Post Holdings, Inc 8-K/A, filed Jun 30, 2023
Post Holdings, Inc. (POST)
8-K/A
2023-06-30
For: 2023-04-28
View Original
Added on
April 09, 2026
About this 8-K/A
Post Holdings, Inc filed this 8-K/A on June 30, 2023, reporting on events of April 28, 2023.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K/A
(Amendment No. 1)
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (314 ) 644-7600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
As previously reported in its Form 8-K filed with the United States Securities and Exchange Commission (the “SEC”) on April 28, 2023 (the “Original Report”), Post Holdings, Inc. (the “Company”) completed its previously announced acquisition of a portion of the pet food business of The J. M. Smucker Company (“Smucker”), including brands such as Rachael Ray Nutrish, Nature’s Recipe, 9Lives, Kibbles ’n Bits and Gravy Train, private label pet food assets and certain manufacturing and distribution facilities (collectively, “Pet Food”). This Amendment No. 1 to Form 8-K (the “Form 8-K Amendment”) is being filed by the Company to amend the Original Report to file the financial statements required by Item 9.01(a) of Form 8-K and the pro forma financial information required by Item 9.01(b) of Form 8-K relative to the completion of the Pet Food acquisition.
For a copy of the asset purchase agreement dated as of February 8, 2023, which was subsequently amended, by and among the Company, Post Brands Pet Care, LLC (formerly PCB Sub, LLC), a Delaware limited liability company and wholly-owned, indirect subsidiary of the Company, and Smucker, which sets forth the terms and conditions of the Pet Food acquisition, including the current and potential liabilities assumed by the Company, refer to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 13, 2023 (and refer to Exhibit 2.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 5, 2023, for the amendment to the asset purchase agreement).
The J. M. Smucker Company Divested Pet Foods Business audited abbreviated financial statements as of and for the year ended April 30, 2022 and The J. M. Smucker Company Divested Pet Foods Business unaudited abbreviated financial statements as of and for the nine months ended January 31, 2023 were prepared by Smucker and approved by Smucker’s management, and the Company was not involved in the preparation of such financial statements.
The unaudited pro forma financial information included in the Form 8-K Amendment has been prepared for illustrative purposes only. Such financial information is not necessarily indicative of the consolidated financial position or results of operations that would have been realized had the Company completed the Pet Food acquisition on the dates indicated in the pro forma financial information, nor is it meant to be indicative of any future consolidated financial position or future results of operations that the Company will experience.
Except as described in the Form 8-K Amendment, all other information in the Original Report remains unchanged.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Attached are the following financial statements as required by Item 9.01(a) of Form 8-K:
•The J. M. Smucker Company Divested Pet Foods Business abbreviated financial statements consisting of a statement of assets acquired and liabilities assumed as of April 30, 2022 and the related statement of revenue and direct operating expenses for the year ended April 30, 2022, the notes related thereto and the Report of Independent Auditors, attached as Exhibit 99.1.
•The J. M. Smucker Company Divested Pet Foods Business abbreviated financial statements (unaudited) consisting of a statement of assets acquired and liabilities assumed as of January 31, 2023 and the related statement of revenue and direct operating expenses for the nine months ended January 31, 2023 and the notes related thereto, attached as Exhibit 99.2.
(b) Pro Forma Financial Information.
Attached as Exhibit 99.3 is the following unaudited pro forma condensed combined financial information of the Company, giving effect to the Pet Food acquisition, as required by Item 9.01(b) of Form 8-K:
•unaudited pro forma condensed combined balance sheet as of March 31, 2023;
•unaudited pro forma condensed combined statement of operations for the year ended September 30, 2022;
•unaudited pro forma condensed combined statement of operations for the six months ended March 31, 2023; and
•notes to unaudited pro forma condensed combined financial information.
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(d) Exhibits.
Exhibit No. | Description | ||||
| 23.1 | |||||
| 99.1 | |||||
| 99.2 | |||||
| 99.3 | |||||
| 104 | Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline XBRL document) | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 30, 2023 | Post Holdings, Inc. | |||||||
(Registrant) | ||||||||
By: | /s/ Matthew J. Mainer | |||||||
Name: | Matthew J. Mainer | |||||||
Title: | SVP, Chief Financial Officer and Treasurer | |||||||
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Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement Nos. 333-262393, 333-229376, 333-209180, 333-179316 and 333-179315 on Form S-8 and No. 333-269940 on Form S-3 of Post Holdings, Inc. of our report dated May 8, 2023, relating to the abbreviated financial statements of The J. M. Smucker Company Divested Pet Foods Business as of and for the year ended April 30, 2022 appearing in this Current Report on Form 8-K/A of Post Holdings, Inc.
/s/ Ernst & Young LLP
Akron, Ohio
June 30, 2023
Exhibit 99.1
THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
ABBREVIATED FINANCIAL STATEMENTS
April 30, 2022
(With Independent Auditors' Report Thereon)
1
| INDEX TO FINANCIAL STATEMENTS | Page No. | ||||
| Report of Independent Auditors | 3 | ||||
| Statement of Assets Acquired and Liabilities Assumed | 5 | ||||
| Statement of Revenue and Direct Operating Expenses | 6 | ||||
| Notes to Abbreviated Financial Statements | 7 | ||||
2
Report of Independent Auditors
The Board of Directors of The J. M. Smucker Company
Opinion
We have audited the accompanying abbreviated financial statements of The J. M. Smucker Company Divested Pet Foods Business (the “Company”), which comprise the statement of assets acquired and liabilities assumed as of April 30, 2022, and the related statement of revenue and direct operating expenses for the year then ended, and the related notes (the “abbreviated financial statements”).
In our opinion, the accompanying abbreviated financial statements present fairly, in all material respects, the assets acquired and liabilities assumed as of April 30, 2022, and the revenue and direct operating expenses for the year then ended, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Abbreviated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis of Accounting
We draw attention to Note 1 to the abbreviated financial statements, which describes that the accompanying abbreviated statement of assets acquired and liabilities assumed and the statement of revenues and direct operating expenses were prepared for the purpose of assisting the Buyer in complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Company’s assets, liabilities, revenues, and expenses. As a result, the abbreviated financial statements may not be suitable for another purpose. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Abbreviated Financial Statements
Management is responsible for the preparation and fair presentation of the abbreviated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the abbreviated financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the Abbreviated Financial Statements
Our objectives are to obtain reasonable assurance about whether the abbreviated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the abbreviated financial statements.
In performing an audit in accordance with GAAS, we:
•Exercise professional judgment and maintain professional skepticism throughout the audit.
•Identify and assess the risks of material misstatement of the abbreviated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the historical summaries.
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Report of Independent Auditors
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the abbreviated financial statements.
•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/Ernst & Young LLP
Akron, Ohio
May 8, 2023
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THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Statement of Assets Acquired and Liabilities Assumed
(Dollars in millions) | April 30, 2022 | ||||
| Assets: | |||||
| Inventories | $ | 152.9 | |||
Property, plant, and equipment – net | 161.3 | ||||
Operating lease right-of-use assets | 0.1 | ||||
Other intangible assets – net | 369.6 | ||||
Total assets | $ | 683.9 | |||
| Liabilities: | |||||
Current operating lease liabilities | $ | 0.1 | |||
Current finance lease liabilities | 0.2 | ||||
Noncurrent finance lease liabilities | 0.2 | ||||
Total liabilities | 0.5 | ||||
Net assets | $ | 683.4 | |||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Statement of Revenue and Direct Operating Expenses
(Dollars in millions) | Year Ended April 30, 2022 | ||||
Net sales | $ | 1,454.0 | |||
Cost of products sold | 1,144.5 | ||||
Gross Profit | 309.5 | ||||
Selling, distribution, and administrative expenses | 233.3 | ||||
| Amortization | 21.3 | ||||
Other intangible asset impairment charge | 150.4 | ||||
Other operating expense (income) – net | 3.1 | ||||
Operating Loss | $ | 98.6 | |||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Notes to Abbreviated Financial Statements
April 30, 2022
(Dollars in millions)
NOTE 1: DESCRIPTION OF BUSINESS
The J. M. Smucker Company ("Smucker" or "Parent") entered into an Asset Purchase Agreement (the "Agreement") with Post Holdings, Inc. (the "Buyer"), which provides for the sale of certain assets pertaining to several of Smucker's pet food brands ("the Divested Pet Foods Business"). The sale closed on April 28, 2023. The transaction included the Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train brands, as well as our private label pet food business, inclusive of certain trademarks and licensing agreements, dedicated manufacturing and distribution facilities in Bloomsburg, Pennsylvania, manufacturing facilities in Meadville, Pennsylvania, and Lawrence, Kansas, and approximately 1,100 employees who support these pet food brands. The operating results of the Divested Pet Foods Business were primarily included within Smucker's U.S. Retail Pet Foods segment. The accompanying statements for the Divested Pet Foods Business present the assets acquired and liabilities assumed as of April 30, 2022, and the revenue and direct operating expenses for the year ended April 30, 2022.
The accompanying Statement of Assets Acquired and Liabilities Assumed and the Statement of Revenue and Direct Operating Expenses of the Divested Pet Foods Business were prepared for the purpose of assisting the Buyer in complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Divested Pet Foods Business' assets, liabilities, equity, revenues, expenses, and cash flows.
NOTE 2: ACCOUNTING POLICIES
Basis of Presentation: The Statement of Revenue and Direct Operating Expenses of the Divested Pet Foods Business was derived from Smucker's historical accounting records, which are maintained in accordance with U.S. generally accepted accounting principles ("GAAP"). The Statement of Revenue and Direct Operating Expenses is not intended to be a complete presentation of the results of operations as if the Divested Pet Foods Business had operated independently during the period presented. Further, Smucker does not represent that the results as presented are indicative of the results of operations that would have been achieved if the Divested Pet Foods Business had operated as a separate, stand-alone entity as of or for the period presented, nor are they indicative of the financial condition or results of operations to be expected in the future due to changes in the business and the omission of certain operating expenses as described below. Certain expenses, such as corporate and administrative, are not tracked or monitored in a manner that would enable the development of full financial statements. Such costs include, but are not limited to, general overhead costs, such as costs related to corporate human resources, accounting, legal, other administrative services, interest income or expense, and income taxes. As such, only costs directly related to the revenue-generating activities of the Divested Pet Foods Business are included in these abbreviated financial statements as permitted by Rule 3-05 of Regulation S-X. The Statement of Revenue and Direct Operating Expenses includes allocations of certain costs directly related to revenue-generating activities as discussed in the policies below.
Management believes that the allocations are reasonable.
The Statement of Assets Acquired and Liabilities Assumed includes only the assets and liabilities of the Divested Pet Foods Business to be acquired by the Buyer pursuant to the Agreement. Certain assets and liabilities of the Divested Pet Foods Business will not be sold per the terms of the Agreement, and therefore, are not included in the Statement of Assets Acquired and Liabilities Assumed including, but not limited to, accounts receivable and accounts payable. Outside of lease liabilities, no other liabilities, contingent or otherwise, were assumed by the Buyer.
Under Smucker's centralized cash management system, cash requirements of the Divested Pet Foods Business are provided directly by Smucker, and cash generated by the Divested Pet Foods Business is remitted directly to Smucker. Transaction systems (i.e., payroll, employee benefits, and accounts payable) used to record and account for cash disbursements are provided by centralized Smucker organizations. Smucker also provides centralized sales, order management, billing, credit, and collection functions to the Divested Pet Foods Business. These functions are operated on a regional basis and are customer focused rather than business or product focused. Transaction systems (e.g., billing, accounts receivable, and cash application) used to account for cash receipts are also provided by centralized Smucker organizations outside the defined scope of the Divested Pet Foods Business. These systems are not designed to track the detail of operating, financing, or investing cash flows necessary to separately disclose these activities related to the Divested Pet Foods Business. All cash flow requirements of the Divested Pet Foods Business were historically funded by Smucker, and cash management functions provided by centralized Smucker organizations. To the extent available, select information pertaining to the operating cash flows of the Divested Pet Foods Business have been included within the notes to the abbreviated financial statements. There were no significant cash flows related to investing or financing activities.
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Use of Estimates: The preparation of the abbreviated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results could differ from these estimates. Further, these financial statements include allocations and estimates that are not necessarily indicative of the costs and expenses that would have resulted if the Divested Pet Foods Business had been operated as a separate entity, or the future results of the Divested Pet Foods Business.
Inventories: Inventories are stated at the lower of cost or market, with market being defined as net realizable value, less costs to sell. Cost for all inventories is determined using the first-in, first-out method applied on a consistent basis. The cost of finished products and work-in process inventory includes materials, direct labor, and overhead.
Property, Plant, and Equipment: Property, plant, and equipment is recognized at cost and is depreciated on a straight-line basis over the estimated useful life of the asset (3 to 20 years for machinery and equipment, 1 to 7 years for capitalized software costs related to software that we have purchased or has been licensed to us, and 5 to 40 years for buildings, fixtures, and improvements). Included in property, plant, and equipment are certain manufacturing assets located at the manufacturing and distribution facilities in Bloomsburg, Pennsylvania, and the manufacturing facilities in Meadville, Pennsylvania, and Lawrence, Kansas.
The Divested Pet Foods Business' long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There are no events or changes in circumstances of which Smucker is aware of that indicate the carrying value of the Divested Pet Foods Business long-lived assets was not recoverable as of April 30, 2022.
Leases: The Divested Pet Foods Business has finance and operating lease agreements. Leases with a term of 12 months or less are not recognized on the Statement of Assets Acquired and Liabilities Assumed. Instead, the related lease expense is expensed on a straight- line basis over the lease term. Although the majority of the right-of-use asset and lease liability balances of the Divested Pet Foods Business consist of leases with renewal options, generally it is not reasonably certain they will be exercised, and therefore, the optional periods do not typically impact the lease term. Certain leases also include termination provisions or an option to purchase the leased property. Since we are not reasonably certain that these types of options will be exercised, minimum lease payments do not include any amounts related to these termination or purchase options. The lease agreements generally do not contain residual value guarantees or restrictive covenants that are material.
It is determined if an agreement is or contains a lease at inception by evaluating whether an identified asset exists that Smucker controls over the term of the arrangement. A lease commences when the lessor makes the identified asset available for use. In general, the lease and non-lease components are accounted for as a single lease component. Minimum lease payments do not include variable lease payments other than those that depend on an index or rate.
For the majority of the leases, the interest rate implicit in the lease cannot be readily determined, so the Parent's incremental borrowing rate is utilized to present value lease payments using information available at the lease commencement date. The current economic environment and the Parent's credit rating are considered in determining this collateralized rate.
Lease expense for the manufacturing and distribution facilities in Bloomsburg, Pennsylvania, and the manufacturing facilities in Meadville, Pennsylvania, and Lawrence, Kansas totaled $1.0, of which operating lease costs were $0.1, finance lease costs were $0.2, variable lease costs were $0.2, and short-term lease costs were $0.5 in 2022.
Intangible Assets: Other indefinite-lived intangible assets are not amortized but are reviewed at least annually for impairment. Smucker conducts an annual test for impairment of other indefinite-lived intangible assets as of February 1 each year, or more often if events or circumstances occur that would more likely than not reduce the fair value of an indefinite-lived intangible asset below its carrying value.
Finite-lived intangible assets are amortized over a straight-line basis over their estimated useful lives, which are evaluated on an annual basis. For additional information, refer to Note 6: Other Intangible Assets.
Revenue Recognition: We recognize revenue when obligations under the terms of a contract with a customer have been satisfied. This occurs when control of our products transfers, which typically takes place upon delivery to or pick up by the customer.
Transaction price is based on the list price included in our published price list, which is then reduced by the estimated impact of variable consideration, such as trade marketing and merchandising programs, discounts, unsaleable product allowances, returns, and similar items, in the same period that the revenue is recognized. To estimate the impact of these costs, we consider customer contract provisions, historical data, and our current expectations.
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Trade marketing and merchandising programs support our products and consist of various promotional activities conducted through retailers, distributors, or directly with consumers, including in-store display and product placement programs, price discounts, coupons, and other similar activities. The costs of these programs are recorded based upon volume and classified as a reduction of sales. The estimates of these costs for promotional programs are regularly reviewed and revised, when deemed necessary, based on estimates of what will be redeemed by retailers, distributors, or consumers. These estimates are made using various techniques, including historical data on performance of similar promotional programs.
Cost of Products Sold: Cost of products sold includes direct variable and fixed costs of materials, labor, overhead, and transportation costs, which relate to the costs incurred to ship the products.
Selling, Distribution, and Administrative ("SD&A") Expenses: In general, SD&A activity is expensed as incurred and includes costs related to marketing, advertising, selling, distribution, and general and administrative activities, which are associated with the revenue-generating activities of the Divested Pet Foods Business. General and administrative expenses primarily include corporate headquarter-related costs, as well as other facility and service-related costs shared by the Divested Pet Foods Business with other Parent businesses. SD&A expenses are allocated based on their respective underlying cost driver.
Shipping and Handling Costs: Transportation costs included in cost of products sold relate to the costs incurred to ship our products. Distribution costs are included in SD&A expenses and primarily relate to the warehousing costs incurred to store our products. Total distribution costs recorded within SD&A were $84.4 in 2022.
Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $22.6 in 2022.
Research and Development Costs: Research and development ("R&D") costs are expensed as incurred and are included in SD&A in the Statement of Revenue and Direct Operating Expenses. R&D costs include expenditures for new and existing product and manufacturing process innovations, which are comprised primarily of internal salaries and wages, consulting, testing, and other supplies attributable to time spent on R&D activities. Total R&D expense was $11.3 in 2022.
Foreign Currency Translation: The Divested Pet Foods Business has operations outside of the U.S. with the Parent which are primarily denominated in Canadian currency. Revenue and expenses are translated by the Parent to U.S. dollars using the average rate throughout the periods covered in the abbreviated financial statements.
NOTE 3: REVENUE
The Divested Pet Foods Business primarily includes the domestic sales of Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train branded products.
The long-lived assets of the Divested Pet Foods Business are situated in the U.S. The following table presents geographical information related to the net sales of the Divested Pet Foods Business.
Year Ended April 30, 2022 | |||||
Net sales: | |||||
United States | $ | 1,431.6 | |||
All other international | 22.4 | ||||
Total net sales | $ | 1,454.0 | |||
NOTE 4: INVENTORIES
The components of inventories are as follows:
April 30, 2022 | |||||
Finished products | $ | 101.5 | |||
Raw materials | 51.4 | ||||
Total inventory | $ | 152.9 | |||
Work-in-process inventory is included in finished products and was $3.2 at April 30, 2022.
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NOTE 5: PROPERTY, PLANT, AND EQUIPMENT
The components of property, plant, and equipment – net are as follows:
April 30, 2022 | |||||
Land and land improvements | $ | 7.3 | |||
Buildings and fixtures | 53.4 | ||||
Machinery and equipment | 214.9 | ||||
Construction in progress | 18.2 | ||||
Gross property, plant, and equipment | 293.8 | ||||
Less: Accumulated depreciation | (132.5) | ||||
Total property, plant and equipment | $ | 161.3 | |||
Depreciation expense of $22.1 in 2022, was primarily included in cost of products sold in the Statement of Revenue and Direct Operating Expenses.
NOTE 6: OTHER INTANGIBLE ASSETS
The following table summarizes other intangible assets and the related accumulated amortization and impairment charges.
April 30, 2022 | |||||||||||||||||||||||
| Acquisition Cost | Accumulated Amortization | Impairment Charges | Net | ||||||||||||||||||||
Finite-lived intangible assets subject to amortization: | |||||||||||||||||||||||
| Trademarks | $ | 512.6 | $ | (100.1) | $ | (150.4) | $ | 262.1 | |||||||||||||||
Licensing agreement | 128.0 | (20.5) | — | 107.5 | |||||||||||||||||||
Total intangible assets subject to amortization | $ | 640.6 | $ | (120.6) | $ | (150.4) | $ | 369.6 | |||||||||||||||
Amortization expense for finite-lived intangible assets was $21.3 in 2022. The weighted-average useful lives of trademarks and the licensing agreement is 15 and 25 years, respectively. The weighted-average useful life of total finite-lived intangible assets is 18 years. Based on the carrying value of intangible assets subject to amortization at April 30, 2022, total estimated amortization expense for each of the next five years is $29.2.
During the third quarter of 2022, Smucker made certain strategic decisions related to its U.S. Retail Pet Foods segment which resulted in reallocation of resources between brands in support of Smucker's growth strategies. As a result, Smucker performed an interim impairment review which resulted in an impairment charge of $150.4 related to the Rachael Ray Nutrish brand, primarily driven by the repositioning of this brand within Smucker's U.S. Retail Pet Foods brand portfolio, which led to a decline in the current and long- term net sales expectations and the royalty rate used in the valuation analysis. This charge was included as a noncash charge in the Statement of Revenue and Direct Operating Expenses. Additionally, Smucker reassessed the long-term strategic expectations for the Rachael Ray Nutrish brand and reclassified this brand as a finite-lived intangible asset as of January 31, 2022.
NOTE 7: RELATIONSHIP WITH PARENT
Historically, the Divested Pet Foods Business has been managed and operated as a business of the Parent. Accordingly, certain direct and allocable operating expenses have been recorded to the Divested Pet Foods Business and reflected as expenses in the Statement of Revenue and Direct Operating Expenses. Management considers the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of the Parent attributable to the Divested Pet Foods Business for purposes of the abbreviated financial statements; however, the expenses reflected in the Statement of Revenue and Direct Operating Expenses may not be indicative of the actual expenses that would have been incurred during the period presented if the Divested Pet Foods Business historically operated as a separate, standalone entity. In addition, the expenses reflected in the Statement of Revenue and Direct
Operating Expenses exclude certain expenses such as, but not limited to, general overhead costs, such as costs related to corporate human resources, accounting, legal, other administrative services, and income taxes.
Throughout the period covered by the abbreviated financial statements, the Divested Pet Foods Business produced finished goods for the Parent business. Related party sales to the Parent was $83.8 and related party cost of products sold was $83.8 in 2022. The Divested Pet Foods Business also purchased finished goods from the Parent. Related party cost of products purchased from the Parent was $227.6 in 2022.
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Throughout the period covered by the abbreviated financial statements, the Divested Pet Foods Business stored and distributed the Parent's products in its warehouses. Distribution costs associated with the Parent's products were $4.9 in 2022 and were offset with a contra expense of an equal amount.
NOTE 8: SUBSEQUENT EVENT
Subsequent events have been evaluated through May 8, 2023, the date these abbreviated financial statements were issued.
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Exhibit 99.2
THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
ABBREVIATED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 2023
1 | ||
| INDEX TO FINANCIAL STATEMENTS | Page No. | ||||
| Statement of Assets Acquired and Liabilities Assumed | 3 | ||||
| Statement of Revenue and Direct Operating Expenses | 4 | ||||
| Notes to Abbreviated Financial Statements | 5 | ||||
2 | ||
THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Statement of Assets Acquired and Liabilities Assumed
(Unaudited)
(Dollars in millions) | January 31, 2023 | ||||
| Assets: | |||||
| Inventories | $ | 198.0 | |||
Property, plant, and equipment – net | 163.5 | ||||
Other intangible assets – net | 347.8 | ||||
Total assets | $ | 709.3 | |||
| Liabilities: | |||||
Current finance lease liabilities | $ | 0.2 | |||
Total liabilities | 0.2 | ||||
Net assets | $ | 709.1 | |||
See accompanying notes to abbreviated financial statements.
3 | ||
THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Statement of Revenue and Direct Operating Expenses
(Unaudited)
(Dollars in millions) | Nine Months Ended January 31, 2023 | ||||
Net sales | $ | 1,180.8 | |||
Cost of products sold | 918.0 | ||||
Gross Profit | 262.8 | ||||
Selling, distribution, and administrative expenses | 164.6 | ||||
| Amortization | 21.8 | ||||
Other operating expenses (income) - net | 2.9 | ||||
Operating Income | $ | 73.5 | |||
See accompanying notes to abbreviated financial statements.
4 | ||
THE J. M. SMUCKER COMPANY DIVESTED PET FOODS BUSINESS
Notes to Abbreviated Financial Statements (Unaudited)
(Dollars in millions)
NOTE 1: DESCRIPTION OF BUSINESS
The J. M. Smucker Company ("Smucker" or "Parent") entered into an Asset Purchase Agreement (the "Agreement") with Post Holdings, Inc. (the "Buyer"), which provides for the sale of certain assets pertaining to several of Smucker's pet food brands (the "Divested Pet Foods Business"). The sale closed on April 28, 2023. The transaction included the Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train brands, as well as our private label pet food business, inclusive of certain trademarks and licensing agreements, dedicated manufacturing and distribution facilities in Bloomsburg, Pennsylvania, manufacturing facilities in Meadville, Pennsylvania, and Lawrence, Kansas, and approximately 1,100 employees who support these pet food brands. The operating results for the Divested Pet Foods Business were primarily included within Smucker's U.S. Retail Pet Foods segment. The accompanying statements of the Divested Pet Foods Business present the assets acquired and liabilities assumed as of January 31, 2023, and the revenue and direct operating expenses for the nine months ended January 31, 2023.
The accompanying Statement of Assets Acquired and Liabilities Assumed and the Statement of Revenue and Direct Operating Expenses of the Divested Pet Foods Business were prepared for the purpose of assisting the Buyer in complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Divested Pet Foods Business' assets, liabilities, equity, revenues, expenses, and cash flows.
These statements should be read in conjunction with the audited financial statements and footnotes of the Divested Pet Foods Business for the fiscal year ended April 30, 2022, that are filed as an exhibit to the same Form 8-K to which these financial statements are filed as an exhibit. The accounting policies used in preparing these financial statements are the same as those described in Note 2 to the financial statements in that Form 8-K.
The preparation of abbreviated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results could differ from these estimates. These financial statements include allocations and estimates that are not indicative of the costs and expenses that would have resulted if the Divested Pet Foods Business had operated as a separate entity, or the future results of the Divested Pet Foods Business.
NOTE 2: REVENUE
The Divested Pet Foods Business primarily includes the domestic sales of Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train branded products.
The long-lived assets of the Divested Pet Foods Business are situated in the U.S. The following table presents geographical information related to the net sales of the Divested Pet Foods Business.
Nine Months Ended January 31, 2023 | |||||
Net sales: | |||||
United States | $ | 1,163.9 | |||
All other international | 16.9 | ||||
Total net sales | $ | 1,180.8 | |||
NOTE 3: INVENTORIES
The components of inventories are as follows:
January 31, 2023 | |||||
Finished products | $ | 151.6 | |||
Raw materials | 46.4 | ||||
Total inventory | $ | 198.0 | |||
Work-in-process inventory is included in finished products and was $4.7 at January 31, 2023.
5 | ||
NOTE 4: PROPERTY, PLANT, AND EQUIPMENT
The components of property, plant, and equipment – net are as follows:
January 31, 2023 | |||||
Land and land improvements | $ | 7.8 | |||
Buildings and fixtures | 56.3 | ||||
Machinery and equipment | 227.6 | ||||
Construction in progress | 20.2 | ||||
Gross property, plant, and equipment | $ | 311.9 | |||
Less: Accumulated depreciation | (148.4) | ||||
Total property, plant and equipment | $ | 163.5 | |||
Depreciation expense of $16.2 for the nine months ended January 31, 2023, is primarily included in cost of products sold in the Statement of Revenue and Direct Operating Expenses.
NOTE 5: OTHER INTANGIBLE ASSETS
The following table summarizes other intangible assets and the related accumulated amortization and impairment charges.
January 31, 2023 | |||||||||||||||||||||||
Acquisition Cost | Accumulated Amortization | Impairment Charges | Net | ||||||||||||||||||||
Finite-lived intangible assets subject to amortization: | |||||||||||||||||||||||
| Trademarks | $ | 512.6 | $ | (118.1) | $ | (150.4) | $ | 244.1 | |||||||||||||||
Licensing agreement | 128.0 | (24.3) | — | 103.7 | |||||||||||||||||||
Total intangible assets subject to amortization | $ | 640.6 | $ | (142.4) | $ | (150.4) | $ | 347.8 | |||||||||||||||
NOTE 6: RELATIONSHIP WITH PARENT
Historically, the Divested Pet Foods Business has been managed and operated as a business of the Parent. Accordingly, certain direct and allocable operating expenses have been recorded to the Divested Pet Foods Business and reflected as expenses in the Statement of Revenue and Direct Operating Expenses. Management considers the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of the Parent attributable to the Divested Pet Foods Business for purposes of the abbreviated financial statements; however, the expenses reflected in the Statement of Revenue and Direct Operating Expenses may not be indicative of the actual expenses that would have been incurred during the period presented if the Divested Pet Foods Business historically operated as a separate, standalone entity. In addition, the expenses reflected in the Statement of Revenue and Direct Operating Expenses exclude certain expenses such as, but not limited to, general overhead costs, such as costs related to corporate human resources, accounting, legal, other administrative services, and income taxes.
Throughout the period covered by the abbreviated financial statements, the Divested Pet Foods Business produced finished goods for the Parent business. Related party sales to the Parent was $43.3, and related party cost of products sold was $43.3 for the nine months ended January 31, 2023. The Divested Pet Foods Business also purchased finished goods from the Parent. Related party cost of products purchased from the Parent was $143.1 for the nine months ended January 31, 2023.
Throughout the period covered by the abbreviated financial statements, the Divested Pet Foods Business stored and distributed the Parent's products in its warehouses. Distribution costs associated with the Parent's products were $3.6 for the nine months ended January 31, 2023, which were offset with a contra expense of an equal amount.
NOTE 7: SUBSEQUENT EVENT
Subsequent events have been evaluated through May 8, 2023, the date these abbreviated financial statements were issued.
6 | ||
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 28, 2023, pursuant to a purchase agreement dated as of February 8, 2023, and subsequently amended, by and among Post Holdings, Inc., a Missouri corporation (“Post” or the “Company”), Post Brands Pet Care, LLC (formerly PCB Sub, LLC), a Delaware limited liability company and wholly-owned, indirect subsidiary of Post, and The J. M. Smucker Company, an Ohio corporation (“Smucker”), Post completed the acquisition of a portion of Smucker’s pet food business, including brands such as Rachael Ray Nutrish, Nature’s Recipe, 9Lives, Kibbles ’n Bits and Gravy Train, private label pet food assets and certain manufacturing and distribution facilities (collectively, “Pet Food”). The Company completed the Pet Food acquisition for $700.0 million in cash, subject to inventory adjustments, resulting in a payment at closing of $715.5 million, and issued 5.4 million shares of Post common stock to Smucker. The payment was made using cash on hand and a portion of the proceeds from the Company’s $400.0 million incremental term loan under its existing credit agreement, which the Company borrowed in full on April 26, 2023 (the “Term Loan”).
The following unaudited pro forma condensed combined financial information is based on the historical consolidated financial information of Post and the abbreviated financial information of Pet Food. The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2022 and for the six months ended March 31, 2023 have been prepared to reflect the Pet Food acquisition as though it occurred on October 1, 2021, including the related financing. The unaudited pro forma condensed combined balance sheet as of March 31, 2023 has been prepared to reflect the Pet Food acquisition as though it occurred on March 31, 2023, including the related financing.
These statements are provided for informational purposes only, are not necessarily indicative of the operating results that would have been achieved had the Pet Food acquisition been completed as of October 1, 2021 and are not intended to project the future financial results of Post after the Pet Food acquisition. The unaudited pro forma condensed combined balance sheet does not purport to reflect what Post’s financial condition would have been had the Pet Food acquisition closed on March 31, 2023 or for any future or historical period. The unaudited pro forma condensed combined financial information is based on certain assumptions, described in the accompanying notes, which management believes are reasonable, and does not reflect the cost of any integration activities or benefits from the Pet Food acquisition and synergies that may be derived.
Post’s fiscal year ends in September, while Smucker’s fiscal year ends in April. As such, the unaudited pro forma condensed combined financial information included herein consist of the following sets of financial information.
The unaudited pro forma condensed combined balance sheet as of March 31, 2023 combines:
• the unaudited condensed consolidated balance sheet of Post as of March 31, 2023; and
• the unaudited statement of assets acquired and liabilities assumed of Pet Food as of January 31, 2023.
The full-year unaudited pro forma condensed combined statement of operations for the year ended September 30, 2022 combines:
•the audited consolidated statement of operations of Post for the year ended September 30, 2022; and
•the unaudited statement of revenue and direct operating expenses of Pet Food for the twelve months ended July 31, 2022.
The unaudited statement of revenue and direct operating expenses of Pet Food for the twelve months ended July 31, 2022 was derived from the audited statement of revenue and direct operating expenses of Pet Food for the fiscal year ended April 30, 2022 by removing the unaudited statement of revenue and direct operating expenses for the three months ended July 31, 2021 and adding the unaudited statement of revenue and direct operating expenses for the three months ended July 31, 2022.
The interim unaudited pro forma condensed combined statement of operations for the six months ended March 31, 2023 combines:
•the unaudited condensed consolidated statement of operations of Post for the six months ended March 31, 2023; and
•the unaudited statement of revenue and direct operating expenses of Pet Food for the six months ended January 31, 2023.
The unaudited statement of revenue and direct operating expenses of Pet Food for the six months ended January 31, 2023 was derived from the unaudited statement of revenue and direct operating expenses of Pet Food for the nine months ended January 31, 2023 by removing the unaudited statement of revenue and direct operating expenses for the three months ended July 31, 2022.
1
The unaudited pro forma condensed combined financial information should be read in conjunction with the following information:
•notes to the unaudited pro forma condensed combined financial information;
•Post’s Current Report on Form 8-K filed on April 28, 2023 with the United States Securities and Exchange Commission (the “SEC”), including exhibits thereto, which describes the Pet Food acquisition;
•unaudited interim financial statements of Post for the six months ended March 31, 2023, which are included in Post’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as filed with the SEC on May 5, 2023;
•audited financial statements of Post as of and for the year ended September 30, 2022, which are included in Post’s Annual Report on Form 10-K for the year ended September 30, 2022, as filed with the SEC on November 17, 2022;
•audited abbreviated financial statements of Pet Food as of and for the year ended April 30, 2022, which are included as Exhibit 99.1 to Post’s Current Report on Form 8-K/A filed with the SEC on June 30, 2023; and
•unaudited abbreviated interim financial statements of Pet Food for the nine months ended January 31, 2023, which are included as Exhibit 99.2 to Post’s Current Report on Form 8-K/A filed with the SEC on June 30, 2023.
2
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2023
(in millions)
| Post Historical | Pet Food Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
Current Assets | |||||||||||||||||||||||
Cash and cash equivalents | $ | 490.7 | $ | — | $ | (329.1) | (a,b) | $ | 161.6 | ||||||||||||||
Restricted cash | 5.4 | — | — | 5.4 | |||||||||||||||||||
Receivables, net | 576.3 | — | — | 576.3 | |||||||||||||||||||
Inventories | 594.3 | 198.0 | 21.5 | (c) | 813.8 | ||||||||||||||||||
Investments held in trust | 352.3 | — | — | 352.3 | |||||||||||||||||||
Prepaid expenses and other current assets | 112.1 | — | 0.2 | (i) | 112.3 | ||||||||||||||||||
Total Current Assets | 2,131.1 | 198.0 | (307.4) | 2,021.7 | |||||||||||||||||||
Property, net | 1,785.7 | 163.5 | 38.1 | (d) | 1,987.3 | ||||||||||||||||||
Goodwill | 4,434.6 | — | 160.7 | (e) | 4,595.3 | ||||||||||||||||||
Other intangible assets, net | 2,679.4 | 347.8 | 281.2 | (f) | 3,308.4 | ||||||||||||||||||
Other assets | 286.0 | — | 0.3 | (g) | 286.3 | ||||||||||||||||||
Total Assets | $ | 11,316.8 | $ | 709.3 | $ | 172.9 | $ | 12,199.0 | |||||||||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||||||||
Current Liabilities | |||||||||||||||||||||||
Current portion of long-term debt | $ | 1.1 | $ | — | $ | — | $ | 1.1 | |||||||||||||||
Accounts payable | 402.7 | — | — | 402.7 | |||||||||||||||||||
Other current liabilities | 375.7 | 0.2 | 3.2 | (g,h,i) | 379.1 | ||||||||||||||||||
Total Current Liabilities | 779.5 | 0.2 | 3.2 | 782.9 | |||||||||||||||||||
Long-term debt | 5,837.1 | — | 398.1 | (b) | 6,235.2 | ||||||||||||||||||
Deferred income taxes | 675.0 | — | (2.9) | (i) | 672.1 | ||||||||||||||||||
Other liabilities | 230.7 | — | 0.3 | (g) | 231.0 | ||||||||||||||||||
Total Liabilities | 7,522.3 | 0.2 | 398.7 | 7,921.2 | |||||||||||||||||||
| Redeemable noncontrolling interest | 310.6 | — | 310.6 | ||||||||||||||||||||
Shareholders' Equity | |||||||||||||||||||||||
| Net historical parent investment | — | 709.1 | (709.1) | (j) | — | ||||||||||||||||||
Common stock | 0.9 | — | — | 0.9 | |||||||||||||||||||
Additional paid-in capital | 4,757.5 | — | 492.3 | (k) | 5,249.8 | ||||||||||||||||||
Retained earnings | 1,253.8 | — | (9.0) | (l) | 1,244.8 | ||||||||||||||||||
Accumulated other comprehensive loss | (114.3) | — | — | (114.3) | |||||||||||||||||||
Treasury stock, at cost | (2,424.9) | — | — | (2,424.9) | |||||||||||||||||||
Total Shareholders' Equity Excluding Noncontrolling Interest | 3,473.0 | 709.1 | (225.8) | 3,956.3 | |||||||||||||||||||
Noncontrolling interest | 10.9 | — | — | 10.9 | |||||||||||||||||||
Total Shareholders' Equity | 3,483.9 | 709.1 | (225.8) | 3,967.2 | |||||||||||||||||||
Total Liabilities and Shareholders' Equity | $ | 11,316.8 | $ | 709.3 | $ | 172.9 | $ | 12,199.0 | |||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
3
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended September 30, 2022
(in millions, except per share data)
Post Historical | Pet Food Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||||||
Net Sales | $ | 5,851.2 | $ | 1,500.0 | $ | — | $ | 7,351.2 | |||||||||||||||
Cost of goods sold | 4,383.7 | 1,176.1 | 26.6 | (c,d,m) | 5,586.4 | ||||||||||||||||||
Gross Profit | 1,467.5 | 323.9 | (26.6) | 1,764.8 | |||||||||||||||||||
Selling, general and administrative expenses | 904.7 | 226.7 | 19.9 | (d,h,l,m,n) | 1,151.3 | ||||||||||||||||||
Amortization of intangible assets | 146.0 | 23.9 | 11.3 | (f) | 181.2 | ||||||||||||||||||
Impairment of goodwill and other intangible assets | — | 150.4 | — | 150.4 | |||||||||||||||||||
Other operating expense, net | 1.2 | 3.6 | — | 4.8 | |||||||||||||||||||
Operating Profit (Loss) | 415.6 | (80.7) | (57.8) | 277.1 | |||||||||||||||||||
Interest expense, net | 317.8 | — | 29.5 | (o) | 347.3 | ||||||||||||||||||
Gain on extinguishment of debt, net | (72.6) | — | — | (72.6) | |||||||||||||||||||
| Income on swaps, net | (268.0) | — | — | (268.0) | |||||||||||||||||||
| Gain on investment in BellRing | (437.1) | — | — | (437.1) | |||||||||||||||||||
Other income, net | (19.8) | — | — | (19.8) | |||||||||||||||||||
Earnings (Loss) before Income Taxes and Equity Method Loss | 895.3 | (80.7) | (87.3) | 727.3 | |||||||||||||||||||
Income tax expense | 85.7 | — | (41.2) | (i) | 44.5 | ||||||||||||||||||
| Equity method loss, net of tax | 67.1 | — | — | 67.1 | |||||||||||||||||||
Net Earnings (Loss) from Continuing Operations, Including Noncontrolling Interest | 742.5 | (80.7) | (46.1) | 615.7 | |||||||||||||||||||
Less: Net earnings attributable to noncontrolling interest from continuing operations | 7.5 | — | — | 7.5 | |||||||||||||||||||
Net Earnings (Loss) from Continuing Operations | $ | 735.0 | $ | (80.7) | $ | (46.1) | $ | 608.2 | |||||||||||||||
Earnings from Continuing Operations per Common Share: | |||||||||||||||||||||||
Basic | $ | 12.07 | $ | — | $ | — | $ | 9.17 | |||||||||||||||
Diluted | $ | 11.75 | $ | — | $ | — | $ | 8.95 | |||||||||||||||
Weighted-Average Common Shares Outstanding: | |||||||||||||||||||||||
Basic | 60.9 | — | 5.4 | (k) | 66.3 | ||||||||||||||||||
Diluted | 62.7 | — | 5.4 | (k) | 68.1 | ||||||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
4
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended March 31, 2023
(in millions, except per share data)
Post Historical | Pet Food Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||||||
Net Sales | $ | 3,186.2 | $ | 787.9 | $ | — | $ | 3,974.1 | |||||||||||||||
Cost of goods sold | 2,357.5 | 613.0 | 7.0 | (d,m) | 2,977.5 | ||||||||||||||||||
Gross Profit | 828.7 | 174.9 | (7.0) | 996.6 | |||||||||||||||||||
Selling, general and administrative expenses | 468.0 | 111.6 | (1.5) | (d,m,n) | 578.1 | ||||||||||||||||||
Amortization of intangible assets | 73.0 | 14.5 | 3.0 | (f) | 90.5 | ||||||||||||||||||
Other operating expense, net | 0.1 | 2.2 | — | 2.3 | |||||||||||||||||||
Operating Profit | 287.6 | 46.6 | (8.5) | 325.7 | |||||||||||||||||||
Interest expense, net | 129.7 | — | 14.8 | (o) | 144.5 | ||||||||||||||||||
Gain on extinguishment of debt, net | (14.8) | — | — | (14.8) | |||||||||||||||||||
| Income on swaps, net | (3.3) | — | — | (3.3) | |||||||||||||||||||
| Gain on investment in BellRing | (5.1) | — | — | (5.1) | |||||||||||||||||||
Other income, net | (11.8) | — | — | (11.8) | |||||||||||||||||||
Earnings before Income Taxes and Equity Method Loss | 192.9 | 46.6 | (23.3) | 216.2 | |||||||||||||||||||
Income tax expense | 43.6 | — | 5.7 | (i) | 49.3 | ||||||||||||||||||
| Equity method loss, net of tax | 0.2 | — | — | 0.2 | |||||||||||||||||||
Net Earnings from Continuing Operations, Including Noncontrolling Interest | 149.1 | 46.6 | (29.0) | 166.7 | |||||||||||||||||||
Less: Net earnings attributable to noncontrolling interests from continuing operations | 3.1 | — | — | 3.1 | |||||||||||||||||||
Net Earnings from Continuing Operations | $ | 146.0 | $ | 46.6 | $ | (29.0) | $ | 163.6 | |||||||||||||||
| Earnings from Continuing Operations per Common Share: | |||||||||||||||||||||||
| Basic | $ | 2.64 | $ | — | $ | — | $ | 2.69 | |||||||||||||||
| Diluted | $ | 2.44 | $ | — | $ | — | $ | 2.50 | |||||||||||||||
Weighted-Average Common Shares Outstanding: | |||||||||||||||||||||||
| Basic | 58.8 | — | 5.4 | (k) | 64.2 | ||||||||||||||||||
| Diluted | 65.8 | — | 5.4 | (k) | 71.2 | ||||||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
5
Notes to Unaudited Pro Forma Condensed Combined Financial Information
($ in millions, except per share data)
Note 1 – Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information presented here is based on the historical audited and unaudited consolidated financial statements of Post and the abbreviated financial statements of Pet Food as described above. The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2022 and for the six months ended March 31, 2023 have been prepared to reflect the Pet Food acquisition as though it occurred on October 1, 2021, including the related financing. The unaudited pro forma condensed combined balance sheet as of March 31, 2023 has been prepared to reflect the Pet Food acquisition as though it occurred on March 31, 2023, including the related financing. The Company financed the Pet Food acquisition using $700.0 in cash, subject to inventory adjustments, resulting in a payment at closing of $715.5, and issued 5.4 million shares of Post common stock to Smucker. The payment was made using cash on hand and a portion of the proceeds from the Term Loan. Transaction accounting adjustments related to the financing have been made in the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2022 and for the six months ended March 31, 2023 to reflect the impact of the financing as if it had been completed on October 1, 2021, and in the unaudited pro forma condensed combined balance sheet as of March 31, 2023 to reflect the impact of the financing as if it had been completed on March 31, 2023.
Transaction accounting adjustments reflected in the unaudited pro forma condensed combined balance sheet and in the unaudited pro forma condensed combined statements of operations reflect the application of required accounting principles for the Pet Food acquisition. The transaction adjustments are based on available information and assumptions that the Company believes are reasonable. Such adjustments are estimates and actual results may differ from such estimates.
The Pet Food acquisition was accounted for as a business combination. Post has completed a preliminary valuation analysis to determine the fair values of Pet Food’s assets acquired and liabilities assumed, and the total purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values from the preliminary valuation analysis. Accordingly, the unaudited pro forma condensed combined financial information includes a preliminary allocation of the purchase price based on assumptions and estimates that, while considered reasonable under the circumstances, are subject to changes, which may be material. In addition, the unaudited pro forma condensed combined financial information reflects all known material adjustments required to conform Pet Food’s accounting policies to Post’s. However, Post has not yet completed the due diligence necessary to identify all items that could significantly impact the purchase price allocation or the assumptions and adjustments made in the preparation of this unaudited pro forma condensed combined financial information. Upon completion of a detailed valuation analysis, there may be additional increases or decreases to the recorded fair values of Pet Food’s assets and liabilities, including but not limited to inventories, property, plant and equipment and other intangible assets that could give rise to future amounts of depreciation and amortization expense that are not reflected in the information contained in this unaudited pro forma condensed combined financial information. Accordingly, once the necessary valuation analysis has been performed and the final purchase price allocation has been completed, actual results may differ materially from the information presented in this unaudited pro forma condensed combined financial information. The valuation analysis is expected to be completed by the end of the calendar year.
The unaudited pro forma condensed combined statements of operations do not reflect the cost of any integration activities or benefits from the Pet Food acquisition and synergies that may be derived from any integration activities, both of which may have a material effect on Post’s consolidated results of operations in periods following the completion of the acquisition.
6
Note 2 – Transaction Summary
The purchase price of the Pet Food acquisition included $700.0 in cash, subject to inventory adjustments, resulting in a payment at closing of $715.5, 5.4 million shares of Post common stock, or approximately $492.3 based on the opening share price of Post’s common stock of $91.34 on April 28, 2023, and immaterial working capital adjustments. The following table summarizes the preliminary allocation of the Pet Food acquisition purchase price based upon the estimated fair value of net assets acquired utilizing currently available information:
| Inventories | $ | 219.5 | |||
| Prepaid expenses and other current assets | 0.2 | ||||
| Property, net | 201.6 | ||||
| Other intangible assets, net | 629.0 | ||||
| Other assets | 0.3 | ||||
| Other current liabilities | (3.4) | ||||
| Other liabilities | (0.3) | ||||
| Total identifiable net assets | 1,046.9 | ||||
| Goodwill | 160.7 | ||||
| Fair value of total consideration transferred | $ | 1,207.6 | |||
7
Note 3 – Transaction Accounting Adjustments
| (a) | Reflects the cash payment of $715.5 to Smucker upon closing of the Pet Food acquisition, $11.9 of transaction costs paid by the Company in connection with the Pet Food acquisition that were not included in the purchase price and immaterial working capital adjustments as a result of the transaction accounting adjustments described in (c), (h) and (i) below. See (l) below for further information regarding transaction costs. | ||||
| (b) | Reflects proceeds of $400.0 received in connection with the Term Loan, partially offset by $1.9 of debt issuance costs paid in connection with the Term Loan. | ||||
| (c) | Reflects the adjustment of Pet Food’s historical inventory to its preliminary estimated fair value. The preliminary estimated fair value was determined based on the estimated selling price, less remaining manufacturing and selling costs and a reasonable profit margin. For the unaudited pro forma condensed combined balance sheet, the adjustment also gives effect to an $8.2 increase in the book value of inventory at the acquisition date. | ||||
| (d) | Reflects the adjustment of Pet Food’s historical property, plant and equipment to its preliminary estimated fair value. For the purpose of determining pro forma depreciation expense to be recorded in the unaudited pro forma condensed combined statements of operations, the total estimated fair value of property, plant and equipment was assumed to have a weighted-average useful life of approximately 10 years. The pro forma depreciation expense adjustments were ($1.0) and ($0.4) for the year ended September 30, 2022 and for the six months ended March 31, 2023, respectively, and were recorded within “Cost of goods sold” (“COGS”) and “Selling, general and administrative expenses” (“SG&A”) within each respective period. | ||||
| (e) | Reflects estimated goodwill resulting from the preliminary allocation of the Pet Food acquisition purchase price to the estimated fair value of the identifiable assets acquired and liabilities assumed in the Pet Food acquisition. See Note 2 above for further information. | ||||
| (f) | Reflects the adjustment of Pet Food’s historical identifiable intangible assets to their preliminary estimated fair values, including $235.0 of trademarks and licensing agreements and $394.0 of customer relationships, all of which were definite-lived intangible assets. For the purpose of determining pro forma amortization expense to be recorded in the unaudited pro forma condensed combined statements of operations, the total estimated fair value of identifiable intangible assets was assumed to have a weighted-average useful life of 18 years for both trademarks and licensing agreements and for customer relationships. | ||||
| (g) | Reflects the adjustment of Pet Food’s right-of-use assets and lease liabilities to their preliminary estimated present value of future minimum lease payments. The adjustment to determine pro forma lease expense was deemed immaterial and not included in the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2022 or for the six months ended March 31, 2023. | ||||
| (h) | Reflects the accrual of $3.2 for certain employee-related costs for benefits earned by transferring employees prior to the acquisition for which the Company assumed the related obligation in connection with the Pet Food acquisition. For the unaudited pro forma condensed combined statement of operations for the year ended September 30, 2022, the adjustment also gives effect to $1.3 of certain future benefits due to transferring employees as required by the purchase agreement but for which a historical obligation was not assumed by the Company in connection with the Pet Food acquisition. | ||||
| (i) | Reflects amounts prepaid and accrued for Pet Food real estate and property taxes and an estimated deferred tax asset for certain deductible transaction costs, as described in (l) below, using the Post statutory tax rate of approximately 24.5%. Income tax expense adjustments on the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2022 and for the six months ended March 31, 2023 have been estimated using the Post statutory tax rate of approximately 24.5% and relate to the income tax effect of the Pet Food historical results and the transaction accounting adjustments described in (c), (d), (f), (h), (l), (n) and (o). | ||||
| (j) | Reflects the elimination of Smucker’s historical investment in Pet Food, which was equal to Pet Food’s net assets, as a result of the acquisition. | ||||
| (k) | Represents the Company’s issuance of 5.4 million shares of Post common stock, $0.01 par value per share, to Smucker representing approximately $492.3 (based on the opening share price of Post’s common stock of $91.34 on April 28, 2023) of consideration paid to Smucker in connection with the Pet Food acquisition. | ||||
| (l) | Reflects $11.9 of incremental transaction costs ($9.0 net of tax) incurred by Post that have not been reflected within Post’s historical results for the respective reporting periods. | ||||
| (m) | Pet Food recognizes royalty expenses in SG&A while Post recognizes royalty expenses in COGS. Net adjustments of $14.2 and $7.4 were made for the year ended September 30, 2022 and for the six months ended March 31, 2023, respectively, to conform Pet Food’s presentation of royalty expenses to Post’s presentation. | ||||
| (n) | Reflects $21.0 and $6.0 of expense in the year ended September 30, 2022 and six months ended March 31, 2023, respectively, related to the transition services agreement entered into between Post and Smucker to support the operations of Pet Food subsequent to closing. | ||||
| (o) | Reflects additional interest expense incurred and amortization of debt issuance costs related to the Term Loan. The adjustment to interest expense was calculated using an interest rate of 7.23%. An assumed 0.125% increase or decrease in the interest rate would have resulted in an increase or decrease in “Interest expense, net” by approximately $0.5 and $0.3 for the year ended September 30, 2022 and for the six months ended March 31, 2023, respectively. | ||||
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