment profit. For additional information on restructuring costs, refer to Note 5 within "Notes to Condensed Consolidated Financial Statements." Three Months Ended June 30, Nine Months Ended June 30, favorable/(unfavorable) favorable/(unfavorable) dollars in millions 2021 2020 $ Change 2021 2020 $ Change Post Consumer Brands $ -$ 0.4 $ 0.4$ 0.3 $ 1.5 $ 1.2 Weetabix - 0.6 0.6 - 0.5 0.5 BellRing Brands 0.1 - (0.1) 5.6 - (5.6)$ 0.1 $ 1.0 $ 0.9$ 5.9 $ 2.0 $ (3.9) LIQUIDITY AND CAPITAL RESOURCES We completed the following activities during the nine months endedJune 30, 2021 (for additional information, see Notes 3, 17 and 19 within "Notes to Condensed Consolidated Financial Statements") impacting our liquidity and capital resources: •$345.0 million proceeds received by PHPC from the PHPC IPO, before deducting underwriting discounts and commissions, including$40.0 million value of PHPC Units purchased by PHPC Sponsor in the PHPC IPO; •$1,800.0 million principal value issued of 4.50% senior notes; •$1,697.3 million principal value repaid and$74.3 million premium payment made on the extinguishment of our 5.00% senior notes; •3.3 million shares of our common stock repurchased at an average share price of$95.78 per share for a total cost of$315.3 million , including broker's commissions. Additionally,$7.4 million paid related to the repurchases of shares of common stock that were accrued atSeptember 30, 2020 and did not settle until fiscal 2021; •$47.5 million received in connection with share repurchase contracts entered into in the fourth quarter of fiscal 2020; •$55.0 million outstanding principal repaid by BellRing on its term loan (the "BellRing Term B Facility"); 41
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•$20.0 million borrowed by BellRing under its revolving credit facility (the
"BellRing Revolving Credit Facility");
•$50.0 million repaid by BellRing under the BellRing Revolving Credit Facility;
and
•BellRing entered into a second amendment to the BellRing Credit Agreement (the
"BellRing Amendment"), which provided for the refinancing of the BellRing Term B
Facility on substantially the same terms as in effect prior to the BellRing
Amendment, except that it (i) reduced the interest rate margin by 100 basis
points, resulting in (A) for Eurodollar rate loans, an interest rate of the
Eurodollar rate plus a margin of 4.00% and (B) for base rate loans, an interest
rate of the base rate plus a margin of 3.00%, (ii) reduced the floor for the
Eurodollar rate to 0.75%, (iii) modified the BellRing Credit Agreement to
address the anticipated unavailability of London Interbank Offered Rate
("LIBOR") as a reference interest rate and (iv) provided that if on or before
August 26, 2021 BellRing repays the BellRing Term B Facility in whole or in part
with the proceeds of new or replacement debt at a lower effective interest rate,
or further amends the BellRing Credit Agreement to reduce the effective interest
rate applicable to the BellRing Term B Facility, BellRing must pay a 1.00%
premium on the amount repaid or subject to the interest rate reduction. In
connection with the BellRing Amendment, BellRing paid $1.6 million of debt
refinancing fees.
The following table shows select cash flow data, which is discussed below.
Nine Months Ended
June 30,
dollars in millions 2021 2020
Cash provided by (used in):
Operating activities $ 395.3 $ 408.4
Investing activities (737.4) (94.8)
Financing activities (75.2) (313.9)Effect of exchange rate changes on cash, cash equivalents and restricted cash
6.2 0.5
Net (decrease) increase in cash, cash equivalents and restricted cash
$
(411.1)
Historically, we have generated and expect to continue to generate positive cash flows from operations. We believe our cash on hand, cash flows from operations and current and possible future credit facilities will be sufficient to satisfy our future working capital requirements, interest payments, research and development activities, capital expenditures, pension contributions and other financing requirements for the foreseeable future. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures and other business risk factors. As a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we took steps across the organization to limit discretionary expenses and re-prioritize our capital projects and to focus on cash flow generation. We temporarily suspended our share repurchase program, and we and BellRing borrowed under our respective revolving credit facilities in order to increase our cash position and financial flexibility in the second quarter of fiscal 2020. As a result of our strong operating cash flows and our healthy liquidity position, in the third quarter of fiscal 2020, we were able to resume our share repurchase program inMay 2020 , and we and BellRing repaid such borrowings under our respective revolving credit facilities prior to the end of fiscal 2020. In addition, we resumed normal levels of capital investment. We believe that we have sufficient liquidity and cash on hand to satisfy our cash needs. Additionally, we expect to generate positive cash flows from the operations of our diverse businesses; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity, navigate the uncertainty caused by the pandemic and ensure that our business can continue to operate during these uncertain times. If we are unable to generate sufficient cash flows from operations, or are otherwise unable to comply with the terms of our credit facilities, we may be required to seek additional financing alternatives, which may require waivers under our amended and restated credit agreement (the "Credit Agreement") and our indentures governing our senior notes, in order to generate additional cash. There can be no assurance that we would be able to obtain additional financing or any such waivers on terms acceptable to us or at all. For additional information on our debt, refer to Note 17 within "Notes to Condensed Consolidated Financial Statements." Short-term financing needs primarily consist of working capital requirements and principal and interest payments on our long-term debt. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity, other strategic transactions and repayment or refinancing of our long-term debt obligations. We may, from time to time, seek to retire or purchase our outstanding debt through cash purchases in open market transactions, privately negotiated transactions or otherwise. Additionally, we may continue to seek to repurchase shares of our common stock, and BellRing may seek to repurchase shares of the BellRing Class A Common Stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Obligations under our Credit Agreement are unconditionally guaranteed by our existing and subsequently acquired or organized domestic subsidiaries (other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries we designate as unrestricted subsidiaries, which include 8th Avenue and its subsidiaries and BellRing Brands, Inc. and its subsidiaries) and 42
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are secured by security interests in substantially all of our assets and the assets of our subsidiary guarantors, but excluding, in each case, real property. All of our senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing and subsequently acquired or organized domestic subsidiaries, other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries we designate as unrestricted subsidiaries, which include 8th Avenue and its subsidiaries and BellRing Brands, Inc. and its subsidiaries. These guarantees are subject to release in certain circumstances. BellRing Brands, Inc. and its subsidiaries, 8th Avenue and its subsidiaries, PHPC and PHPC Sponsor are not obligors or guarantors under the Credit Agreement or our senior notes. Obligations under the BellRing Credit Agreement are unconditionally guaranteed by the existing and subsequently acquired or organized domestic subsidiaries of BellRing (other than immaterial subsidiaries, certain excluded subsidiaries and subsidiaries of BellRing it designates as unrestricted subsidiaries) and are secured by security interests in substantially all of the assets of BellRing and the assets of its subsidiary guarantors (other than real property), subject to limited exceptions. We and our subsidiaries (other than BellRing and certain of its subsidiaries) are not obligors or guarantors under the BellRing Credit Agreement. Operating Activities Cash provided by operating activities for the nine months endedJune 30, 2021 decreased$13.1 million compared to the prior year period, driven by unfavorable changes related to the fluctuations in the timing of sales and collections of trade receivables within our BellRing Brands, Foodservice andPost Consumer Brands segments, partially offset by favorable changes in the timing of payments of trade accounts payables within our BellRing Brands and Foodservice segments, lower interest payments of$31.2 million and lower payments on our interest rate swaps of$11.5 million . Investing Activities Nine months endedJune 30, 2021 Cash used in investing activities for the nine months endedJune 30, 2021 was$737.4 million , primarily driven by the deposit of$345.0 million of proceeds received by PHPC from the PHPC IPO and the PHPC Private Placement into a trust account, net cash paid for acquisitions of$290.3 million , primarily driven by our current year acquisitions of the PL RTE Cereal Business, Egg Beaters, Peter Pan and Almark, capital expenditures of$142.7 million and cash paid related to investments in partnerships of$17.1 million , partially offset by proceeds from the sale of equity securities and property and assets held for sale of$34.2 million and$19.0 million , respectively. The largest individual capital expenditure project in the period related to the re-construction of a building that was destroyed in a fire at ourBloomfield, Nebraska laying facility in the second quarter of fiscal 2020. Nine months endedJune 30, 2020 Cash used in investing activities for the nine months endedJune 30, 2020 was$94.8 million , primarily consisting of capital expenditures of$160.0 million , partially offset by proceeds received of$52.7 million largely resulting from the termination of$448.7 million notional value of our cross-currency swaps that were designated as hedging instruments and insurance proceeds received of$10.0 million related to a fire at ourBloomfield, Nebraska layer facility. The largest individual capital expenditure project in the period related to the purchase of a previously leased manufacturing plant inSulphur Springs, Texas . 43
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Financing Activities Nine months endedJune 30, 2021 Cash used in financing activities for the nine months endedJune 30, 2021 was$75.2 million . We received proceeds of$1,800.0 million from the issuance of our 4.50% senior notes. BellRing borrowed$20.0 million under the BellRing Revolving Credit Facility. These issuances and borrowings resulted in total proceeds from the issuance of long-term debt of$1,820.0 million . In connection with the 4.50% senior notes issuance, we paid$16.8 million in debt issuance costs. We repaid the outstanding principal balance under our 5.00% senior notes and made a principal payment on a municipal bond. BellRing repaid$55.0 million of outstanding principal under the BellRing Term B Facility and repaid$50.0 million of outstanding principal under the BellRing Revolving Credit Facility, which resulted in total repayments of long-term debt of$1,803.3 million . In connection with the repayment of the 5.00% senior notes and the BellRing Amendment (discussed above), we paid$75.9 million in debt premiums and refinancing fees. We paid$322.7 million , including broker's commissions, for the repurchase of shares of our common stock, which included repurchases of common stock that were accrued atSeptember 30, 2020 and did not settle until fiscal 2021. We received$47.5 million related to the settlement of share repurchase contracts that were entered into in fiscal 2020 and did not settle until fiscal 2021. PHPC received$345.0 million gross proceeds from the PHPC IPO and PHPC Sponsor purchased$40.0 million in PHPC Units in the PHPC IPO, which resulted in proceeds received from the IPO of$305.0 million . In connection with the PHPC IPO, PHPC incurred offering costs of$7.1 million . Nine months endedJune 30, 2020 Cash used in financing activities for the nine months endedJune 30, 2020 was$313.9 million . BellRing Brands, Inc. received$524.4 million net proceeds from the BellRing IPO, after deducting discounts and commissions. We received proceeds of$1,250.0 million from the issuance of our 4.625% senior notes. We borrowed$1,225.0 million under the 2020 Bridge Loan and$500.0 million under our revolving credit facility. BellRing borrowed$700.0 million under the BellRing Term B Facility, at a discount of$14.0 million , and borrowed$185.0 million under the BellRing Revolving Credit Facility. These issuances and borrowings, combined with proceeds received of$2.0 million from a municipal bond, resulted in total proceeds from the issuance of long-term debt of$3,848.0 million . In connection with these issuances, borrowings and the amendment and restatement of our Credit Agreement, we paid$40.8 million in debt issuance costs and deferred financing fees. We repaid the outstanding principal balances under our term loan, our 5.50% senior notes maturing inMarch 2025 and our 8.00% senior notes, repaid$325.0 million of outstanding principal borrowings on our Revolving Credit Facility and made a principal payment on a municipal bond. BellRing repaid the outstanding principal balance under the 2020 Bridge Loan which it assumed from us in connection with the BellRing IPO and repaid principal borrowings under the BellRing Revolving Credit Facility, which resulted in total repayments of long-term debt of$4,130.3 million . We paid premiums of$49.8 million related to our early extinguishment of our 5.50% senior notes maturing inMarch 2025 and our 8.00% senior notes. In connection with the BellRing IPO, we were refunded$15.3 million of debt issuance costs paid in connection with the 2020 Bridge Loan. We paid$469.0 million , including broker's commissions, for the repurchase of shares of our common stock, which included repurchases of common stock that were accrued atSeptember 30, 2019 and did not settle until fiscal 2020. Debt Covenants Credit Agreement Under the terms of our Credit Agreement, we are required to comply with a financial covenant consisting of a secured net leverage ratio (as defined in the Credit Agreement) not to exceed 4.25 to 1.00, measured as of the last day of any fiscal quarter, if, as of the last day of such fiscal quarter, the aggregate outstanding amount of all revolving credit loans, swing line loans and letter of credit obligations (subject to certain exceptions specified in the Credit Agreement) exceeds 30% of our revolving credit commitments. As ofJune 30, 2021 , we were not required to comply with such financial covenant as the aggregate amount of the aforementioned obligations did not exceed 30% of the Company's revolving credit commitments. We do not believe non-compliance is reasonably likely in the foreseeable future. Our Credit Agreement provides for incremental revolving and term loan facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the Credit Agreement. BellRing Credit Agreement Under the terms of the BellRing Credit Agreement, BellRing is required to comply with a financial covenant requiring BellRing to maintain a total net leverage ratio (as defined in the BellRing Credit Agreement) not to exceed 6.00 to 1.00, measured as of the last day of each fiscal quarter. The total net leverage ratio of BellRing did not exceed this threshold as ofJune 30, 2021 . We do not believe non-compliance is reasonably likely in the foreseeable future. The BellRing Credit Agreement provides for incremental revolving and term facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the BellRing Credit Agreement. 44
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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, 2020 , as filed with
the Securities and Exchange Commission ( the "SEC") on November 20, 2020 . There
have been no significant changes to our critical accounting policies and
estimates since September 30, 2020 .
RECENTLY ISSUED ACCOUNTING STANDARDSSee Note 2 within "Notes to Condensed Consolidated Financial Statements" for a discussion regarding recently issued accounting standards.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, are made throughout this report, including statements regarding the
effect of the COVID-19 pandemic on our business and our continuing response to
the COVID-19 pandemic. These forward-looking statements are sometimes identified
from the use of forward-looking words such as "believe," "should," "could,"
"potential," "continue," "expect," "project," "estimate," "predict,"
"anticipate," "aim," "intend," "plan," "forecast," "target," "is likely,"
"will," "can," "may" or "would" or the negative of these terms or similar
expressions elsewhere in this report. Our financial condition, results of
operations and cash flows may differ materially from those in the
forward-looking statements. Such statements are based on management's current
views and assumptions and involve risks and uncertainties that could affect
expected results. Those risks and uncertainties include, but are not limited to,
the following:
•the impact of the COVID-19 pandemic, including negative impacts on the global
economy and capital markets, the health of our employees, our ability to
manufacture and deliver our products, operating costs, demand for our
foodservice and on-the-go products and our operations generally;
•our high leverage, our ability to obtain additional financing (including both
secured and unsecured debt), our ability to service our outstanding debt
(including covenants that restrict the operation of our business) and a
downgrade or potential downgrade in our credit ratings;
•our ability to continue to compete in our product categories and our ability to
retain our market position and favorable perceptions of our brands;
•our ability to anticipate and respond to changes in consumer and customer
preferences and behaviors and introduce new products;
•changes in economic conditions, disruptions in the U.S. and global capital and
credit markets, changes in interest rates, volatility in the market value of
derivatives and fluctuations in foreign currency exchange rates;
•disruptions or inefficiencies in our supply chain, including as a result of our
reliance on third party suppliers or manufacturers for the manufacturing of many
of our products, pandemics (including the COVID-19 pandemic) and other outbreaks
of contagious diseases, fires and evacuations related thereto, changes in
weather conditions, natural disasters, agricultural diseases and pests and other
events beyond our control;
•significant volatility in the cost or availability of inputs to our business
(including freight, raw materials, energy and other supplies);
•our ability to hire and retain talented personnel, the ability of our employees
to safely perform their jobs, including the potential for physical injuries or
illness (such as COVID-19), employee absenteeism, labor strikes, work stoppages
and unionization efforts;
•allegations that our products cause injury or illness, product recalls and
withdrawals and product liability claims and other related litigation;
•our ability to identify, complete and integrate or otherwise effectively
execute acquisitions or other strategic transactions and effectively manage our
growth;
•the possibility that PHPC, a newly formed special purpose acquisition company
for which the sponsor is our wholly-owned subsidiary and in which we indirectly
own an interest (through PHPC Sponsor), may not consummate a suitable partnering
transaction within the prescribed two-year time period, that the partnering
transaction may not be successful or that the activities for PHPC could be
distracting to our management;
•our ability to successfully execute the proposed plan to distribute our
interest in BellRing;
•our ability to promptly and effectively realize the strategic and financial
benefits expected as a result of the BellRing IPO;
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•impairment in the carrying value of goodwill or other intangibles; •our ability to successfully implement business strategies to reduce costs; •legal and regulatory factors, such as compliance with existing laws and regulations, as well as new laws and regulations and changes to existing laws and regulations and interpretations thereof, affecting our business, including current and future laws and regulations regarding food safety, advertising and labeling and animal feeding and housing operations; •the loss of, a significant reduction of purchases by or the bankruptcy of a major customer; •the failure or weakening of the RTE cereal category and consolidations in the retail and foodservice distribution channels; •the ultimate impact litigation or other regulatory matters may have on us; •our ability to successfully collaborate with third parties that have invested with us in8th Avenue and to effectively realize the strategic and financial benefits expected as a result of the separate capitalization of 8th Avenue; •costs associated with the obligations ofBob Evans Farms, Inc. ("Bob Evans") in connection with the sale and separation of its restaurants business inApril 2017 , which occurred prior to our acquisition of Bob Evans, including certain indemnification obligations under the restaurants sale agreement and Bob Evans's payment and performance obligations as a guarantor for certain leases; •our ability to protect our intellectual property and other assets and to continue to use third party intellectual property subject to intellectual property licenses; •the ability of our and our customers', and 8th Avenue's and its customers', private brand products to compete with nationally branded products; •risks associated with our international businesses; •the impact of theU.K.'s exit from theEuropean Union (commonly known as "Brexit") on us and our operations; •costs, business disruptions and reputational damage associated with information technology failures, cybersecurity incidents or information security breaches; •changes in estimates in critical accounting judgments; •losses or increased funding and expenses related to our qualified pension or other postretirement plans; •significant differences in our, 8th Avenue's and BellRing's actual operating results from our guidance regarding our and 8th Avenue's future performance and BellRing's guidance regarding its future performance; •our, BellRing's and PHPC's ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002; and •other risks and uncertainties included under "Risk Factors" within Item 1A of Part II of this report and in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 , filed with theSEC onNovember 20, 2020 . You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.
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