Post Holdings, Inc 10-Q for FY2020 Q1

Post Holdings, Inc. (POST)

10-Q 2020-02-07 For: 2019-12-31

Added on April 09, 2026

About this 10-Q

Post Holdings, Inc filed this 10-Q on February 7, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.46B; up 3.2% from $1.41B a year earlier
Net income: $99.2M; down 21.0% from net income of $125.6M a year earlier
Diluted EPS: $1.38; down 17.4% from $1.67 a year earlier

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Missouri		45-3355106
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	POST	New York Stock Exchange



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).	1

	Condensed Consolidated Statements of Operations (Unaudited).	1

	Condensed Consolidated Statements of Comprehensive Income (Unaudited).	2

	Condensed Consolidated Balance Sheets (Unaudited).	3

	Condensed Consolidated Statements of Cash Flows (Unaudited).	4

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited).	5

	Notes to Condensed Consolidated Financial Statements (Unaudited).	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	36

Item 4.	Controls and Procedures.	37

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	37

Item 1A.	Risk Factors.	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	38

Item 6.	Exhibits.	40

	SIGNATURES.	42



	Three Months Ended December 31,
	2019			2018
Net Sales	$	1,456.8		$	1,411.3
Cost of goods sold	985.3			984.8
Gross Profit	471.5			426.5
Selling, general and administrative expenses	235.3			217.1
Amortization of intangible assets	40.1			40.3
Gain on sale of business	—			(124.7		)
Other operating expenses (income), net	0.1			(0.1		)
Operating Profit	196.0			293.9
Interest expense, net	102.9			59.4
Loss on extinguishment of debt, net	12.9			6.1
(Income) expense on swaps, net	(61.4		)	51.7
Other income, net	(3.2		)	(3.7		)
Earnings before Income Taxes and Equity Method Loss	144.8			180.4
Income tax expense	30.4			43.8
Equity method loss, net of tax	7.3			10.7
Net Earnings Including Noncontrolling Interests	107.1			125.9
Less: Net earnings attributable to noncontrolling interests	7.9			0.3
Net Earnings	99.2			125.6
Less: Preferred stock dividends	—			2.0
Net Earnings Available to Common Shareholders	$	99.2		$	123.6

Earnings per Common Share:
Basic	$	1.40		$	1.85
Diluted	$	1.38		$	1.67

Weighted-Average Common Shares Outstanding:
Basic	70.7			66.7
Diluted	72.1			75.1



	December 31, 2019			September 30, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	812.6		$	1,050.7
Restricted cash	2.5			3.8
Receivables, net	451.8			445.1
Inventories	588.2			579.8
Prepaid expenses and other current assets	66.1			46.9
Total Current Assets	1,921.2			2,126.3
Property, net	1,764.2			1,736.0
Goodwill	4,460.7			4,399.8
Other intangible assets, net	3,328.3			3,338.5
Equity method investments	138.5			145.5
Other assets	330.6			205.5
Total Assets	$	11,943.5		$	11,951.6

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt	$	156.5		$	13.5
Accounts payable	332.1			395.6
Other current liabilities	394.5			393.8
Total Current Liabilities	883.1			802.9
Long-term debt	6,382.6			7,066.0
Deferred income taxes	842.4			688.5
Other liabilities	523.8			456.9
Total Liabilities	8,631.9			9,014.3

Shareholders’ Equity
Preferred stock	—			—
Common stock	0.8			0.8
Additional paid-in capital	4,195.6			3,734.8
Retained earnings	307.0			207.8
Accumulated other comprehensive loss	(1.8		)	(96.8		)
Treasury stock, at cost	(1,143.8		)	(920.7		)
Total Shareholders’ Equity Excluding Noncontrolling Interests	3,357.8			2,925.9
Noncontrolling interests	(46.2		)	11.4
Total Shareholders’ Equity	3,311.6			2,937.3
Total Liabilities and Shareholders’ Equity	$	11,943.5		$	11,951.6



	As Of and For The Three Months Ended December 31,
	2019			2018
Preferred Stock
Beginning and end of period	$	—		$	—
Common Stock
Beginning and end of period	0.8			0.8
Additional Paid-in Capital
Beginning of period	3,734.8			3,590.9
Activity under stock and deferred compensation plans	(7.3		)	(7.2		)
Non-cash stock-based compensation expense	11.1			8.7
Initial public offering, net of tax	457.0			—
End of period	4,195.6			3,592.4
Retained Earnings
Beginning of period	207.8			88.0
Net earnings	99.2			125.6
Adoption of accounting standards update	—			(0.9		)
Preferred stock dividends declared	—			(2.0		)
End of period	307.0			210.7
Accumulated Other Comprehensive Loss
Retirement Benefit Adjustments, net of tax
Beginning of period	26.6			37.9
Net change in retirement benefits, net of tax	(0.4		)	(0.9		)
End of period	26.2			37.0
Hedging Adjustments, net of tax
Beginning of period	44.5			37.4
Net change in hedges, net of tax	(19.4		)	(4.3		)
End of period	25.1			33.1
Foreign Currency Translation Adjustments
Beginning of period	(167.9		)	(114.7		)
Foreign currency translation adjustments	114.8			1.9
End of period	(53.1		)	(112.8		)
Treasury Stock
Beginning of period	(920.7		)	(589.9		)
Purchases of treasury stock	(223.1		)	(25.3		)
End of period	(1,143.8		)	(615.2		)
Total Shareholders’ Equity Excluding Noncontrolling Interests	3,357.8			3,146.0
Noncontrolling Interests
Beginning of period	11.4			10.1
Initial public offering	(66.3		)	—
Net earnings attributable to noncontrolling interests	7.9			0.3
Non-cash stock-based compensation expense	0.3			—
Net change in hedges, net of tax	0.2			—
Foreign currency translation adjustments	0.3			—
End of period	(46.2		)	10.4
Total Shareholders’ Equity	$	3,311.6		$	3,156.4



	Employee-Related Costs			Accelerated Depreciation			Total
Balance, September 30, 2018	$	2.7		$	—		$	2.7
Charge to expense	0.7			1.8			2.5
Non-cash charges	—			(1.8		)	(1.8		)
Balance, December 31, 2018	$	3.4		$	—		$	3.4

Balance, September 30, 2019	$	0.1		$	—		$	0.1
Cash payments	(0.1		)	—			(0.1		)
Balance, December 31, 2019	$	—		$	—		$	—

Total expected restructuring charge	$	4.9		$	9.9		$	14.8
Cumulative restructuring charges incurred to date	4.9			9.9			14.8
Remaining expected restructuring charge	$	—		$	—		$	—



	Three Months Ended December 31, 2019
Increase in additional paid-in capital related to net proceeds from IPO	$	524.4
Increase in additional paid-in capital related to establishment of noncontrolling interest	66.3
Decrease in additional paid-in capital related to tax effects of IPO	(133.7		)
Net transfers from noncontrolling interest	$	457.0



	December 31, 2019		September 30, 2019
Raw materials and supplies	$	105.7	$	99.4
Work in process	20.0		19.4
Finished products	429.3		425.4
Flocks	33.2		35.6
	$	588.2	$	579.8



	December 31, 2019			September 30, 2019
Property, at cost	$	2,818.5		$	2,736.9
Accumulated depreciation	(1,054.3		)	(1,000.9		)
	$	1,764.2		$	1,736.0



	Post Consumer Brands			Weetabix		Foodservice		Refrigerated Retail			BellRing Brands			Total
Balance, September 30, 2019
Goodwill (gross)	$	2,011.8		$	850.7	$	1,335.6	$	793.6		$	180.7		$	5,172.4
Accumulated impairment losses	(609.1		)	—		—		(48.7		)	(114.8		)	(772.6		)
Goodwill (net)	$	1,402.7		$	850.7	$	1,335.6	$	744.9		$	65.9		$	4,399.8
Currency translation adjustment	0.1			60.8		—		—			—			60.9
Balance, December 31, 2019
Goodwill (gross)	$	2,011.9		$	911.5	$	1,335.6	$	793.6		$	180.7		$	5,233.3
Accumulated impairment losses	(609.1		)	—		—		(48.7		)	(114.8		)	(772.6		)
Goodwill (net)	$	1,402.8		$	911.5	$	1,335.6	$	744.9		$	65.9		$	4,460.7



	December 31, 2019							September 30, 2019
	Carrying Amount		Accumulated Amortization			Net Amount		Carrying Amount		Accumulated Amortization			Net Amount
Subject to amortization:
Customer relationships	$	2,309.0	$	(593.3	)	$	1,715.7	$	2,297.2	$	(562.2	)	$	1,735.0
Trademarks and brands	795.7		(235.9		)	559.8		793.7		(225.2		)	568.5
Other intangible assets	3.1		(3.1		)	—		3.1		(3.1		)	—
	3,107.8		(832.3		)	2,275.5		3,094.0		(790.5		)	2,303.5
Not subject to amortization:
Trademarks and brands	1,052.8		—			1,052.8		1,035.0		—			1,035.0
	$	4,160.6	$	(832.3	)	$	3,328.3	$	4,129.0	$	(790.5	)	$	3,338.5


•	Commodity and energy futures and option contracts, which relate to inputs that generally will be utilized within the next year;


•	pay-fixed, receive-variable interest rate swaps maturing in May 2021 and May 2024 that require monthly settlements and have the effect of hedging interest payments on debt expected to be issued but not yet priced; and


•	Pay-fixed, receive-fixed cross-currency swaps maturing in July 2022 that require quarterly cash settlements and are used as net investment hedges of the Company’s investment in Weetabix, which is denominated in Pounds Sterling; and



	December 31, 2019		September 30, 2019
Not designated as hedging instruments under ASC Topic 815:
Commodity contracts	$	63.8	$	47.1
Energy contracts	38.5		39.8
Interest rate swaps	272.8		73.1
Interest rate swaps - Rate-lock swaps	1,399.3		1,531.0
Designated as hedging instruments under ASC Topic 815:
Foreign exchange contracts - Cross-currency swaps	448.7		448.7
Interest rate swaps	350.0		200.0



Derivatives Designated as Hedging Instruments	(Gain) Loss Recognized in OCI including NCI						Loss (Gain) Reclassified from Accumulated OCI including NCI into Earnings					Statement of Operations Location
Derivatives Designated as Hedging Instruments	2019			2018			2019		2018			Statement of Operations Location
Interest rate swaps	$	(1.3	)	$	4.6		$	7.2	$	(30.1	)	Interest expense, net
Cross-currency swaps	34.6			(29.0		)	—		—			(Income) expense on swaps, net



	December 31, 2019						September 30, 2019
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets:
Deferred compensation investments	$	13.0	$	13.0	$	—	$	11.2	$	11.2	$	—
Derivative assets	6.0		—		6.0		23.2		—		23.2
	$	19.0	$	13.0	$	6.0	$	34.4	$	11.2	$	23.2
Liabilities:
Deferred compensation liabilities	$	33.6	$	—	$	33.6	$	31.0	$	—	$	31.0
Derivative liabilities	352.2		—		352.2		418.1		—		418.1
	$	385.8	$	—	$	385.8	$	449.1	$	—	$	449.1


•	rate-lock interest rate swaps that require six lump sum settlements with the first settlement occurring in July 2020 and the last in July 2023 and have the effect of hedging interest payments on debt expected to be issued but not yet priced.



		Fair Value				Portion Designated as Hedging Instruments
	Balance Sheet Location	December 31, 2019		September 30, 2019		December 31, 2019		September 30, 2019
Asset Derivatives:
Commodity contracts	Prepaid expenses and other current assets	$	2.8	$	1.9	$	—	$	—
Energy contracts	Prepaid expenses and other current assets	2.6		0.7		—		—
Commodity contracts	Other assets	—		0.1		—		—
Foreign exchange contracts	Prepaid expenses and other current assets	—		1.3		—		1.3
Foreign exchange contracts	Other assets	—		19.2		—		19.2
Interest rate swaps	Prepaid expenses and other current assets	0.4		—		0.4		—
Interest rate swaps	Other assets	0.2		—		0.2		—
		$	6.0	$	23.2	$	0.6	$	20.5

Liability Derivatives:
Commodity contracts	Other current liabilities	$	0.9	$	1.0	$	—	$	—
Energy contracts	Other current liabilities	1.4		1.5		—		—
Energy contracts	Other liabilities	—		0.1		—		—
Foreign exchange contracts	Other current liabilities	1.0		—		1.0		—
Foreign exchange contracts	Other liabilities	14.5		—		14.5		—
Interest rate swaps	Other current liabilities	58.8		85.1		—		1.6
Interest rate swaps	Other liabilities	275.6		330.4		—		6.2
		$	352.2	$	418.1	$	15.5	$	7.8



Derivatives Not Designated as Hedging Instruments	Statement of Operations Location	(Gain) Loss Recognized in Statement of Operations
Derivatives Not Designated as Hedging Instruments	Statement of Operations Location	2019			2018
Commodity contracts	Cost of goods sold	$	(1.9	)	$	(0.2	)
Energy contracts	Cost of goods sold	(2.5		)	8.3
Interest rate swaps (a)	(Income) expense on swaps, net	(61.4		)	51.7


(a)	For the three months ended December 31, 2019 and 2018, “(Income) expense on swaps, net” related to our interest rate swaps not designated as hedging instruments included cash settlements paid of $19.1 and $0.2, respectively.


•	Lease vs non-lease components — The Company elected to combine lease and non-lease components as a single component and the total consideration for the arrangements were accounted for as a lease.



	December 31, 2019
ROU assets:
Other assets	$	128.8

Lease liabilities:
Other current liabilities	$	23.4
Other liabilities	116.1
Total lease liabilities	$	139.5



	December 31, 2019
Remaining fiscal 2020	$	21.8
Fiscal 2021	27.2
Fiscal 2022	26.3
Fiscal 2023	23.3
Fiscal 2024	17.2
Thereafter	51.1
Total future minimum payments	$	166.9
Less: Implied interest	27.4
Total lease liabilities	$	139.5



	September 30, 2019
Fiscal 2020	$	28.3
Fiscal 2021	29.0
Fiscal 2022	28.1
Fiscal 2023	25.4
Fiscal 2024	19.2
Thereafter	77.3
Total future minimum payments (a)	$	207.3


(a)	Future minimum payments as of September 30, 2019 included $36.0 related to a real estate lease, consisting of land and a building, that was purchased by the Company in December 2019. As of December 31, 2019, the Company de-recognized both a ROU asset and lease liability of $23.1 and recognized the assets as property on the Condensed Consolidated Balance Sheet.



	December 31, 2019			September 30, 2019
5.50% Senior Notes maturing December 2029	$	750.0		$	750.0
5.625% Senior Notes maturing January 2028	940.9			940.9
5.50% Senior Notes maturing March 2025	1,000.0			1,000.0
5.75% Senior Notes maturing March 2027	1,299.3			1,299.3
5.00% Senior Notes maturing August 2026	1,697.3			1,697.3
8.00% Senior Notes maturing July 2025	122.2			122.2
Term Loan	—			1,309.5
BellRing Term B Facility	700.0			—
BellRing Revolving Credit Facility	80.0			—
Capital lease	—			0.1
	$	6,589.7		$	7,119.3
Less: Current portion of long-term debt	(156.5		)	(13.5		)
Debt issuance costs, net	(65.6		)	(69.0		)
Plus: Unamortized premium and discount, net	15.0			29.2
Total long-term debt	$	6,382.6		$	7,066.0



	Repayments of Long-Term Debt			Loss on Extinguishment of Debt, net
Three Months Ended December 31,	Issuance or Borrowing	Principal Amount Repaid		Debt Repurchased at a Discount			Write-off of Debt Issuance Costs		Write-off of Unamortized Premium
	Term Loan	$	1,309.5	$	—		$	9.1	$	—
	2020 Bridge Loan	1,225.0		—			3.8		—
	BellRing Revolving Credit Facility	40.0		$	—		—		$	—
2019	Total	$	2,574.5	$	—		$	12.9	$	—

	Term Loan	$	863.0	$	—		$	7.6	$	—
	5.75% Senior Notes	27.0		(1.5		)	0.3		(0.7		)
	5.625% Senior Notes	20.0		(1.3		)	0.2		—
	5.00% Senior Notes	13.0		(1.2		)	0.1		—
	2018 Bridge Loan	—		—			2.6		—
2018	Total	$	923.0	$	(4.0	)	$	10.8	$	(0.7	)



	North America
	Three Months Ended December 31,
	2019			2018
Service cost	$	1.1		$	1.0
Interest cost	0.9			1.0
Expected return on plan assets	(1.6		)	(1.6		)
Recognized net actuarial loss	0.5			—
Net periodic benefit cost	$	0.9		$	0.4



	Other International
	Three Months Ended December 31,
	2019			2018
Service cost	$	—		$	1.4
Interest cost	3.7			4.8
Expected return on plan assets	(6.2		)	(7.3		)
Net periodic benefit gain	$	(2.5	)	$	(1.1	)


•	Post Consumer Brands: North American RTE cereal business;


•	Weetabix: primarily United Kingdom RTE cereal and muesli business;


•	Refrigerated Retail: refrigerated retail products, inclusive of side dishes and egg, cheese and sausage products; and


•	BellRing Brands: ready-to-drink (“RTD”) protein shakes, other RTD beverages, powders and nutrition bars.


•	Post Consumer Brands: North American ready-to-eat (“RTE”) cereal business;



	Three Months Ended December 31,
							favorable/(unfavorable)
dollars in millions	2019			2018			$ Change			% Change
Net Sales	$	1,456.8		$	1,411.3		$	45.5		3	%

Operating Profit	$	196.0		$	293.9		$	(97.9	)	(33	)%
Interest expense, net	102.9			59.4			(43.5		)	(73	)%
Loss on extinguishment of debt, net	12.9			6.1			(6.8		)	(111	)%
(Income) expense on swaps, net	(61.4		)	51.7			113.1			219	%
Other income, net	(3.2		)	(3.7		)	(0.5		)	(14	)%
Income tax expense	30.4			43.8			13.4			31	%
Equity method loss, net of tax	7.3			10.7			3.4			32	%
Less: Net earnings attributable to noncontrolling interests	7.9			0.3			(7.6		)	(2,533	)%
Net Earnings	$	99.2		$	125.6		$	(26.4	)	(21	)%


•	$524.4 million net proceeds received by BellRing from the IPO, after deducting underwriting discounts and commissions;