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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
__________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 1-39093
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13351347&doc=15
BellRing Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
83-4096323
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
2503 S. Hanley Road
St. Louis, Missouri 63144
(Address of principal executive offices) (Zip Code)
(314) 644-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.01 par value
BRBR
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class A Common Stock, $0.01 Par Value – 39,428,571 shares as of February 3, 2020
 



BELLRING BRANDS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

PART I.
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 


i


PART I.     FINANCIAL INFORMATION.
ITEM 1.    FINANCIAL STATEMENTS (UNAUDITED).

BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
 
 
Three Months Ended
December 31,
 
2019
 
2018
Net Sales
$
244.0

 
$
185.8

Cost of goods sold
152.7

 
120.2

Gross Profit
91.3

 
65.6

Selling, general and administrative expenses
36.5

 
27.2

Amortization of intangible assets
5.5

 
5.5

Operating Profit
49.3

 
32.9

Interest expense, net
11.6

 

Earnings before Income Taxes
37.7

 
32.9

Income tax expense
5.9

 
7.8

Net Earnings Including Redeemable Noncontrolling Interest
31.8

 
25.1

Less: Net earnings attributable to redeemable noncontrolling interest
25.8

 
25.1

Net Earnings Available to Class A Common Stockholders
$
6.0

 
$

 
 
 
 
Earnings per share of Class A Common Stock:
 
 
 
Basic
$
0.15

 
$

Diluted
$
0.15

 
$

 
 
 
 
Weighted-Average shares of Class A Common Stock Outstanding:
 
 
 
Basic
39.4

 

Diluted
39.4

 

 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

1



BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions)


 
Three Months Ended
December 31,
 
2019
 
2018
Net Earnings Including Redeemable Noncontrolling Interest
$
31.8

 
$
25.1

Hedging adjustments:
 
 
 
Unrealized net gain on derivatives
0.6

 

Unrealized foreign currency translation adjustments
0.5

 
(0.3
)
Total Other Comprehensive Income (Loss) Including Redeemable Noncontrolling Interest
1.1

 
(0.3
)
Less: Comprehensive income attributable to redeemable noncontrolling interest
26.3

 
24.8

Total Comprehensive Income Available to Class A Common Stockholders
$
6.6

 
$


See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).



2



BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)  

 
December 31, 2019
 
September 30, 2019
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
29.9

 
$
5.5

Receivables, net
94.0

 
68.4

Inventories
150.2

 
138.2

Prepaid expenses and other current assets
14.0

 
7.4

Total Current Assets
288.1

 
219.5

Property, net
10.6

 
11.7

Goodwill
65.9

 
65.9

Intangible assets, net
291.0

 
296.5

Other assets
15.3

 
0.9

Total Assets
$
670.9

 
$
594.5

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
 
 
 
Current portion of long-term debt
$
35.0

 
$

Accounts payable
46.5

 
61.7

Other current liabilities
25.9

 
31.0

Total Current Liabilities
107.4

 
92.7

Long-term debt
723.8

 

Deferred income taxes
17.2

 
14.1

Other liabilities
25.5

 
1.3

Total Liabilities
873.9

 
108.1

Redeemable noncontrolling interest
2,075.2

 

Stockholders’ Equity
 
 
 
Preferred stock

 

Common stock
0.4

 

Additional paid-in capital
0.3

 

Accumulated deficit
(2,276.9
)
 

Net investment of Post Holdings, Inc.

 
489.0

Accumulated other comprehensive loss
(2.0
)
 
(2.6
)
Total Stockholders’ Equity
(2,278.2
)
 
486.4

Total Liabilities and Stockholders’ Equity
$
670.9

 
$
594.5

 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

3


BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)

 
Three Months Ended
December 31,
 
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net earnings including redeemable noncontrolling interest
$
31.8

 
$
25.1

Adjustments to reconcile net earnings including redeemable noncontrolling interest to net cash flow (used in) provided by operating activities:
 
 
 
Depreciation and amortization
6.4

 
6.4

Non-cash stock-based compensation expense
0.3

 

Deferred income taxes
0.2

 
1.7

Other, net
1.1

 
2.6

Other changes in operating assets and liabilities:
 
 
 
(Increase) decrease in receivables
(25.3
)
 
9.8

Increase in inventories
(11.8
)
 
(18.3
)
Increase in prepaid expenses and other current assets
(5.8
)
 
(0.1
)
Decrease in other assets
0.8

 
0.1

Decrease in accounts payable and other current liabilities
(22.5
)
 
(21.7
)
(Decrease) increase in non-current liabilities
(0.1
)
 
0.3

Net Cash (Used in) Provided by Operating Activities
(24.9
)
 
5.9

 
 
 
 
Cash Flows from Investing Activities
 
 
 
Additions to property
(0.7
)
 
(1.0
)
Net Cash Used in Investing Activities
(0.7
)
 
(1.0
)
 
 
 
 
Cash Flows from Financing Activities
 
 
 
Proceeds from issuance of long-term debt
806.0

 

Proceeds from issuance of common stock, net of issuance costs
524.4

 

Repayments of long-term debt
(1,265.0
)
 

Payments of debt issuance costs and deferred financing fees
(9.6
)
 

Distributions to Post Holdings, Inc., net
(5.9
)
 
(6.4
)
Net Cash Provided by (Used in) Financing Activities
49.9

 
(6.4
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
0.1

 
(0.2
)
Net Increase (Decrease) in Cash and Cash Equivalents
24.4

 
(1.7
)
Cash and Cash Equivalents, Beginning of Year
5.5

 
10.9

Cash and Cash Equivalents, End of Period
$
29.9

 
$
9.2

    
 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 

4


BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(in millions)
 
As Of and For The Three Months Ended
December 31,
 
2019
 
2018
Preferred Stock
 
 
 
Beginning and end of period
$

 
$

Common Stock
 
 
 
Beginning of period

 

Issuance of common stock
0.4

 

End of period
0.4

 

Additional Paid-in Capital
 
 
 
Beginning of period

 

Non-cash stock-based compensation expense
0.3

 

End of period
0.3

 

Accumulated Deficit
 
 
 
Beginning of period

 

Net earnings available to Class A Common Stockholders
6.0

 

Issuance of common stock
(0.4
)
 

Initial public offering
(2,117.1
)
 

Reclassification of net investment of Post Holdings, Inc.
524.4

 

Redemption value adjustment to redeemable noncontrolling interest
(689.8
)
 

End of period
(2,276.9
)
 

Net Investment of Post
 
 
 
Beginning of period
489.0

 
453.1

Net earnings attributable to Post Holdings, Inc.
5.5

 
25.1

Initial public offering
29.9

 

Reclassification of net investment of Post Holdings, Inc.
(524.4
)
 

Net decrease in net investment of Post Holdings, Inc.

 
(4.0
)
End of period

 
474.2

Accumulated Other Comprehensive Loss
 
 
 
Hedging Adjustments, net of tax
 
 
 
Beginning of period

 

Net change in hedges, net of tax
0.2

 

End of period
0.2

 

Foreign Currency Translation Adjustments
 
 
 
Beginning of period
(2.6
)
 
(1.4
)
Foreign currency translation adjustments
0.4

 
(0.3
)
End of period
(2.2
)
 
(1.7
)
Total Stockholders’ Equity
$
(2,278.2
)
 
$
472.5


 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 

5


BELLRING BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
($ in millions, except per share information)
NOTE 1 — BACKGROUND AND BASIS OF PRESENTATION
Background
BellRing Brands, Inc. (along with its consolidated subsidiaries, “BellRing” or “the Company”) is a consumer products holding company operating in the global convenient nutrition category and is a provider of ready-to-drink (“RTD”) protein shakes, other RTD beverages, powders, nutrition bars and nutritional supplements. The Company’s primary brands are Premier Protein, Dymatize and PowerBar.
On October 21, 2019, BellRing Brands Inc. (“BellRing Inc.”) closed its initial public offering (the “IPO”) of 39.4 million shares of its Class A common stock, $0.01 par value per share (the “Class A Common Stock”), which number of shares included the underwriters’ exercise in full of their option to purchase up to an additional 5.1 million shares of Class A Common Stock. The IPO was completed at an offering price of $14.00 per share and BellRing Inc. received net proceeds from the IPO of approximately $524.4, after deducting underwriting discounts and commissions, all of which were contributed to BellRing Brands, LLC, a Delaware limited liability company and subsidiary of BellRing Inc. (“BellRing LLC”), in exchange for 39.4 million BellRing LLC non-voting membership units (the “BellRing LLC units”).
As a result of the IPO and certain other transactions completed in connection with the IPO (the “formation transactions”):
BellRing LLC became the holder of the active nutrition business of Post Holdings, Inc. (“Post”), which until the completion of the IPO, had been comprised of Premier Nutrition Company, LLC (as successor to Premier Nutrition Corporation, “Premier Nutrition”), Dymatize Enterprises, LLC (“Dymatize”), Supreme Protein, LLC, the PowerBar brand and Active Nutrition International GmbH (“Active Nutrition International”).
BellRing Inc. as a holding company, has no material assets other than its ownership of BellRing LLC units and its indirect interests in the subsidiaries of BellRing LLC and has no independent means of generating revenue or cash flow.
The members of BellRing LLC are Post and BellRing Inc.
Post holds 97.5 million BellRing LLC units, equal to 71.2% of the economic interest in BellRing LLC, and one share of Class B common stock of BellRing Inc., $0.01 par value per share (the “Class B Common Stock”), which, for so long as Post or its affiliates (other than the Company) directly own more than 50% of the BellRing LLC units, will represent 67% of the combined voting power of the common stock of BellRing Inc. The Class B Common Stock has no dividend or other economic rights. Subject to the terms of the amended and restated limited liability company agreement of BellRing LLC, Post may redeem BellRing LLC units for, at BellRing LLC’s option (as determined by its Board of Managers), (i) shares of Class A Common Stock or (ii) cash (based on the market price of the shares of Class A Common Stock). The redemption of BellRing LLC units for shares of Class A Common Stock will be at an initial redemption rate of one share of Class A Common Stock for one BellRing LLC unit, subject to customary redemption rate adjustments for stock splits, stock dividends and reclassifications. The share of Class B Common Stock is owned by Post and cannot be transferred except to affiliates of Post and its subsidiaries (other than the Company). BellRing Inc. does not intend to list its Class B Common Stock on any stock exchange.
The public stockholders of BellRing Inc. (i) own 39.4 million shares of Class A Common Stock, which, for so long as Post or its affiliates (other than the Company) directly own more than 50% of the BellRing LLC units, represent 33% of the combined voting power of BellRing Inc. common stock and 100% of the economic interest in BellRing Inc., and (ii) through BellRing Inc.’s ownership of BellRing LLC units, indirectly hold 28.8% of the economic interest in BellRing LLC.
BellRing Inc. and BellRing LLC will at all times maintain, subject to certain exceptions, a one-to-one ratio between the number of shares of Class A Common Stock issued by BellRing Inc. and the number of BellRing LLC units owned by BellRing Inc.
BellRing Inc. holds the voting membership unit of BellRing LLC (which represents the power to appoint and remove the members of the Board of Managers of, and no economic interest in, BellRing LLC). BellRing Inc. has the right to appoint the members of the BellRing LLC Board of Managers, and therefore, controls BellRing LLC. The Board of Managers is responsible for the oversight of BellRing LLC’s operations and overall performance and strategy, while the management of the day-to-day operations of the business of BellRing LLC and the execution of business strategy are the responsibility of the officers and employees of BellRing LLC and its subsidiaries. Post, in its capacity as a member of BellRing LLC, does not have the power to appoint any members of the Board of Managers or voting rights with respect to BellRing LLC. Post controls BellRing Inc. through its ownership of the share of Class B Common Stock.

6


The financial results of BellRing LLC and its subsidiaries are consolidated with BellRing Inc., and effective as of October 21, 2019, 71.2% of the consolidated net earnings of BellRing LLC are allocated to the redeemable noncontrolling interest (“NCI”) to reflect the entitlement of Post to a portion of the consolidated net earnings. Prior to October 21, 2019, 100% of the consolidated net earnings of BellRing LLC were allocated to the NCI.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), under the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), and on a basis substantially consistent with the audited combined financial statements of the Company as of and for the year ended September 30, 2019. These unaudited condensed consolidated financial statements should be read in conjunction with such audited combined financial statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, filed with the SEC on November 22, 2019.
These unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair statement of the Company’s results of operations, comprehensive income, financial position, cash flows and stockholders’ equity for the interim periods presented. Interim results are not necessarily indicative of the results for any other interim period or for the entire fiscal year.
For the period prior to the IPO, these unaudited condensed consolidated financial statements present the combined results of operations, comprehensive income, financial position, cash flows and stockholders’ equity of the active nutrition business of Post. All intercompany balances and transactions have been eliminated. Transactions between the Company and Post are included in these financial statements. See Note 4 for further information on transactions with Post.
For the period prior to the IPO, these unaudited condensed consolidated financial statements included allocations of certain Post corporate expenses. These allocated expenses related to various services that were provided to the Company by Post, including, but not limited to, cash management and other treasury services, administrative services (such as tax, employee benefit administration, risk management, internal audit, accounting and human resources) and stock-based compensation plan administration. See Note 4 for further information on services that Post continues to provide to the Company.
For the three months ended December 31, 2019, $25.8 of the consolidated net earnings of BellRing LLC were allocated to the NCI, of which $5.5 reflects the entitlement of Post to 100% of the consolidated net earnings of BellRing LLC prior to the IPO and $20.3 reflects the entitlement of Post to 71.2% of the consolidated net earnings of BellRing LLC subsequent to the IPO. For the three months ended December 31, 2018, $25.1 of the consolidated net earnings of BellRing LLC were allocated to the NCI to reflect the entitlement of Post to 100% of the consolidated net earnings of BellRing LLC prior to the IPO.
NOTE 2RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
The Company has considered all new accounting pronouncements and has concluded there are no new pronouncements (other than the ones described below) that had or will have a material impact on the Company’s results of operations, comprehensive income, financial condition, cash flows, stockholders’ equity or disclosures based on current information.
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” This ASU requires a company to recognize right-of-use (“ROU”) assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for lessees, lessors and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” This ASU provides an additional transition method by allowing entities to initially apply the new lease standard at the date of adoption with a cumulative effect adjustment to the opening balances of retained earnings in the period of adoption. This ASU also gives lessors the option of electing, as a practical expedient by class of underlying asset, not to separate the lease and non-lease components of a contract when those lease contracts meet certain criteria.
The Company adopted these ASUs on October 1, 2019, and utilized the cumulative effect adjustment approach. At adoption, the Company recognized ROU assets and lease liabilities of $14.8 and $16.0, respectively, on the condensed consolidated balance sheet at October 1, 2019. The new standard did not materially impact the statements of operations or cash flows. In addition, the Company provides expanded disclosures related to its leasing arrangements in accordance with theses ASUs. For additional information, refer to Note 12.

7


NOTE 3REVENUE
The following table presents net sales by product for the three months ended December 31, 2019 and 2018.
 
Three Months Ended
December 31,
 
2019
 
2018
Shakes and other beverages
$
199.8

 
$
135.9

Powders
29.0

 
32.4

Nutrition bars
13.9

 
16.1

Other
1.3

 
1.4

   Net Sales
$
244.0

 
$
185.8


NOTE 4 — RELATED PARTY TRANSACTIONS
Prior to the IPO, the Company used certain functions and services performed by Post. These functions and services included legal, finance, internal audit, treasury, information technology support, insurance and tax matters, including assistance with certain public company reporting obligations; the use of office and/or data center space; payroll processing services; and tax compliance services. Costs for these functions and services performed by Post were allocated to the Company based on a reasonable activity base (including specific costs, revenue, net assets and headcount, or a combination of such items) or another reasonable method. Allocated costs were $2.3, including $1.2 of costs related to the separation from Post, for the three months ended December 31, 2018 and were included in “Selling, general and administrative expenses” in the Condensed Consolidated Statement of Operations. Costs related to the separation from Post were $1.5 for the three months ended December 31, 2019.
After the completion of the IPO, Post continues to provide these services and other services to the Company under a master services agreement (“MSA”). In addition to charges for these services, the Company also incurs certain pass-through charges from Post, primarily relating to stock-based compensation for employees participating in Post’s stock-based compensation plans. MSA fees and stock-based compensation expense related to Post’s stock-based compensation plan for the three months ended December 31, 2019 were $0.5 and $1.1, respectively, and were reported in “Selling, general and administrative expenses” in the Condensed Consolidated Statement of Operations.
The Company sells certain products to Post and its subsidiaries. For the period prior to the IPO, the amounts related to these transactions were included in the accompanying financial statements based upon transfer prices in effect at the time of the individual transactions. For the period subsequent to the IPO, these transactions were based upon pricing governed by agreements between the Company and Post and its subsidiaries. These transactions were consistent with prices of similar arm's-length transactions during both periods. During each of the three months ended December 31, 2019 and 2018, net sales to, purchases from and royalties paid to Post and its subsidiaries were immaterial.
In connection with the IPO, the Company entered into a series of agreements with Post which are intended to govern the ongoing relationship between the Company and Post. These agreements included an amended and restated limited liability company agreement, an employee matters agreement, an investor rights agreement, a tax matters agreement, a tax receivable agreement and the MSA, among others. Under certain of these agreements, the Company will incur expenses payable to Post in connection with certain administrative services provided for varying lengths of time. The Company had receivables and payables with Post of $0.1 and $2.3, respectively, at December 31, 2019, related to MSA fees and pass-through charges owed by the Company to Post, as well as related party sales and purchases. The receivables and payables were included in “Receivables, net” and “Accounts payable,” respectively, on the Condensed Consolidated Balance Sheet.
Based on the provisions of the tax receivable agreement, BellRing Inc. must pay to Post (or certain of its transferees or other assignees) 85% of the amount of cash savings, if any, in U.S. federal income tax, as well as state and local income tax and franchise tax (using an assumed tax rate) and foreign tax that BellRing Inc. realizes (or, in some circumstances, is deemed to realize) as a result of (a) the increase in the tax basis of assets of BellRing LLC attributable to (i) the redemption of Post’s (or certain transferees’ or assignees’) BellRing LLC units for shares of Class A Common Stock or cash, (ii) deemed sales by Post (or certain of its transferees or assignees) of BellRing LLC units or assets to BellRing Inc., (iii) certain actual or deemed distributions from BellRing LLC to Post (or certain transferees or assignees) and (iv) certain formation transactions, (b) disproportionate allocations of tax benefits to BellRing Inc. as a result of Section 704(c) of the Internal Revenue Code and (c) certain tax benefits (e.g., imputed interest, basis adjustments, etc.) attributable to payments under the tax receivable agreement. Amounts payable to Post related to the tax receivable agreement were $12.9 at December 31, 2019, and were recorded as an increase to “Other liabilities” and an increase to “Accumulated deficit” on the Condensed Consolidated Balance Sheet.

8


NOTE 5 — REDEEMABLE NONCONTROLLING INTEREST
Post holds 97.5 million BellRing LLC units, equal to 71.2% of the economic interest in BellRing LLC, and may redeem BellRing LLC units for, at BellRing LLC’s option (as determined by its Board of Managers), (i) one share of Class A Common Stock or (ii) cash (based on the market price of the shares of Class A Common Stock). The redemption of BellRing LLC units for shares of Class A Common Stock will be at an initial redemption rate of one share of Class A Common Stock for one BellRing LLC unit, subject to customary redemption rate adjustments for stock splits, stock dividends and reclassifications.
Post’s ownership of BellRing LLC units represents an NCI to the Company, which is classified outside of permanent stockholders’ equity as the BellRing LLC units are redeemable at the option of Post, through Post’s ownership of the Company’s Class B Common Stock (see Note 1). The carrying amount of the NCI is the greater of: (i) the initial carrying amount, increased or decreased for the NCI’s share of net income or loss, other comprehensive income or loss and distributions or dividends or (ii) the redemption value. As of December 31, 2019, the carrying amount of the NCI was recorded at its redemption value of $2,075.2.
As of December 31, 2019, BellRing Inc. owned 28.8% of the outstanding BellRing LLC units. The financial results of BellRing LLC and its subsidiaries were consolidated with BellRing Inc., and 71.2% of the consolidated net earnings were allocated to the NCI to reflect the entitlement of Post to a portion of the consolidated net earnings.
The following table summarizes the changes to the Company’s NCI for the period beginning October 21, 2019, the effective date of the IPO, and ending December 31, 2019 (see Note 1).
Beginning of period
$

Net earnings attributable to NCI after IPO
20.3

Net change in hedges, net of tax
0.4

Foreign currency translation adjustments
0.1

Impact of IPO
1,364.6

Redemption value adjustment to NCI
689.8

End of period
$
2,075.2


The following table summarizes the effects of changes in ownership in BellRing LLC on BellRing Inc.’s equity for the period beginning October 21, 2019, the effective date of the IPO, and ending December 31, 2019 (see Note 1).
Net earnings available to Class A Common Stockholders
$
6.0

Transfers to NCI:
 
Impact of IPO
1,364.6

Redemption value adjustment to NCI
689.8

     Changes from net earnings available to Class A Common Stockholders and transfers to NCI
$
2,060.4


NOTE 6 — INCOME TAXES
BellRing Inc. holds 28.8% of the economic interest in BellRing LLC (see Note 1), which, as a result of the IPO and formation transactions, is treated as a partnership for U.S. federal income tax purposes. As a partnership, BellRing LLC is itself generally not subject to U.S. federal income tax under current U.S. tax laws.
BellRing Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its 28.8% distributive share of the items of income, gain, loss and deduction of BellRing LLC. BellRing Inc. is also subject to taxes in foreign jurisdictions.
Prior to the IPO and formation transactions, the Company reported 100% of the income, gain, loss and deduction of BellRing LLC as part of Post’s consolidated U.S federal income tax return and therefore, was subject to U.S federal income taxes, in addition to state, local and foreign taxes.
The effective income tax rate was 15.6% and 23.7% during the three months ended December 31, 2019 and 2018, respectively. The decrease in the effective income tax rate compared to the prior year period was primarily due to the Company taking into account for U.S. federal income tax purposes its 28.8% distributive share of the items of income, gain, loss and deduction of BellRing LLC in the period subsequent to the IPO as a result of the formation transactions. Prior to the IPO and formation transactions, the Company reported 100% of the income, gain, loss and deduction of BellRing LLC. In accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” the Company records income tax expense (benefit) for interim periods using the

9


estimated annual effective income tax rate for the full fiscal year adjusted for the impact of discrete items occurring during the interim periods.
NOTE 7 EARNINGS PER SHARE
Basic earnings per share is based on the average number of shares of Class A Common Stock outstanding during the period. Diluted earnings per share is based on the average number of shares of Class A Common Stock used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options and restricted stock units using the “treasury stock” method.
BellRing Inc.’s Class B Common Stock does not have economic rights, including rights to dividends or distributions upon liquidation, and is therefore not a participating security. As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two-class method has not been presented.
The following table sets forth the computation of basic and diluted earnings per share for the period beginning October 21, 2019, the effective date of the IPO, and ending December 31, 2019 (see Note 1). There were no shares of Class A Common Stock outstanding during the three months ended December 31, 2018, and as such, no computation of basic and diluted earnings per share has been provided.
Net earnings available to Class A Common Stockholders
$
6.0

 
 
Weighted-average shares for basic earnings per share (in millions)
39.4

Total dilutive securities

Weighted-average shares for diluted earnings per share (in millions)
39.4

 
 
Basic and Diluted earnings per share of Class A Common Stock
$
0.15

Weighted-average shares for diluted earnings per share excludes 0.1 million equity awards for the period beginning October 21, 2019, the effective date of the IPO, and ending December 31, 2019 (see Note 1), as they were anti-dilutive.
NOTE 8 — INVENTORIES
 
December 31,
2019
 
September 30, 2019
Raw materials and supplies
$
27.0

 
$
26.4

Work in process
0.1

 
0.1

Finished products
123.1

 
111.7

   Inventories
$
150.2

 
$
138.2


NOTE 9 — PROPERTY, NET
 
December 31,
2019
 
September 30, 2019
Property, at cost
$
20.8

 
$
21.1

Accumulated depreciation
(10.2
)
 
(9.4
)
   Property, net
$
10.6

 
$
11.7


NOTE 10 — GOODWILL
The components of “Goodwill” on the Condensed Consolidated Balance Sheets at both December 31, 2019 and September 30, 2019 are presented in the following table.
Goodwill, gross
$
180.7

Accumulated impairment losses
(114.8
)
   Goodwill, net
$
65.9



10


NOTE 11 — INTANGIBLE ASSETS, NET
Total intangible assets are as follows:
 
December 31, 2019
 
September 30, 2019
 
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amount
 
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amount
Customer relationships
$
209.4

 
$
(68.3
)
 
$
141.1

 
$
209.4

 
$
(65.5
)
 
$
143.9

Trademarks and brands
213.4

 
(63.5
)
 
149.9

 
213.4

 
(60.8
)
 
152.6

Other intangible assets
3.1

 
(3.1
)
 

 
3.1

 
(3.1
)
 

   Intangible assets, net
$
425.9

 
$
(134.9
)
 
$
291.0

 
$
425.9

 
$
(129.4
)
 
$
296.5


NOTE 12 — LEASES
In conjunction with the adoption of ASUs 2016-02 and 2018-11 (see Note 2), the Company updated its policy for recognizing leases under ASC Topic 842. The Company assessed the impact of these ASUs by reviewing its lease portfolio, implementing lease accounting software, developing related business processes and implementing internal controls. A summary of the updated policy is included below. Prior to October 1, 2019, the Company accounted for leases under ASC Topic 840, “Leases.”
Lease Portfolio
The Company leases office space, certain warehouses and equipment primarily through operating lease agreements. The Company has no material finance lease agreements. Leases have remaining terms which range from less than one year to seven years and most leases provide the Company with the option to exercise one or more renewal terms.
Lease Policy
The Company determines if an arrangement is a lease at its inception. When the arrangements include lease and non-lease components, the Company accounts for them as a single lease component. Leases with an initial term of less than 12 months are not reported on the balance sheet, but rather recognized as lease expense on a straight-line basis over the lease term. Arrangements may include options to extend or terminate the lease arrangement. These options are included in the lease term used to establish ROU assets and lease liabilities when it is reasonably certain they will be exercised. The Company will reassess expected lease terms based on changes in circumstances that indicate options may be more or less likely to be exercised.
The Company has certain lease arrangements that include variable rental payments. The future variability of these payments and adjustments are unknown and therefore are not included in minimum rental payments used to determine ROU assets and lease liabilities. The Company has lease arrangements where it makes separate payments to the lessor based on the lessor's common area maintenance expenses, property and casualty insurance costs, property taxes assessed on the property and other variable expenses. As the Company has elected the practical expedient not to separate lease and non-lease components, these variable amounts are captured in operating lease expense in the period in which they are incurred. Variable rental payments are recognized in the period in which their associated obligation is incurred.
As most of the Company’s lease arrangements do not provide an implicit interest rate, an incremental borrowing rate (“IBR”) is applied in determining the present value of future payments. The Company’s IBR is selected based upon information available at the lease commencement date.
ROU assets are recorded as “Other assets,” and lease liabilities are recorded as “Other current liabilities” and “Other liabilities” on the Condensed Consolidated Balance Sheet. Operating lease expense is recognized on a straight-line basis over the lease term and is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statement of Operations. Costs associated with finance leases and lease income do not have a material impact on the Company’s financial statements.
Impact of Adoption
The Company utilized the cumulative effect adjustment method of adoption and, accordingly, recorded ROU assets and lease liabilities of $14.8 and $16.0, respectively, on the balance sheet at October 1, 2019. The Company elected the following practical expedients in accordance with ASC Topic 842:
Reassessment elections — The Company elected the package of practical expedients and did not reassess whether any existing contracts are or contain a lease, provided a lease analysis was conducted under ASC Topic 840. To the extent leases were identified under ASC Topic 840, the Company did not reassess the classification of those leases. Additionally, to the extent initial direct costs were capitalized under ASC Topic 840 and are not amortized as a result of the implementation of ASC Topic 842, they were not reassessed.

11


Short-term lease election — ASC Topic 842 allows lessees an option to not recognize ROU assets and lease liabilities arising from short-term leases. A short-term lease is defined as a lease with an initial term of 12 months or less. The Company elected to not recognize short-term leases as ROU assets and lease liabilities on the balance sheet. All short-term leases which are not included on the Company’s balance sheet will be recognized within lease expense. Leases that have an initial term of 12 months or less with an option for renewal will need to be assessed in order to determine if the lease qualifies for the short-term lease exception. If the option is reasonably certain to be exercised, the lease does not qualify as a short-term lease.
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.
The following table presents the balance sheet location of the Company’s operating leases as of December 31, 2019.
 
December 31, 2019
ROU assets:
 
   Other assets
$
13.9

 
 
Lease liabilities:
 
   Other current liabilities
$
2.7

   Other liabilities
12.4

      Total lease liabilities
$
15.1


The following table presents maturities of the Company’s operating lease liabilities as of December 31, 2019, presented under ASC Topic 842.
 
December 31, 2019
Remaining Fiscal 2020
$
2.6

Fiscal 2021
2.8

Fiscal 2022
2.7

Fiscal 2023
2.5

Fiscal 2024
1.9

Thereafter
4.7

   Total future minimum payments
17.2

   Less: Implied interest
(2.1
)
      Total lease liabilities
$
15.1


The following table presents future minimum rental payments under the Company’s noncancelable operating leases as of September 30, 2019, presented under ASC Topic 840.
 
September 30, 2019
Fiscal 2020
$
2.7

Fiscal 2021
2.7

Fiscal 2022
2.7

Fiscal 2023
2.7

Fiscal 2024
1.9

Thereafter
4.7

   Total future minimum payments
$
17.4


As reported under ASC Topic 842, operating lease expense for the three months ended December 31, 2019 was $1.1, which included immaterial variable lease costs and short-term lease costs. As reported under ASC Topic 840, rent expense for the three months ended December 31, 2018 was $0.7. Operating cash flows for amounts included in the measurement of the Company’s operating lease liabilities for the three months ended December 31, 2019 were $0.9. ROU assets obtained in exchange for operating

12


lease liabilities during the three months ended December 31, 2019 were immaterial. The weighted average remaining lease term of the Company’s operating leases as of December 31, 2019 was approximately six years and the weighted average incremental borrowing rate was 4.1% as of December 31, 2019.
NOTE 13 — DERIVATIVE FINANCIAL INSTRUMENTS
In the ordinary course of business, the Company is exposed to commodity price risks relating to the acquisition of raw materials and supplies, interest rate risks relating to floating rate debt and foreign currency exchange rate risks. The Company utilizes swaps to manage certain of these exposures by hedging when it is practical to do so. The Company does not hold or issue financial instruments for speculative or trading purposes.
At December 31, 2019, the Company had pay-fixed, receive-variable interest rate swaps maturing in December 2022 that require monthly settlements beginning on January 31, 2020 and are used as cash flow hedges of forecasted interest payments on its variable rate debt (see Note 15). The interest rate swaps are designated as hedging instruments under ASC Topic 815. At December 31, 2019, the notional amount of interest rate swaps held by the Company was $350.0. No derivative instruments were held by the Company at September 30, 2019.
The following table presents the balance sheet location and fair value of the Company’s derivative instruments on a gross basis, along with the portion designated as hedging instruments under ASC Topic 815, as of December 31, 2019. The Company does not offset derivative assets and liabilities within the Condensed Consolidated Balance Sheet.
Balance Sheet Location
 
Fair Value
 
Portion Designated as Hedging Instrument
Other current assets
 
$
0.4

 
$
0.4

Other assets
 
0.2

 
0.2

   Total assets
 
$
0.6

 
$
0.6


At December 31, 2019, accumulated other comprehensive income (“OCI”) included a $0.6 net hedging gain (before and after taxes), all of which was recognized in the three months ended December 31, 2019. Approximately $0.4 of the net hedging gain reported in accumulated OCI at December 31, 2019 is expected to be reclassified into earnings within the next 12 months. The reclassification will occur on a straight-line basis over the term of the related debt.
NOTE 14 — FAIR VALUE MEASUREMENTS
The Company had derivative assets with a fair value of $0.6 at December 31, 2019 which were classified as Level 2 within the fair value hierarchy in ASC Topic 820. The Company’s calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve on a recurring basis. There were no such derivative assets as of September 30, 2019.
The Company’s NCI had a fair value of $2,075.2 at December 31, 2019 which was classified as Level 1 within the fair value hierarchy in ASC Topic 820. The fair value of the NCI is calculated as its redemption value based on the stock price and number of BellRing LLC units owned by Post as of December 31, 2019 (see Note 5). The Company did not have an NCI as of September 30, 2019.
The Company’s financial assets and liabilities include cash and cash equivalents, receivables and accounts payable for which the carrying value approximates fair value due to their short maturities (less than 12 months). The Company does not record its short-term and long-term debt at fair value on the Condensed Consolidated Balance Sheets. The fair value of outstanding borrowings under the Revolving Credit Facility (as defined in Note 15) as of December 31, 2019 approximated its carrying value. Based on current market rates, the fair value (Level 2) of the Term B Facility (as defined in Note 15) was $707.0 as of December 31, 2019. The Company did not have short-term or long-term debt as of September 30, 2019.
Certain assets and liabilities, including property, plant and equipment, goodwill and other intangible assets, are measured at fair value on a non-recurring basis.
NOTE 15LONG-TERM DEBT
The components of “Long-term debt” on the Condensed Consolidated Balance Sheet at December 31, 2019 are presented in the following table. No long-term debt was held by the Company at September 30, 2019.

13


 
December 31,
2019
Term B Facility
$
700.0

Revolving Credit Facility
80.0

 
780.0

Less: Current portion of long-term debt
(35.0
)
Debt issuance costs, net
(8.0
)
Unamortized discount
(13.2
)
Long-term debt
$
723.8


Assumption of Bridge Loan
On October 11, 2019, in connection with the IPO and the formation transactions, Post entered into a $1,225.0 Bridge Facility Agreement (the “Bridge Loan Facility”) and borrowed $1,225.0 under the Bridge Loan Facility (the “Bridge Loan”). Certain of Post’s domestic subsidiaries (other than BellRing Inc. but including BellRing LLC and its domestic subsidiaries) guaranteed the Bridge Loan.
On October 21, 2019, BellRing LLC entered into a Borrower Assignment and Assumption Agreement with Post and the administrative agent under the Bridge Loan Facility, under which (i) BellRing LLC became the borrower under the Bridge Loan and assumed all interest of $2.2 thereunder, and Post and its subsidiary guarantors (other than BellRing LLC and its domestic subsidiaries) were released from all material obligations under the Bridge Loan, (ii) the domestic subsidiaries of BellRing LLC continued to guarantee the Bridge Loan, and (iii) BellRing LLC’s obligations under the Bridge Loan became secured by a first priority security interest in substantially all of the assets (other than real estate) of BellRing LLC and in substantially all of the assets of its subsidiary guarantors. BellRing LLC did not receive any of the proceeds of the Bridge Loan. On October 21, 2019, the Bridge Loan was repaid in full. See below for additional information.
Credit Agreement
On October 21, 2019, BellRing LLC entered into a Credit Agreement (the “Credit Agreement”) by and among BellRing LLC, the institutions from time to time party thereto as lenders (the “Lenders”), Credit Suisse Loan Funding LLC, BofA Securities, Inc., Morgan Stanley Senior Funding, Inc., Barclays Bank PLC, Citibank, N.A., Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and BMO Capital Markets Corp., Coöperatieve Rabobank U.A., New York Branch, Nomura Securities International, Inc., Suntrust Robinson Humphrey, Inc., UBS Securities LLC and Wells Fargo Securities, LLC, as co-managers, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the Lenders (in such capacity, the “Agent”).
The Credit Agreement provides for a term B loan facility in an aggregate principal amount of $700.0 (the “Term B Facility”) and a revolving credit facility in an aggregate principal amount of $200.0 (the “Revolving Credit Facility”), with the commitments under the Revolving Credit Facility to be made available to BellRing LLC in U.S. Dollars, Euros and Pounds Sterling. Letters of credit are available under the Credit Agreement in an aggregate amount of up to $20.0. The outstanding amounts under the Revolving Credit Facility and Term B Facility must be repaid on or before October 21, 2024.
On October 21, 2019, BellRing LLC borrowed the full amount under the Term B Facility and $100.0 under the Revolving Credit Facility. The Term B Facility was issued at 98.0% of par and BellRing LLC received $776.4 from the Term B Facility and Revolving Credit Facility after accounting for the original issue discount of $14.0 and paying investment banking and other fees of $9.6, which were deferred and will be amortized to interest expense over the terms of the loans. BellRing LLC used the proceeds, together with the net proceeds of the IPO that were contributed to it by BellRing Inc., (i) to repay in full the $1,225.0 of borrowings under the Bridge Loan and all interest thereunder and related costs and expenses, (ii) to pay directly, or reimburse Post for, as applicable, all fees and expenses incurred by BellRing LLC or Post in connection with the IPO and the formation transactions, (iii) to reimburse Post for the amount of cash on BellRing LLC’s balance sheet immediately prior to the completion of the IPO and (iv) for general corporate and working capital purposes, as well as to repay $20.0 of outstanding borrowings under the Revolving Credit Facility.
During the three months ended December 31, 2019, BellRing LLC borrowed $120.0 and repaid $40.0 on the Revolving Credit Facility. The available borrowing capacity under the Revolving Credit Facility was $120.0 at December 31, 2019, and there were no outstanding letters of credit at December 31, 2019.
Borrowings under the Term B Facility bear interest, at the option of BellRing LLC, at an annual rate equal to either (a) the Eurodollar Rate or (b) the Base Rate (as such terms are defined in the Credit Agreement) determined by reference to the greatest of (i) the Prime Rate (as defined in the Credit Agreement), (ii) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50% per annum and (iii) the one-month Eurodollar Rate plus 1.00% per annum, in each case plus an applicable margin of

14


5.00% for Eurodollar Rate-based loans and 4.00% for Base Rate-based loans. The Term B Facility requires quarterly scheduled amortization payments of $8.75 beginning on March 31, 2020, with the balance to be paid at maturity on October 21, 2024. The Term B Facility contains customary mandatory prepayment provisions, including provisions for mandatory prepayment (a) from the net cash proceeds of certain asset sales and (b) beginning with the fiscal year ending September 30, 2020, of 75% of Consolidated Excess Cash Flow (as defined in the Credit Agreement) (which percentage will be reduced to 50% if the secured net leverage ratio (as defined in the Credit Agreement) is less than or equal to 3.35:1.00 as of a fiscal year end). The Term B Facility may be optionally prepaid at 101% of the principal amount prepaid at any time during the first 12 months following the closing of the Term B Facility, and without premium or penalty thereafter.
Borrowings under the Revolving Credit Facility bear interest, at the option of BellRing LLC, at an annual rate equal to either the Eurodollar Rate or the Base Rate (determined as described above) plus a margin, which initially will be 4.25% for Eurodollar Rate-based loans and 3.25% for Base Rate-based loans, and thereafter, will be determined by reference to the secured net leverage ratio, with the applicable margin for Eurodollar Rate-based loans and Base Rate-based loans being (i) 4.25% and 3.25%, respectively, if the secured net leverage ratio is greater than or equal to 3.50:1.00, (ii) 4.00% and 3.00%, respectively, if the secured net leverage ratio is less than 3.50:1.00 and greater than or equal to 2.50:1.00 or (iii) 3.75% and 2.75%, respectively, if the secured net leverage ratio is less than 2.50:1.00. Facility fees on the daily unused amount of commitments under the Revolving Credit Facility will initially accrue at the rate of 0.50% per annum and thereafter, depending on BellRing LLC’s secured net leverage ratio, will accrue at rates ranging from 0.25% to 0.50% per annum.
Under the terms of the Credit Agreement, BellRing LLC is required to comply with a financial covenant requiring it to maintain a total net leverage ratio (as defined in the Credit Agreement) not to exceed 6.00 to 1.00, measured as of the last day of each fiscal quarter, beginning with the quarter ending March 31, 2020. The total net leverage ratio of BellRing LLC would not have exceeded this threshold if it would have been required to comply with the financial covenant as of December 31, 2019.
The 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 Credit Agreement.
The Credit Agreement provides for customary events of default, including material breach of representations and warranties, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or default under certain other material indebtedness, certain events of bankruptcy and insolvency, inability to pay debts, the occurrence of one or more unstayed or undischarged judgments in excess of $65.0, certain events under the Employee Retirement Income Security Act of 1974, the invalidity of any loan document, a change in control, and the failure of the collateral documents to create a valid and perfected first priority lien. Upon the occurrence and during the continuance of an event of default, the maturity of the loans under the Credit Agreement may accelerate and the Agent and Lenders under the Credit Agreement may exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees of BellRing LLC’s obligations under the Credit Agreement.
BellRing LLC’s obligations under the Credit Agreement are unconditionally guaranteed by its existing and subsequently acquired or organized direct and indirect domestic subsidiaries (other than immaterial domestic subsidiaries and certain excluded subsidiaries) and are secured by security interests in substantially all of BellRing LLC’s assets and the assets of its subsidiary guarantors, but excluding, in each case, real property.
NOTE 16 — COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Joint Juice Litigation
In March 2013, a complaint was filed on behalf of a putative, nationwide class of consumers against Premier Nutrition in the U.S. District Court for the Northern District of California seeking monetary damages and injunctive relief. The case asserted that some of Premier Nutrition’s advertising claims regarding its Joint Juice® line of glucosamine and chondroitin dietary supplements were false and misleading. In April 2016, the district court certified a California-only class of consumers in this lawsuit (this lawsuit is hereinafter referred to as the “California Federal Class Lawsuit”).
In 2016 and 2017, the lead plaintiff’s counsel in the California Federal Class Lawsuit filed ten additional class action complaints in the U.S. District Court for the Northern District of California on behalf of putative classes of consumers under the laws of Connecticut, Florida, Illinois, New Jersey, New Mexico, New York, Maryland, Massachusetts, Michigan and Pennsylvania. These additional complaints contain factual allegations similar to the California Federal Class Lawsuit, also seeking monetary damages and injunctive relief.
In April 2018, the district court dismissed the California Federal Class Lawsuit with prejudice. This dismissal was appealed and is pending before the U.S. Court of Appeals for the Ninth Circuit. The other ten complaints remain pending in the U.S. District Court for the Northern District of California, and the court has certified individual state classes in each of those cases.

15


In January 2019, the same lead counsel filed another class action complaint against Premier Nutrition in Alameda County California Superior Court, alleging claims similar to the above actions and seeking monetary damages and injunctive relief on behalf of a putative class of California consumers.
The Company continues to vigorously defend these cases. The Company does not believe that the resolution of these cases will have a material adverse effect on its financial condition, results of operations or cash flows.
Other than legal fees, no expense related to this litigation was incurred during the three months ended December 31, 2019 or 2018. At both December 31, 2019 and September 30, 2019, the Company had accrued $8.5 related to this matter that was included in “Other current liabilities” on the Condensed Consolidated Balance Sheets.
Other
The Company is subject to various other legal proceedings and actions arising in the normal course of business. In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from such pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accruals for estimated liabilities (if any), are not expected to be material individually or in the aggregate to the financial condition, results of operations or cash flows of the Company. In addition, although it is difficult to estimate the potential financial impact of actions regarding expenditures for compliance with regulatory matters, in the opinion of management, based upon the information currently available, the ultimate liability arising from such compliance matters is not expected to be material to the financial condition, results of operations or cash flows of the Company.
NOTE 17 — STOCKHOLDERS’ EQUITY
On October 21, 2019, 50.0 million shares of preferred stock were authorized pursuant to BellRing Inc.’s Amended and Restated Certificate of Incorporation. There were no shares of the BellRing Inc.’s preferred stock issued or outstanding as of December 31, 2019.
Additionally, on October 21, 2019, 500.0 million shares of Class A Common Stock and one share of Class B Common Stock were authorized pursuant to BellRing Inc.’s Amended and Restated Certificate of Incorporation. The share of Class B Common Stock was issued to Post in exchange for 1,000 shares of BellRing Inc.’s common stock, par value of $0.01 per share, initially issued to Post in connection with BellRing Inc.’s incorporation. These common shares were outstanding as of September 30, 2019 and were cancelled on October 21, 2019 as part of the exchange. BellRing Inc. initially issued 39.4 million shares of Class A Common Stock on October 21, 2019 in connection with the IPO, which were also outstanding as of December 31, 2019. One share of Class B Common Stock was issued and outstanding as of December 31, 2019.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of BellRing Brands, 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 Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and the “Cautionary Statement On Forward-Looking Statements” section included below. The terms “our,” “we,” “us,” “Company” and “BellRing” as used herein refer to BellRing Brands, Inc. and its consolidated subsidiaries.
OVERVIEW
We are a consumer products holding company operating in the global convenient nutrition category and a provider of ready-to-drink (“RTD”) protein shakes, other RTD beverages, powders, nutrition bars and nutritional supplements. Our primary brands are Premier Protein, Dymatize and PowerBar.
On October 21, 2019, BellRing Brands Inc. (“BellRing Inc.”) closed its initial public offering (the “IPO”) of 39.4 million shares of its Class A common stock, $0.01 par value per share (the “Class A Common Stock”), which number of shares included the underwriters’ exercise in full of their option to purchase up to an additional 5.1 million shares of Class A Common Stock. The IPO was completed at an offering price of $14.00 per share and BellRing Inc. received net proceeds from the IPO of approximately $524.4 million, after deducting underwriting discounts and commissions, all of which were contributed to BellRing Brands, LLC, a Delaware limited liability company and BellRing Inc.’s subsidiary (“BellRing LLC”) in exchange for 39.4 million BellRing LLC non-voting membership units (the “BellRing LLC units”).
As a result of the IPO and certain other transactions completed in connection with the IPO (the “formation transactions”), BellRing Inc. became the holder of the active nutrition business of Post Holdings, Inc. (“Post”), which until the completion of the IPO, had been comprised of Premier Nutrition Company, LLC (the successor of Premier Nutrition Corporation), Dymatize

16


Enterprises, LLC , Supreme Protein, LLC, the PowerBar brand and Active Nutrition International GmbH. As a holding company, BellRing Inc. has no material assets other than its ownership of BellRing LLC units and its indirect interests in the subsidiaries of BellRing LLC and has no independent means of generating revenue or cash flow. For additional information on the IPO, see Note 1 within “Notes to Condensed Consolidated Financial Statements.”
The members of BellRing LLC are Post and BellRing Inc. BellRing Inc. holds the voting membership unit of BellRing LLC (which represents the power to appoint and remove the members of the Board of Managers of, and no economic interest in, BellRing LLC). BellRing Inc. has the right to appoint the members of the BellRing LLC Board of Managers, and therefore, controls BellRing LLC. The Board of Managers is responsible for the oversight of BellRing LLC’s operations and overall performance and strategy, while the management of the day-to-day operations of the business of BellRing LLC and the execution of business strategy are the responsibility of the officers and employees of BellRing LLC and its subsidiaries. Post, in its capacity as a member of BellRing LLC, does not have the power to appoint any members of the Board of Managers or voting rights with respect to BellRing LLC.
As of December 31, 2019, BellRing Inc. owned 28.8% of the outstanding BellRing LLC units. The financial results of BellRing LLC and its subsidiaries were consolidated with BellRing Inc., and effective as of October 21, 2019, 71.2% of the consolidated net earnings were allocated to the redeemable noncontrolling interest (“NCI”) to reflect the entitlement of Post to a portion of the consolidated net earnings.
Lease Accounting
On October 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” At adoption, we recognized right-of-use assets and lease liabilities of $14.8 million and $16.0 million, respectively, on the condensed consolidated balance sheet at October 1, 2019. For additional information regarding the ASUs, refer to Notes 2 and 12 within “Notes to Condensed Consolidated Financial Statements.”
RESULTS OF OPERATIONS
 
Three Months Ended December 31,
 
 
 
 
 
favorable/(unfavorable)
dollars in millions
2019
 
2018
 
$ Change
 
% Change
Net Sales
$
244.0

 
$
185.8

 
$
58.2

 
31
 %
 
 
 
 
 
 
 
 
Operating Profit
$
49.3

 
$
32.9

 
$
16.4

 
50
 %
Interest expense, net
11.6

 

 
(11.6
)
 
(100
)%
Income tax expense
5.9

 
7.8

 
1.9

 
24
 %
Less: Net earnings attributable to NCI
25.8

 
25.1

 
(0.7
)
 
(3
)%
Net Earnings Available to Class A Common Stockholders
$
6.0

 
$

 
$
6.0

 
100
 %
Net Sales
Net sales increased $58.2 million, or 31%, during the three months ended December 31, 2019, compared to the corresponding prior year period. Sales of Premier Protein products were up $63.2 million, or 45%, with volume up 38%. Volume increases were driven by higher RTD protein shake product volumes which primarily related to distribution gains and lapping short-term capacity constraints in the first quarter of 2019. Average net selling prices increased in the three months ended December 31, 2019 resulting from targeted price increases that occurred in the second quarter of fiscal 2019. Sales of Dymatize products were down $3.0 million, or 10%, with volume down 4%, primarily due to higher club volumes in the prior year associated with promotional activity that did not recur. Sales of PowerBar products were down $1.2 million, or 12%, with volume down 28%, driven by strategic sales reductions of low performing products within our North American portfolio. Sales of all other products were down $0.8 million.
Operating Profit
Operating profit increased $16.4 million, or 50%, during the three months ended December 31, 2019, when compared to the prior year period. This increase was primarily driven by higher net sales, as previously discussed, partially offset by higher net product costs of $1.7 million, as unfavorable raw materials and manufacturing costs were partially offset by lower freight costs. These positive impacts were partially offset by higher employee-related expenses, higher warehousing costs of $1.9 million, increased marketing spending of $1.8 million and incremental public company costs of $2.1 million (including higher stock-based compensation expense of $0.9 million).

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Interest Expense, Net
Interest expense, net was $11.6 million during the three months ended December 31, 2019, compared to zero in the prior year period. The increase was due to the issuance of debt in the first quarter of fiscal 2020. We had no debt outstanding in fiscal 2019. See Note 15 for additional information on our debt.
Income Taxes
Our effective income tax rate was 15.6% and 23.7% for the three months ended December 31, 2019 and 2018, respectively. The decrease in the effective income tax rate compared to the prior year period was primarily due to us taking into account for U.S. federal income tax purposes our 28.8% distributive share of the items of income, gain, loss and deduction of BellRing LLC in the period subsequent to the IPO as a result of the formation transactions. Prior to the IPO and formation transactions, we reported 100% of the income, gain, loss and deduction of BellRing LLC. In accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” we record income tax expense (benefit) for interim periods using the estimated annual effective income tax rate for the full fiscal year adjusted for the impact of discrete items occurring during the interim periods.
LIQUIDITY AND CAPITAL RESOURCES
On October 21, 2019, BellRing Inc. closed its IPO of 39.4 million shares of Class A Common Stock, which number of shares included the underwriters’ exercise in full of their option to purchase up to an additional 5.1 million shares of Class A Common Stock, at an offering price of $14.00 per share. BellRing Inc. received net proceeds from the IPO of $524.4 million, after deducting underwriting discounts and commissions.
On October 11, 2019, in connection with the IPO and the formation transactions, Post entered into a $1,225.0 million Bridge Facility Agreement (the “Bridge Loan Facility”) and borrowed $1,225.0 million under the Bridge Loan Facility (the “Bridge Loan”). Certain of Post’s domestic subsidiaries (other than BellRing Inc. but including BellRing LLC and its domestic subsidiaries) guaranteed the Bridge Loan. On October 21, 2019, BellRing LLC entered into a Borrower Assignment and Assumption Agreement with Post and the administrative agent under the Bridge Loan Facility, under which (i) BellRing LLC became the borrower under the Bridge Loan and assumed all interest of $2.2 million thereunder, and Post and its subsidiary guarantors (other than BellRing LLC or its domestic subsidiaries) were released from all material obligations under the Bridge Loan, (ii) the domestic subsidiaries of BellRing LLC continued to guarantee the Bridge Loan, and (iii) BellRing LLC’s obligations under the Bridge Loan became secured by a first priority security interest in substantially all of BellRing LLC’s assets and substantially all of the assets of its subsidiary guarantors (other than real estate). BellRing LLC did not receive any of the proceeds of the Bridge Loan.
On October 21, 2019, BellRing LLC entered into a Credit Agreement (the “Credit Agreement”) by and among BellRing LLC, the institutions from time to time party thereto as lenders (the “Lenders”), Credit Suisse Loan Funding LLC, BofA Securities, Inc., Morgan Stanley Senior Funding, Inc., Barclays Bank PLC, Citibank, N.A., Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and BMO Capital Markets Corp., Coöperatieve Rabobank U.A., New York Branch, Nomura Securities International, Inc., Suntrust Robinson Humphrey, Inc., UBS Securities LLC and Wells Fargo Securities, LLC, as co-managers, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the Lenders (in such capacity, the “Agent”).
The Credit Agreement provides for a term B loan facility in an aggregate principal amount of $700.0 million (the “Term B Facility”), and a revolving credit facility in an aggregate principal amount of $200.0 million (the “Revolving Credit Facility”). During the three months ended December 31, 2019, BellRing LLC borrowed the full amount under the Term B Facility and $120.0 million under the Revolving Credit Facility and used the proceeds, together with the net proceeds of the IPO that were contributed to it by BellRing Inc., (i) to repay in full the $1,225.0 million of borrowings under the Bridge Loan and all interest thereunder and related costs and expenses, (ii) to pay directly, or reimburse Post for, as applicable, all fees and expenses incurred by BellRing LLC or Post in connection with the IPO and the formation transactions, (iii) to reimburse Post for the amount of cash on BellRing LLC’s balance sheet immediately prior to the completion of the IPO and (iv) for general corporate and working capital purposes, as well as to repay $40.0 million of borrowings under the Revolving Credit Facility.
BellRing LLC has $120.0 million of borrowing capacity under the secured Revolving Credit Facility as of December 31, 2019, and letters of credit are available under the Revolving Credit Facility in an aggregate amount of up to $20.0 million. The Credit Agreement provides for potential incremental revolving and term facilities at BellRing LLC’s request and at the discretion of the Lenders or other persons providing such incremental facilities, in each case on terms to be determined, and also permits BellRing LLC to incur other secured or unsecured debt, in all cases subject to conditions and limitations on the amount as specified in the Credit Agreement.
For additional information on the IPO, the formation transactions and the Credit Agreement, see Notes 1 and 15 within “Notes to Condensed Consolidated Financial Statements.”

18


We expect to generate positive cash flows from operations and believe our cash on hand, cash flows from operations and possible future credit facilities will be sufficient to satisfy our future working capital requirements, research and development activities and other financing requirements for the foreseeable future. Our asset-light business model requires modest capital expenditures, with annual capital expenditures over the last three fiscal years averaging less than 1% of net sales. No significant capital expenditures are planned for the remainder of fiscal 2020. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures and other business risk factors. If we are unable to generate sufficient cash flows from operations, or otherwise to comply with the terms of BellRing LLC’s credit facilities, we may be required to seek additional financing alternatives.
The following table shows select cash flow data, which is discussed below.
 
Three Months Ended
December 31,
dollars in millions
2019
 
2018
Cash (used in) provided by:
 
 
 
Operating activities
$
(24.9
)
 
$
5.9

Investing activities
(0.7
)
 
(1.0
)
Financing activities
49.9

 
(6.4
)
Effect of exchange rate changes on cash and cash equivalents
0.1

 
(0.2
)
Net increase (decrease) in cash and cash equivalents
$
24.4

 
$
(1.7
)
Operating Activities
Cash used in operating activities for the three months ended December 31, 2019 decreased $30.8 million compared to the prior year period. The decrease was driven by unfavorable working capital changes of $35.1 million primarily due to fluctuations in the timing of sales and collections of trade receivables as well as a 31% increase in net sales compared to the prior year period, which resulted in a signification increase in trade receivables at December 31, 2019. In addition, we had higher interest payments of $10.3 million due to the increase in the principal balance of our outstanding debt. These negative impacts were partially offset by higher operating profit compared to the prior year period.
Investing Activities
Cash used in investing activities for the three months ended December 31, 2019 decreased $0.3 million compared to the prior year period, resulting from a decrease in capital expenditures.
Financing Activities
Cash provided by financing activities for the three months ended December 31, 2019 was $49.9 million compared to cash used in financing activities of $6.4 million in the prior year period. In the three months ended December 31, 2019, BellRing LLC received proceeds of $686.0 million, net of discount, related to the issuance of the Term B Facility and drew an aggregate of $120.0 million on the Revolving Credit Facility. In addition, BellRing Inc. received $524.4 million from the issuance of its Class A Common Stock in conjunction with the IPO and had net cash transfers of $5.9 million from Post to fund our operations prior to the IPO. BellRing LLC repaid the $1,225.0 million outstanding principal balance of the Bridge Loan assumed from Post and repaid $40.0 million of outstanding borrowings on the Revolving Credit Facility. In connection with the issuance of BellRing LLC’s long-term debt, BellRing LLC paid $9.6 million in debt issuance costs and deferred financing fees. In the three months ended December 31, 2018, financing activities primarily related to cash transfers to and from Post, including cash deposits to Post and cash borrowings received from Post used to fund operations or capital expenditures and allocations of Post’s corporate expenses.
Debt Covenants
Under the terms of BellRing LLC’s Credit Agreement, BellRing LLC is required to comply with a financial covenant requiring BellRing LLC to maintain a total net leverage ratio (as defined in the Credit Agreement) not to exceed 6.00 to 1.00, measured as of the last day of each fiscal quarter, beginning with the quarter ending March 31, 2020. We do not believe non-compliance is reasonably likely in the foreseeable future.
The 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 Credit Agreement.

19


CRITICAL ACCOUNTING POLICIES AND ESTIMATES
On October 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842)” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” For additional information, refer to Notes 2 and 12 within “Notes to Condensed Consolidated Financial Statements.”
Our critical accounting policies and estimates are more fully described in our Annual Report on Form 10-K for the year ended September 30, 2019, as filed with the Securities and Exchange Commission (“SEC”) on November 22, 2019. Except as noted above, there have been no significant changes to our critical accounting policies and estimates since September 30, 2019.
RECENTLY ISSUED ACCOUNTING STANDARDS
See 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 (the “Exchange Act”), are made throughout this report. These forward-looking statements are sometimes identified from the use of forward-looking words such as “believe,” “should,” “could,” “potential,” “continue,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “aim,” “intend,” “plan,” “forecast,” “target,” “is likely,” “will,” “can,” “may,” “would” or the negative of these terms or similar expressions elsewhere in this report. Our results of operations, financial condition 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:
our dependence on sales from our RTD protein shakes;
our dependence on a limited number of third party contract manufacturers and suppliers for the manufacturing of most of our products, including one manufacturer for the substantial majority of our RTD protein shakes;
our operation in a category with strong competition;
our reliance on a limited number of third party suppliers to provide certain ingredients and packaging;
higher freight costs, significant volatility in the costs or availability of certain commodities (including raw materials and packaging used to manufacture our products) or higher energy costs;
disruptions in our supply chain, changes in weather conditions and other events beyond our control;
consolidation in our distribution channels;
our ability to anticipate and respond to changes in consumer and customer preferences and trends and to introduce new products;
our ability to maintain favorable perceptions of our brands;
our ability to expand existing market penetration and enter into new markets;
allegations that our products cause injury or illness, product recalls and withdrawals and product liability claims and other litigation;
legal and regulatory factors, such as compliance with existing laws and regulations and changes to and new laws and regulations affecting our business, including current and future laws and regulations regarding food safety and advertising;
our high leverage, our ability to obtain additional financing (including both secured and unsecured debt) and our ability to service our outstanding debt (including covenants that restrict the operation of our business);
our ability to manage our growth and to identify, complete and integrate any acquisitions or other strategic transactions;
fluctuations in our business due to changes in our promotional activities and seasonality;
risks associated with our international business;
risks related to our ongoing relationship with Post, including Post’s control over us and ability to control the direction of our business, conflicts of interest or disputes that may arise between Post and us and our obligations under various agreements with Post, including under the tax receivable agreement;

20


the loss of, a significant reduction of purchases by or the bankruptcy of a major customer;
the ultimate impact litigation or other regulatory matters may have on us;
the accuracy of our market data and attributes and related information;
our ability to attract and retain key employees;
economic downturns that limit customer and consumer demand for our products;
disruptions in the United States and global capital and credit markets, changes in interest rates and fluctuations in foreign currency exchange rates;
our ability to protect our intellectual property and other assets;
costs, business disruptions and reputational damage associated with information technology failures, cybersecurity incidents and/or information security breaches;
risks associated with our public company status, including our ability to operate as a separate public company following our initial public offering and the additional expenses we will incur to create the corporate infrastructure to operate as a public company;
changes in estimates in critical accounting judgments;
impairment in the carrying value of goodwill or other intangibles;
significant differences in our actual operating results from any guidance we may give regarding our performance;
our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002; and
other risks and uncertainties discussed elsewhere in this report.
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.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Commodity Price Risk
In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and fuels. The Company manages the impact of cost increases, wherever possible, on commercially reasonable terms, by locking in prices on the quantities through purchase commitments required to meet production requirements. In addition, the Company may attempt to offset the effect of increased costs by raising prices to customers. However, for competitive reasons, the Company may not be able to pass along the full effect of increases in raw materials and other input costs as they are incurred.
Foreign Currency Risk
Related to Active Nutrition International GmbH whose functional currency is the euro, the Company is exposed to risks of fluctuations in future cash flows and earnings due to changes in exchange rates.
Interest Rate Risk
Long-term debt
As of December 31, 2019, BellRing LLC had an aggregate principal amount of $700.0 million outstanding on its Term B Facility and an aggregate principal amount of $80.0 million outstanding under its Revolving Credit Facility. Borrowings under the Term B Facility and the Revolving Credit Facility bear interest at variable rates. Including the impact of interest rate swaps, a hypothetical 10% increase in interest rates would have an immaterial impact on both interest expense and interest paid during the three months ended December 31, 2019. BellRing LLC had no outstanding debt as of September 30, 2019. For additional information regarding the BellRing LLC’s debt, see Note 15 within “Notes to Condensed Consolidated Financial Statements.”
Interest rate swaps
As of December 31, 2019, the Company had interest rate swaps with a notional value of $350.0 million. A hypothetical 10% adverse change in interest rates would have decreased the fair value of the interest rate swaps by approximately $2 million as of

21


December 31, 2019. The Company held no interest rate swaps as of September 30, 2019. For additional information regarding the Company’s interest rate swap contracts, see Note 13 within “Notes to Condensed Consolidated Financial Statements.”
ITEM 4.    CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Management, with the Executive Chairman, Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Executive Chairman, CEO and CFO concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to provide reasonable assurance of achieving the desired control objectives.
Changes in Internal Control Over Financial Reporting
There were no significant changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II.
OTHER INFORMATION.
ITEM 1.
LEGAL PROCEEDINGS.
Joint Juice Litigation
In March 2013, a complaint was filed on behalf of a putative, nationwide class of consumers against Premier Nutrition Company, LLC (as successor to Premier Nutrition Corporation, “Premier Nutrition”) in the U.S. District Court for the Northern District of California seeking monetary damages and injunctive relief. The case asserted that some of Premier Nutrition’s advertising claims regarding its Joint Juice® line of glucosamine and chondroitin dietary supplements were false and misleading. In April 2016, the district court certified a California-only class of consumers in this lawsuit (this lawsuit is hereinafter referred to as the “California Federal Class Lawsuit”).
In 2016 and 2017, the lead plaintiff’s counsel in the California Federal Class Lawsuit filed ten additional class action complaints in the U.S. District Court for the Northern District of California on behalf of putative classes of consumers under the laws of Connecticut, Florida, Illinois, New Jersey, New Mexico, New York, Maryland, Massachusetts, Michigan and Pennsylvania. These additional complaints contain factual allegations similar to the California Federal Class Lawsuit, also seeking monetary damages and injunctive relief.
In April 2018, the district court dismissed the California Federal Class Lawsuit with prejudice. This dismissal was appealed and is pending before the U.S. Court of Appeals for the Ninth Circuit. The other ten complaints remain pending in the U.S. District Court for the Northern District of California, and the court has certified individual state classes in each of those cases.
In January 2019, the same lead counsel filed another class action complaint against Premier Nutrition in Alameda County California Superior Court, alleging claims similar to the above actions and seeking monetary damages and injunctive relief on behalf of a putative class of California consumers.
The Company continues to vigorously defend these cases. The Company does not believe that the resolution of these cases will have a material adverse effect on its financial condition, results of operations or cash flows.
Other
The Company is subject to various other legal proceedings and actions arising in the normal course of business. In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from such pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accruals for estimated liabilities (if any), are not expected to be material individually or in the aggregate to the combined financial condition, results of operations or cash flows of the Company. In addition, although it is difficult to estimate the potential financial impact of actions regarding expenditures for compliance with regulatory matters, in the opinion of management, based upon the information currently available, the ultimate liability arising from such compliance matters is not expected to be material to the combined financial condition, results of operations or cash flows of the Company.
ITEM 1A.
RISK FACTORS.
In addition to the information set forth elsewhere in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors we previously disclosed in our Annual Report on Form 10-K, filed with the United States Securities and Exchange

22


Commission on November 22, 2019, as of and for the year ended September 30, 2019. These risks could materially and adversely affect our business, financial condition, results of operations and cash flows. The enumerated risks are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On October 21, 2019, in connection with the completion of BellRing Inc.’s initial public offering, the filing of BellRing Inc.’s amended and restated certificate of incorporation and BellRing Inc.’s entry into the BellRing Brands, LLC Limited Liability Company Agreement with BellRing Brands, LLC and Post Holdings, Inc. (“Post”), (a) BellRing Inc.’s issued one share of its Class B common stock, $0.01 par value per share (the “Class B Common Stock”) to Post, in exchange for the 1,000 shares of BellRing Inc. common stock initially issued to Post in connection with BellRing Inc.’s incorporation, which shares were cancelled as part of the exchange, and (b) BellRing Brands, LLC issued 39.4 million BellRing Brands, LLC units to BellRing Inc. and 97.5 million BellRing Brands, LLC units to Post.
Under the BellRing Brands, LLC Limited Liability Company Agreement, Post may from time to time redeem BellRing Brands, LLC units for, at BellRing Brands, LLC’s option (as determined by its board of managers), (i) shares of Class A common stock, $0.01 par value per share (the “Class A Common Stock”) or (ii) cash (based on the market price of the shares of the Class A Common Stock). The redemption of BellRing Brands, LLC units for shares of Class A Common Stock will be at an initial redemption rate of one share of Class A Common Stock for one BellRing Brands, LLC unit, subject to customary redemption rate adjustments for stock splits, stock dividends and reclassifications.
The issuance of the Class B Common Stock and the issuance of the BellRing Brands, LLC units were made in reliance on Section 4(a)(2) of the Securities Act.

23


ITEM 6.
EXHIBITS.
The following exhibits are either provided with this Form 10-Q or are incorporated herein by reference.
Exhibit No
 
Description
3.1
 
3.2
 
4.1
 
10.1
 
10.2
 
10.3
 
10.4
 
10.5
 
10.6
 
10.7
 

10.8
 
†10.9
 
10.10
 
10.11
 
10.12
 
10.13
 
†10.14
 
†10.15
 

24


Exhibit No
 
Description
†10.16
 
†10.17
 
10.18
 
10.19
 
†10.20
 
†10.21
 
31.1
 
31.2
 
31.3
 
32.1
 
101
 
Interactive Data File (Form 10-Q for the quarterly period ended December 31, 2019 filed in iXBRL (Inline eXtensible Business Reporting Language)). The financial information contained in the iXBRL-related documents is “unaudited” and “unreviewed.”
104
 
The cover page from the Company’s Form 10-Q for the quarterly period ended December 31, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101

These exhibits constitute management contracts, compensatory plans and arrangements.
Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).


25


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, BellRing Brands, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
BELLRING BRANDS, INC.
Date:
February 7, 2020
By:
/s/ Darcy H. Davenport
 
 
 
Darcy H. Davenport
 
 
 
President and Chief Executive Officer



26
Exhibit

EXHIBIT 10.18

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED WITH “[***]”, HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.


MASTER SUPPLY AGREEMENT

THIS MASTER SUPPLY AGREEMENT (“Agreement”) is made as of 31 October 2019 (“Effective Date”) by and between Premier Nutrition Company, LLC, a Delaware limited liability company with its headquarters located at 1222 67th Street, Suite 210, Emeryville, CA 94608 (“Buyer” or “PNC”), and Fonterra (USA) Inc., a California corporation with its principal place of business located at 8700 W. Bryn Mawr Avenue, Suite 500N, Chicago, IL 60631 (“Supplier” or “Fonterra”) (each a “Party”, collectively “Parties”).

WHEREAS PNC produces, distributes, markets and sells products including ready to drink protein shakes and beverages, powdered protein shakes, nutrition bars, and dietary supplements (the “Finished Products”); and

WHEREAS Supplier produces raw materials including protein powders used by PNC to produce at least some of the Finished Products;

NOW THEREFORE in consideration of their respective rights and obligations as set forth in this Agreement, and for other good and valuable consideration, the adequacy and receipt of which are acknowledged, PNC and Supplier agree as follows:

1    Supply of Ingredients

1.1
Supplier will provide such materials to PNC or its Third Party Manufacturers (“TPMs”) as are specified in any Master Purchase Commitment or any other purchase orders that the Parties may execute from time to time during the term of this Agreement (“Ingredients”). Ingredients will be produced at Supplier’s facilities listed in a Master Purchase Commitment, or any other of Supplier’s facilities approved in advance, in writing by PNC.

1.2
PNC or its TPMs will place specific orders for Ingredients from Supplier by issuing a purchase order that specifies, at minimum, the item, quantities, price, delivery dates, and delivery and payment terms (each a “Purchase Order”).

1.3
PNC and Supplier may enter certain Master Purchase Commitments from time to time during the Term of this Master Supply Agreement. Such Master Purchase Commitments and any Purchase Orders issued against such Commitments shall be subject exclusively to the terms and conditions of this Agreement. In the event the terms of any Master Purchase Commitment conflicts with the terms of this Agreement, the terms of the Master Purchase Commitment shall control.

1.4
Supplier will receive Purchase Orders by telephone, USPS, overnight courier, email, and fax transmission, Monday through Friday except on state or nationally recognized bank holidays. Purchase Orders not received by 3:00 p.m. Eastern Time are considered to be received on the following


Page 1



business day. Supplier will confirm or reject Purchase Orders within [***] of receipt of the Purchase Order. Orders not rejected in writing within such time will be deemed confirmed and accepted by Supplier. Each Purchase Order issued by PNC or its TPMs and accepted by Supplier shall be governed by the terms and conditions of this Agreement. Additional terms included in acknowledgments, standard terms and conditions, or any other documents or communications exchanged by the Parties in connection with the sale or purchase of any Ingredients shall be void and of no force or effect. The Parties may only modify, add to or amend any of the terms or conditions of this Agreement by a writing signed by authorized representatives of both Parties.

1.5
Supplier represents and warrants that at the time and date of delivery, the Ingredients will comply with all specifications (“Specifications”), a copy of which will be attached to the relevant Master Purchase Commitment or Purchase Order accordingly. A Specification may be updated from time to time by PNC in its sole discretion, provided PNC provides Supplier with reasonable prior notice on any updates (“Change Notification”). Within [***] from receipt of the Change Notification, Supplier will either: (1) accept the Specification change at the current price and terms; or (2) submit to PNC a proposal (“Proposal”) setting forth the conditions of acceptance that may include a change in price and/or other terms, including documentation to support same. Within [***] the Parties will discuss the Proposal in good faith and exercise their best efforts to agree on the appropriate adjustment if any. PNC will not issue any Purchase Orders, nor be required to issue any Purchase Orders to Supplier until PNC and Supplier have agreed on required Ingredient Specifications and any associated price and/or term adjustment. In the event the Parties fail to agree on required Ingredient Specifications or price and/or term adjustments despite their best good faith efforts, neither Party will have any further obligation with regard to purchase or supply of those Ingredients under any Master Purchase Commitments except that PNC shall take and pay for [***] of Ingredient inventory manufactured according to the then-current Specification.

1.6
Supplier will provide a Certificate of Analysis (“COA”) completed in accordance with the Specifications with any shipment of Ingredients.

1.7
INTENTIONALLY LEFT BLANK

1.8
This Agreement is nonexclusive and sets forth the terms and conditions under which the Parties will supply and purchase Ingredients from the other Party. Nothing herein is intended to, nor does, guarantee that either Party will supply or purchase any specific, item, in any specific quantity, or conclude any business transaction with the other.

1.9
Supplier Performance metrics will be identified and tracked periodically through Supplier Performance Review meetings no more frequently than each calendar quarter during the Term. [***] Metric targets will be established by PNC and agreed by Fonterra and updated as needed. The ultimate goal is zero defects for quality and administrative compliance issues.

1.10
Supplier agrees to make a good faith effort to provide Advance Ship Notices (“ASN”) with bar-coded pallet labels; Invoices, Purchase Orders and other business transactions, as may be advised by PNC, for each Ingredient shipment. Supplier will provide, itself or through a third-party provider, the information via Electronic Data Interface (“EDI”) if and as requested by PNC. The technical specifications for all required EDI transactions will be provided by PNC.

2




2    Quality and Food Safety

2.1
For the purposes set forth in Section 303(c) of the Federal Food, Drug, and Cosmetic Act (the “Act”), Supplier guarantees to PNC that as of the time and date of delivery, all Ingredients will not be adulterated or misbranded within the meaning of the Act, nor will any Ingredients constitute an article that may not, under the provisions of Sections 404 and 505 of the Act, be introduced into interstate commerce. The Supplier further guarantees that as of the time and date of delivery, all of the Ingredients will be in compliance with all applicable laws, regulations, requirements and programs including those administered by the Food and Drug Administration (the “FDA”), the United States Department of Agriculture (the “USDA”) and any state or local food or drug laws then in effect. This guarantee specifically includes Proposition 65 (California Safe Drinking Water and Toxic Enforcement Act), and Supplier hereby certifies that the Ingredients will not contain any non-naturally occurring chemicals subject to Proposition 65 or that any such chemicals pose “no significant risk” or cause “no observable effect” as set forth in the California Health and Safety Code, 22 CCR §§ 12701 et seq. and 22 CCR §§ 12801 et seq., as amended. Supplier shall comply with all applicable regulatory requirements for determining and documenting that all Ingredients are at or below no significant risk levels and no observable effect levels, as applicable.

2.2
Supplier shall develop and maintain a food safety/food defense program as required under the Food Safety Modernization Act 21 USC §301 et seq and shall submit a copy of such plan (and any changes thereto) to PNC upon PNC’s request. Supplier will conduct [***] third-party food safety/food defense audits (the “Audits”) in compliance with, and consistent with, relevant audit schemes approved by the Global Food Safety Initiatives, AIB International, Silliker, or GMA SAFE. Supplier will submit summaries of audit reports to PNC’s Quality Manager at [***] upon request. Failure to comply with the requirements of this Section 2.2 will constitute a material breach of this Agreement.

2.3
Supplier will notify PNC immediately, by person-to-person voice communication or equivalent means, if any of the Ingredients contain, or are reasonably suspected to contain, material hazardous to human health, including but not limited to, chemical, physical or biological hazards.

2.4
PNC shall notify Supplier in writing if it determines any Ingredient fails to meet the Specifications. Supplier shall be given an opportunity to and will promptly inspect and/or test such Ingredients to confirm compliance to Specification. If after any reasonable, good faith inspection and testing it is confirmed that certain Ingredients fail to meet the Specifications [***].

2.5
Subject to the occurring of a Force Majeure Event, if Supplier fails to deliver the Ingredients in accordance with the Specifications, including within the time specified on the Purchase Order, in addition to any other remedies available, PNC may terminate the Purchase Order in whole or in part. In the event of such a termination, Supplier shall continue performance of any nonterminated portion of the Purchase Order, or any nonterminated Purchase Orders, and the quantity of Ingredient ordered and so terminated shall be deducted against any relevant Master Purchase Commitment.

2.6
PNC or its contracted third-party auditors may enter and audit/inspect Supplier’s facilities where the Ingredients are produced, stored, packaged or otherwise processed [***] unless food safety is at issue or PNC has a good faith reason to believe the Ingredients are being stored, packaged, or processed

3



in a way that is inconsistent with the Specifications, in which case an audit may be performed at any time during the Term. For routine visits and audits, PNC will provide [***] if facilities located in the US and with [***] if facilities are located [***], provided that such examination will be conducted during Supplier’s normal business hours and in such a manner as to reasonably minimize disruption to Supplier’s business, unless food safety is at issue, in which case such examination may be conducted at any time. Supplier shall cooperate in good faith with PNC during all such inspections. During qualification processes and on-site inspections, Supplier will present necessary documentation to ensure compliance with all applicable programs specified under 21 CFR Part 117 Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Human Food. Records of environmental monitoring activities by the Supplier, following Supplier’s established environmental monitoring program and standard operating procedures will be made available upon request to PNC. Supplier will notify Buyer immediately via person-to-person voice communication in the event that any pathogen is found, or reasonably suspected, in the plant environment during any environmental monitoring activity that could have an impact on the quality or safety of PNC’s Ingredients. In the event of an actual or suspected food safety concern, Supplier shall conduct sampling in all relevant areas and promptly provide results of such tests to PNC. If PNC or its representatives find that any of Supplier’s facilities, processes, inventory, procedures or equipment are not in accordance or compliance with the requirements of this Agreement or applicable law or regulation, PNC will give notice to Supplier, and Supplier shall promptly take all reasonable steps to correct such deficiency as soon as possible. If correction of the deficiency cannot be affected within [***] of such notice, then Supplier shall promptly notify PNC with its plan to correct the deficiency including an estimated schedule. If the deficiency cannot be corrected within [***], unless otherwise agreed, then PNC shall have the right to terminate any Purchase Orders then outstanding, along with any Master Purchase Commitment related thereto.

3
Business Continuity/Continuous Supply Assurances. Supplier will develop and maintain a business continuity plan that identifies critical pathways and potential crisis situations that could interrupt the supply of Ingredients to PNC and establish contingency plans for dealing with each crisis situation. Upon PNC’s written request, Supplier will submit the business continuity plan to PNC for PNC’s review.

4
Intellectual Property.
4.1
Each Party shall retain ownership of all Intellectual Property Rights (as defined below): (1) owned or licensed by that Party prior to the commencement date of this Agreement; or (2) developed or acquired independently of this Agreement by that Party or its licensors other than in connection with this Agreement.
4.2
Ownership in the Intellectual Property Rights, if any, of any developments and/or modifications to the Ingredients during the Term shall be [***].
4.3
For purposes of this Section 4, the term “Intellectual Property Rights” shall mean all statutory, common law and proprietary intellectual property rights, including rights in know-how, confidential information, copyright works, designs, inventions, patents, plant varieties, trademarks and all other rights, whether registered or unregistered (including applications for such rights).

5
Confidential Information. “Confidential Information” means all business, financial and technical information of the Parties, or of a third-party as to whom a Party has an obligation of confidentiality, whether disclosed before or after the Effective Date and whether disclosed in writing, orally, by electronic delivery, or by inspection of tangible objects. Confidential Information includes, without limitation, trade secrets, ideas,

4



processes, formulae (including formula and specifications for Ingredients and Finished Products), computer software (including source code), algorithms, data, data structures, know-how, copyrightable material, improvements, inventions (whether or not patentable), techniques, strategies, business and product development plans, timetables, forecasts, customer and supplier information, and information relating to product designs, specifications and schematics, product costs, product prices, product names, financial information, marketing plans, business opportunities, personnel, research, development and know-how. Confidential Information includes that which is marked or otherwise identified as confidential, as well as that which by its nature and the circumstances of its disclosure are reasonably understood to be confidential.

5.1
Maintenance of Confidentiality and Limitations on Use. Each Party will hold in strict confidence and keep confidential all Confidential Information disclosed to it by the other. The Parties will use at least the same degree of care to avoid publication or dissemination of such Confidential Information as it uses with respect to similarly confidential information of its own, but in no event less than reasonable care. Use of such Confidential Information by such Party will be strictly limited to activities directly in support of its activities under this Agreement. The Parties will disclose such Confidential Information on a need-to-know basis only, and in all events only to such employees and independent contractors who are informed of the confidential nature of the Confidential Information and are bound by obligations substantially similar to those set forth herein applicable to such Confidential Information. Each Party hereby guarantees the performance of the provisions hereof by each person obtaining disclosure of such Confidential Information directly or indirectly from such Party.

5.2
Copying and Return of Confidential Information. Each Party shall not make any copies or extracts of Confidential Information, or include such Confidential Information in its own materials except as reasonably required directly in support of its activities under this Agreement. When a Party no longer has need thereof in support of its activities under this Agreement or upon request of the other Party, whichever occurs first, such Party shall promptly cease using and shall return or destroy (and, if requested, certify destruction of) all such Confidential Information along with all tangible and electronic copies which it may have made, provided, however, that a Party is not obligated to remove Confidential Information from back up devices that have been made and are maintained in accordance with a corporate records retention policy.

5.3
Certain Exceptions. Information will not be, or will cease being, Confidential Information, as the case may be, if Supplier can show:

5.3.1
that such information entered the public domain other than by breach of this Agreement on the part of any Party obligated to confidentiality hereunder;
5.3.2
it is rightfully known to the receiving Party without obligation of confidentiality to any third-party prior to receipt of same from the disclosing Party as evidenced by bona fide written, dated documents;
5.3.3
it is independently developed by personnel of the receiving Party who have not had access to Confidential Information of the disclosing Party; and,
5.3.4
that it is generally made available to third-parties by the disclosing Party without obligation of confidentiality.

5.4
Legally Required Disclosure. A Party shall not be in breach hereof if it discloses Confidential Information pursuant to a judicial or governmental order, or as required by applicable law or the rules

5



of a recognized stock exchange, but any such disclosure shall be made only to the extent so ordered or required. In any such event, the Party (i) shall timely notify the other Party so that it may intervene in response to such order or take action to protect its interests (in which event such Party will cooperate in such effort), or (ii) if timely notice cannot be given, shall seek to obtain a protective order or confidential treatment from the court or government for such information.

5.5
Defend Trade Secrets Act. Notwithstanding anything in this agreement to the contrary, a receiving Party is hereby notified in accordance with the US Defend Trade Secrets Act of 2016 that it will not be held criminally or civilly liable under any US federal or state trade secret law for the disclosure of a trade secret that: (x) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (y) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.

5.6
Trading in Securities. Supplier acknowledges that it is aware, and agrees to advise its directors, officers, employees, agents and representatives who are informed as to the matters which are the subject of this Agreement, that the United States securities laws prohibit any person who has material, non-public information concerning PNC, its parent and affiliate companies including BellRing Brands, Inc. and Post Holdings, Inc. from purchasing or selling securities of those companies or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

5.7
Title. As between the Parties, title or right to possess Confidential Information of PNC, except as otherwise provided herein, shall remain in PNC. Nothing in this Agreement shall be construed as granting or conferring any rights to any Confidential Information, except as otherwise explicitly stated in this Agreement.

5.8
No Representation or Warranty. Except as expressly set forth herein, neither Party makes any representations or warranties of any nature whatsoever with respect to any Confidential Information it may provide, including, without limitation, any warranties of merchantability, fitness for a particular purpose or accuracy. All Confidential Information is provided on an “as-is” basis, and the recipient assumes all responsibility for its use thereof or reliance thereon. Further, each Party understands and acknowledges that any confidential information received from the other Party concerning future plans may be tentative and may not represent firm decisions concerning such plans, and neither Party shall be liable to the other Party for inaccuracies in Confidential Information under any theory of liability.

6
Term and Termination.

6.1
This Agreement will commence on the Effective Date and continue for an Initial Term of five (5) years, and will automatically renew for additional periods of five (5) years unless one Party notifies the other of its intention not to renew, no less than 12 months prior to the expiration of the then-current term, unless terminated as permitted under this Agreement.

6.2
Either Party may terminate this Agreement for cause if the other Party fails to perform any material provision of this Agreement or commits a material breach of this Agreement which is not corrected within [***] after receiving written notice of the failure or breach. except that if the default is by

6



Supplier that creates an immediate public food safety risk, PNC may terminate this Agreement immediately without regard to any period for correction.

6.3
This Agreement will automatically terminate if either Party becomes insolvent or files a petition in bankruptcy, if a Party makes an assignment for the benefit of a creditor, if a receiver is appointed to take possession of any part of a Party’s assets or if a Party becomes unable generally to pay its debts as they become due, or otherwise ceases to do business.

6.4
On the termination of this Agreement for any reason, all rights granted to Supplier under this Agreement will immediately cease, and Supplier must deliver to PNC all written or recorded materials relating to the Confidential Information of PNC in the possession or control of Supplier or any of its related party, subject to Section 5.2.

7
Indemnification and Insurance.
 
7.1
Each Party will defend and hold harmless the other Party and its subsidiaries, affiliates, officers, directors, employees, attorneys, insurers, shareholders, representatives and agents from and against any and all liabilities, losses, damages, claims, actions, proceedings, suits, costs or expenses, including reasonable attorney fees for counsel retained by the indemnified Party, brought by a Third Party, arising out of or in connection with:
7.1.1
any negligent or intentional act or omission of the indemnifying Party, its agents or employees;
7.1.2
any breach in or default by the indemnifying Party of its obligations under this Agreement;
7.1.3
any other loss, damage or injury caused by or arising out of the indemnifying Party’s or its agents’ or employees’ on-site visits to the indemnified Party’s premises; or
any claims relating directly to trademark, patent or copyright infringement arising out of a Party’s use of the other Party’s (or its licensors’) trademarks, patents or copyrights as permitted hereunder.
7.1.4
For purposes of this Section 7.1, “Third Party” means any individual, corporation, partnership, trust, cooperative, or other business organization or entity, and any other recognized organization, other than the Parties or their affiliates.

7.2
Except for a Party’s gross negligence or intentional acts or omissions and its obligations of indemnity under this Agreement, under no circumstances will either Party be liable to the other Party for [***].

7.3
Supplier agrees to indemnify and hold PNC harmless from any and all employment-related claims, payments, entitlements, taxes, interest and penalties assessed against or obtained from PNC by any individual or authority as a consequence of or related to the performance by any agent or employee of Supplier.

7.4
Supplier shall maintain insurance with an insurance company with an equivalent of an A.M. Best rating of “A” or better, of the following kinds and in the following amounts during the term of this Agreement:
7.5    
7.5.1
Comprehensive General Liability (CGL) Insurance with limits of not less than [***] each occurrence and [***] in the aggregate, including Contractual, Completed-Operations and

7



Product-Liability Coverage’s with limits of not less than [***] for each occurrence, covering both bodily injury and property damage liability.
7.5.2
Umbrella/Excess Liability with limits of not less than [***].
7.5.3
Workers' Compensation Coverage plus Occupational Disease Insurance if Occupational Disease coverage is required by the laws of the state where the Facility is located or work is to be performed. Employers Liability $500,000 each accident
7.5.4
Auto Liability $1,000,000 combined single limit.

7.6
Supplier shall have Buyer named as an additional insured on its insurance policies in subparts 7.5.1 and 7.5.2 above. Supplier shall furnish Buyer with a certificate from its insurer verifying that it has the above insurance in effect during the duration of this Agreement and that insurer acknowledges (a) the contractual liability assumed by Supplier in this Agreement and (b) that Buyer is an additional insured on such policies and (c) Supplier’s CGL policy is primary and Buyer’s CGL policy is non-contributory and (d) a waiver of subrogation shall be provided in favor of Buyer on the CGL, Workers’ Compensation and Auto policies. Said certificate of insurance shall require Supplier’s insurance carrier to give Buyer no less than ten (10) days written notice of any cancellation or change in coverage. Failure to secure such insurance as of the date of execution of this Agreement shall constitute a breach of this Agreement. Supplier shall provide to PNC a certificate evidencing such insurance within thirty (30) days of a request for same from PNC.

7.7
Supplier shall, at its own expense, maintain throughout the term of this Agreement, all insurance required by law or regulation in all countries in which this Agreement will be performed.

8
Recall. If Ingredients provided by Supplier under this Agreement are misbranded, contaminated, or otherwise unfit for human consumption at the time they are delivered to PNC or its TPM (“Defect”), PNC in its sole discretion will make a determination of the necessity of a recall, market withdrawal, inventory retrieval, or other action designed to prevent the distribution or sale of the affected Finished Products, plus the type, extent, method of handling, disposition of the Finished Products as well as any affected work in progress, and all other particulars involved in such an action (a “Recall”), and PNC will execute any Recall. Supplier, in its sole discretion, will make a determination of the necessity of a recall, market withdrawal, inventory retrieval or other action designed to prevent the distribution or sale of the Ingredients. Subject to Section 9.1, Supplier shall bear the complete responsibility for a Recall occasioned by a Defect in the Ingredient and shall indemnify PNC for [***] resulting from or related to the Recall. Any Recall occasioned by PNC labels or by tampering with the Ingredients after they have left Supplier’s control, or by improper storing or handling by PNC, will not be considered a Defect.

9
Limitation of Liability.

9.1
The maximum liability of one Party to the other Party and its affiliates in relation to this Agreement will be [***] (“Liability Cap”), provided however that:


8



9.1.1
The Liability Cap will not apply to any (1) material confidentiality breach under Section 5, and/or (2) indemnification obligations under Section 7.1.
9.1.2
The Liability Cap will not apply to intentional misconduct and/or gross negligence.

9.2
For the purpose of this Section, “liability” means liability for any and all claims, causes of action, judgments, costs and expenses (including but not limited to reasonable attorney fees and expenses), reimbursements, losses, and any and all other liabilities and damages of any kind, whether in contract, tort (including negligence), equity, statute or otherwise arising out of, in relation to or as a result of this Agreement.

10
Force Majeure.

10.1
Neither Party will be liable for any breach of its obligations under this Agreement resulting from causes beyond its reasonable control, including, but not limited to, an act of nature, drought, outbreak of foot and mouth disease, port and other transport strikes, war, fires, quarantine restrictions, insurrections or riots, energy shortages, embargo or the inability to obtain supplies or raw materials because of a global shortage or governmental action (a “Force Majeure Event”). Notwithstanding anything herein to the contrary, in the event of a Force Majeure Event, or any other circumstance that limits Fonterra’s ability to produce or deliver product, Supplier will exercise its best efforts to comply with its obligations hereunder, mitigate the adverse impact on and not disfavor PNC, and will treat it in parity with its other customers.

10.2
Any obligation of either Party under this Agreement will be postponed until the cause underlying the Force Majeure Event has been eliminated, at which time the obligation will again be in effect. Any loss of time by the Force Majeure Event will not be held against the Party who was unable to comply with its obligations under this Agreement because of the Force Majeure Event. The Party unable to comply with its obligations under this Agreement will immediately notify the other Party in writing that a Force Majeure Event has delayed its performance and will state, to the best of its knowledge, the revised date for performance. If a Force Majeure Event persists for longer than [***], the Party not directly affected by the Force Majeure Event may terminate this Agreement with regard to any relevant Master Purchase Commitments or Purchase Orders.

10.3
Should Supplier be unable to comply with its obligations under this Agreement because of a Force Majeure Event, PNC may obtain elsewhere the Ingredients the Supplier was unable to deliver because of the Force Majeure Event and those Ingredients will be credited against any relevant Minimum Purchase Commitment. PNC will not be obligated to purchase those Ingredients from Supplier at a later time.

11
Notices. Notices contemplated by this Agreement must be in writing and may be sent by registered or certified mail, postage prepaid, to the address specified in the first paragraph of this Agreement or to any other address designated by prior written notice.

12
Governing Law; Dispute Resolution.


9



12.1
This Agreement will be governed by the laws of the State of Delaware without regard to its conflicts of law principles.

12.2
The Parties consent to, acknowledge, and agree that any dispute arising out of or relating to this Agreement, including the breach, termination or validity thereof, shall be brought exclusively before the state and federal courts in and for the City of Wilmington and County of New Castle, Delaware Each Party waives any objection based on forum non conveniens.

13
Assignment. Neither Party may transfer or assign any of its rights or obligations under this Agreement without the prior written consent of the other Party, except that either Party may assign this Agreement to any entity controlled by it, its parents, subsidiaries, or affiliates, or to any purchaser of the business to which this Agreement relates subject to the other Parties consent which will not be unreasonably withheld or delayed.

14
Supplier Conduct. Supplier agrees to engage in responsible and ethical business practices and conduct itself in full compliance with all applicable laws, rules, and regulations in every country in which it does business.

15
California Transparency Act. PNC does not accept or support the use of illegal, abusive, or forced labor in our own facilities. Within its supply chain, Supplier will comply with all laws of the country they are doing business in and are subject to.

16
U.S. Government Affirmative Action Regulations. During the performance of this contract or any purchase order issued hereunder, the Supplier agrees to comply with all applicable Federal, state and local laws respecting discrimination in employment and non-segregation of facilities including, but not limited to, requirements set out at 41 CFR §60-1.4, 41 CFR §61-300.10, 29 CFR Part 471 Appendix A to Subpart A, 41 CFR §60-300.5 and 41 CFR §60-741.5, which specific clauses are herein incorporated by reference into all covered contracts and subcontracts as required by Federal law. This Supplier and any applicable subcontractor shall abide by the requirements of 41 CFR §60-300.5(a) and §60-741.5(a) to the extent applicable. These regulations prohibit discrimination against qualified individuals on the basis of protected veteran status or disability, and require affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans and individuals with disabilities.

17
Fair Labor Practices.

17.1
Supplier shall provide workers with clean, safe and healthy work environments; recognize and respect the right of employees to free association and collective bargaining in accordance with law; comply with all applicable wage and hour laws; and properly verify the employment eligibility of its employees.

17.2
Forced Labor. Suppliers will not employ, use or otherwise benefit from involuntary labor, forced labor, or labor that results from slavery or human trafficking. Supplier hereby certifies that: (i) it is in compliance with this paragraph; and (ii) all materials incorporated into its products comply with all applicable laws addressing slavery, human trafficking and other forms of forced labor. Supplier shall provide PNC with documentation establishing compliance with this paragraph upon [***] notice.


10



17.3
Child Labor. Supplier will not employ anyone under the legal working age defined by local law. Supplier will comply with all applicable laws addressing the working requirements and conditions for child workers.

17.4
Respectful Workplace. Supplier shall prohibit all forms of unlawful discrimination, abuse, harassment, violence and retaliation.

18
Gifts and Entertainment. Supplier will not offer any gift to a PNC employee, contractor, or agent that is: (i) more than a nominal value; (ii) more than an infrequent occurrence; (iii) cash or cash equivalents; or (iv) illegal, sexually oriented, offensive or otherwise inappropriate.

19
Environment & Sustainability. Supplier will comply with all applicable environmental laws and reporting obligations, maintain all required permits, and strive to responsibly manage the impacts of their operations on the environment.

20
Anticorruption. Suppliers will not, directly or indirectly, offer improper gifts to government employees, engage in bribery or fraud, or take any other action that would cause a violation of the U.S. Foreign Corrupt Practices Act, the UK Bribery Act or any other applicable anti-corruption law.

21
Miscellaneous.

21.1
If any provision of this Agreement is determined to be illegal or unenforceable, all other provisions will continue in full force and effect.

21.2
This Agreement may be executed concurrently by original or facsimile signature in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

21.3
Each right and remedy of each Party described in this Agreement is cumulative and in addition to every other right or remedy, express or implied, now or hereafter arising, available to such Party, at law or in equity, or under any other agreement. No delay or omission by either Party in the exercise of any right or remedy arising under this Agreement will impair any such right or remedy or the right of such Party to resort thereto at a later date or be construed to be a waiver of any default under this Agreement. The indemnities, representations and warranties of each Party will survive termination of this Agreement.

21.4
This Agreement, together with any schedules and exhibits and any Purchase Orders, Specifications and COAs, constitutes the complete agreement between the Parties and supersedes all prior agreements between the Parties regarding this subject matter. The Parties hereby agree that any such prior agreements are hereby terminated. No other contracts, warranties, promises or representations, either oral or in writing, relating to this Agreement will bind either Party except for the Purchase Orders, Specifications and COAs. This Agreement may not be amended or modified except by a writing signed by an authorized representative of the Party against whom such amendment or modification is asserted. This Agreement will be binding upon, and will inure to the benefit of, the parties, their successors and permitted assigns.

(signature page follows)

11



Agreed to and executed effective as of the date first above written.


Fonterra (USA) Inc.
 
Premier Nutrition Company, LLC
 
 
 
By: [***]
 
By: /s/ Paul Rode
Title: President
 
Title: CFO


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Agreed to and executed effective as of the date first above written.


Fonterra (USA) Inc.
 
Premier Nutrition Company, LLC
 
 
 
By:
 
By: /s/ Paul Rode
Title:
 
Title: CFO








Exhibit

EXHIBIT 10.19

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED WITH “[***]”, HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.


MPC MASTER PURCHASE COMMITMENT
DATE:

This Purchase Commitment (“Commitment”) is issued by Premier Nutrition Company, LLC (“PNC”) and accepted by Fonterra (USA) Inc (“Fonterra”), each a Party to that certain Master Supply Agreement with an Effective Date of 31 October 2019 (“Master Supply Agreement”). Purchase Orders issued by PNC and its Third Party Manufacturers (“TPMs”) against this Master Purchase Commitment shall be subject exclusively to the terms and conditions of the Master Supply Agreement.

1.
Term

1.1.
This Commitment shall commence on January 1, 2020 for an Initial Term of 2 years (up to December 31, 2021).

1.2.
Following the expiry of the Initial Term, the Commitment will automatically renew for additional periods of two years.

1.3.
Either party may provide written notification of termination to the other party not less than [***] prior to the expiry of the then-current term.

1.4.
The Initial Term and any additional terms may be referred to collectively as the “Term”.

2.
Product

2.1.
Milk Protein Concentrate [***] as specified in Exhibit A to this Master Purchase Commitment (“Ingredient”).

2.2.
Fonterra is currently seeking to source MPC from up to two manufacturing plants (“New Plants”) located in the United States and/or Europe. In the event Fonterra desires to seek qualification from PNC for such New Plants, PNC agrees that it will commit and deploy the resources necessary to complete PNC’s qualification process without delay provided Fonterra shall use all reasonable endeavors to cooperate with PNC on a timely basis. Notwithstanding the foregoing, nothing in this provision obligates PNC to approve the qualification of any New Plant unless such New Plant successfully meets all quality standards as required by PNC’s Quality Assurance.

3.
Quantities

3.1.
[***] (“Minimum Forecast Volume”).

3.2.
Volumes of Product ordered during the Term by PNC directly, or by its TPMs on PNC’s behalf, are included as part of the Minimum Forecast Volume.

3.3.
PNC’s TPMs include: [***]

3.4.
PNC may add or remove TPMs from time to time with Fonterra’s consent, which consent will not be unreasonably withheld or delayed.




3.5.
Any purchase orders submitted by PNC for volume in addition to that specified in any Master Purchase Commitment (“Additional Volume”) may be supplied by Supplier on a spot basis as agreed by the parties.

4.
Price

4.1.
Supply Chain Cost definition

Supply Chain
The table below specifies the United States Dollar/Metric Tonne (“USD/MT”) freight rate [***]

The freight rates above are valid until the 31st of December 2020.

 
The Freight Rates may be updated by Fonterra on an annual basis following a transport cost review, which shall be completed by the 1
st of October of each year.


4.2.
Product Price Definition



Price
Pricing is to be determined on a monthly basis in USD: [***]

Pricing information for GDT event results and USDA NDPSR results will be taken from the websites below:
https://www.globaldairytrade.info/en/product-results/skim-milk-powder/
https://usda.library.cornell.edu/concern/publications/rb68xb84x?locale=en

In the event that the GDT Results record a “n.p.” result (“not published”) for a given contract period for the Ingredient, a genuine credible price was discovered, and this price will apply to the formula contained in this Supply Agreement.  This is further described on the GDT website:
https://www.globaldairytrade.info/en/gdt-events/gdt-events-frequently-asked-questions/#section-10 

In the event that a “n.s.” result (“not sold”) is recorded for a given contract period then:

    The average price of the product in the given GDT event will be used in the calculation to replace the price that would have been used for this contract period.  For example, if “n.s.” was recorded for C2 then the average weighted price of C1-C6 for this event would be used in its place;
    If “n.s.” is recorded for every contract period for a particular Ingredient then the percentage change on the GDT index for the given event will be taken as the price change for this Ingredient when compared to the prior event.  This calculated price will then be used in place of the price that would otherwise have been recorded for this contract period.  For example, if the Supply Agreement references the average C2 price for WMP Regular for the month, and the C1, C2, C3, C4, C5 and C6 WMP Regular prices all record “n.s.” then the percentage movement of the entire GDT index for this event (e.g. +3%) will be taken and applied to the C2 price from the previous event (e.g. previous C2 price + 3%) and then used in the formula described in this Supply Agreement.

In the event that the entire GDT platform is discontinued or temporarily ceases trading for any reason, the parties will seek to agree an alternative index for the purposes of calculating the Prices in accordance with the formula above. In the absence of agreement being reached between the parties the last applicable GDT result shall be used to calculate the Price and either party may give one months’ notice to terminate this Supply Agreement and no party shall have any claim against the other except in respect of matters arising prior to the date of termination.

Notwithstanding the foregoing, at any time prior to the time when PNC will provide Fonterra with a [***] forecast (in accordance with sections 5.1 through 5.4 below), PNC and Supplier may mutually agree to alternative pricing models (“Alternative Pricing Models”) for pricing Products purchased from the Supplier for a specified delivery window. PNC has the option, within five (5) business days pf receipt of an Alternative Pricing Model (the “Acceptance Window”) to accept the Alternative Pricing Model offered for the upcoming [***] period.


4.3.
The Domestic Supply Chain Costs [***] for delivering to the TPMs’ locations will be reviewed each August and December and the updated cost will be provided to PNC. PNC has the option to either accept the updated Domestic Supply Chain Cost or elect an “Ex-Warehouse” price to avoid the Domestic Supply Chain Costs.

4.4.
International Supply Chain Costs including Ocean Freight, Insurance, Customs and warehousing charges will be fixed for the first 12 months of the Agreement. Beginning in January 2020 and repeating each calendar year of the Term, International Supply Chain Costs will be reviewed by Fonterra in October and updated, in Fonterra’s sole discretion, for pricing effective the following January (so January 2021 for the initial review). Fonterra will notify PNC of any change to the International Supply Chain Costs, and the basis therefore, by the end of October.




4.5.
Most Favored Nation Pricing (“MFN”). If at any time during the Term, Fonterra sells any [***] to any Third Party in the United States:

4.5.1.
with similar functionality and quality;

4.5.2.
in similar volumes of [***] and of total ingredients purchased in the aggregate; and

4.5.3.
for comparable agreement durations, when compared to any [***] sold to PNC under this Agreement, at a Net Price which is lower than the price for [***] charged to PNC under this Agreement (at the time period the comparison is made) then that lower Net Price will be substituted for the price charged to PNC for the [***] after the effective date of, and for a period commensurate with, the time period during which the lower Net Price is paid by the relevant Third Party. 

4.5.3.1.
“Third Party” means any individual, corporation, partnership, trust, cooperative, or other business organization or entity, and any other recognized organization, other than the parties or their affiliates.

4.5.3.2.
“Net Price” means the ultimate cost to the Third Party, taking into account:

4.5.3.2.1.
any rebates, credits, and/or discounts;

4.5.3.2.2.
elements that may affect the costs, such as packaging parameters, testing, capital, freight, duty, port costs, insurance and warehousing costs and sales taxes;

4.5.3.2.3.
exchange rate calculations and currency fluctuations; and

4.5.3.2.4.
any other unusual or extraordinary factors.

4.5.4.
[***]

4.5.5.
Annually, Fonterra will provide PNC with a certification that Fonterra has complied with its obligations under this clause that is executed by an Officer of Fonterra. Fonterra will send such certification to PNC no later than December 31st of each calendar year during the Term.

4.5.6.
PNC shall have the right, not more than [***] to have an independent third party auditor which is acceptable to Fonterra (“MFN Auditor”) conduct an audit of Fonterra’s compliance with this clause at its cost. The scope and form of the reporting for such audit will be as agreed by the parties. The MFN Auditor will, at the conclusion of such audit, report to the parties whether Fonterra has complied with its MFN obligations, specifying what, if any, breaches occurred with sufficient detail to enable the parties to assess the extent and magnitude of monies owed to PNC, if any.

4.5.7.
Should the MFN Auditor find that Fonterra has not complied with this clause, then [***]

5.
Forecasting / Purchase Orders

5.1.
On or about [***] PNC will provide Fonterra with a forecast setting out how much [***] it will order, directly or through its TPMs, for [***].

5.2.
On or about [***] PNC will provide Fonterra with a forecast setting forth how much [***] it will order, directly or through its TPMs, for [***].

5.3.
On or about [***] PNC will provide Fonterra with a forecast setting out how much [***] it will order, directly or through its TPMs, for [***].




5.4.
On or about [***] PNC will provide Fonterra with a forecast setting forth how much [***] it will order, directly or through its TPMs, for [***].

5.5.
[***].

5.6.
PNC will issue Purchase Orders, directly or in combination with Purchase Orders issued to Fonterra by PNC’s TPMs for a total of no less than [***] Metric Tons of Product [***].

5.7.
If the Purchase Orders described in section 5.6 above for the Product [***] of the Minimum Forecast Volume, such does not constitute breach, and Fonterra shall be entitled to invoice PNC, and PNC shall be required to pay undisputed invoices within forty-five (45) Business Days of receipt of any such invoice for the difference between the volume PNC ordered during [***] and the Minimum Forecast Volume (the “Untaken Volume Fee”). The Untaken Volume Fee will be calculated as:

Minimum Forecast Volume (in metric tons) less (the volume (in metric tons) actually ordered by PNC of Product [***].


6.
Delivery Terms: Per relevant Purchase Orders


7.
Payment Terms: Per relevant Purchase Orders





Agreed to and executed as of the date signed by both parties.

Fonterra (USA) Inc.                    Premier Nutrition Company, LLC


By:     [***]                        By: /s/ Paul Rode

Title: President                             Title: CFO        

Date:                            Date:



Exhibit


EXHIBIT 10.20
BELLRING BRANDS, INC.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
Effective January 1, 2020









BELLRING BRANDS, INC.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
Effective
January 1, 2020

TABLE OF CONTENTS
Page
Article I DEFINITIONS    2
Article II PARTICIPATION IN THE PLAN    6
2.1Eligibility    6
2.2Commencement of Participation    6
Article III ACCOUNTS    7
3.1Deferral Election    7
3.2Account Reflecting Deferred Compensation    7
3.3Credits or Charges.    7
3.4Company Matching Deferral.    8
3.5Investment, Management and Use    8
3.6Valuation of Stock    8
Article IV FUNDS    9
4.1Fund Selection    9
4.2Exchange    9
Article V DISTRIBUTION OF ACCOUNT    10
5.1Time of Distribution.    10
5.2Amount Distributed    11
5.3Method of Distribution    11
5.4Form of Payment    11
5.5Distribution Upon Death    11
5.6Designation of Beneficiary    12
5.7Shares Available    12
Article VI NON-ASSIGNABILITY    13
6.1Non-Assignability    13
Article VII VESTING    14
7.1Vesting    14
Article VIII AMENDMENT OR TERMINATION OF THE PLAN    15

i




8.1Power to Amend Plan    15
8.2Distribution of Plan Benefits Upon Termination    15
8.3When Amendments Take Effect    15
8.4Restriction on Retroactive Amendments    15
Article IX PLAN ADMINISTRATION    16
9.1Powers of the Committee    16
9.2Indemnification    16
9.3Claims Procedure    17
9.4Expenses    18
9.5Conclusiveness of Action    18
9.6Release of Liability    18
Article X MISCELLANEOUS    19
10.1Plan Not a Contract of Employment    19
10.2No Rights Under Plan Except as Set Forth Herein; Unsecured General Creditor Status    19
10.3Rules    19
10.4Withholding of Taxes    19
10.5Severability    19
10.6409A Compliance    19
10.7Participant Responsibility    19
10.8Rules of Construction    20




ii




BELLRING BRANDS, INC.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
Effective as of
January 1, 2020


1




PREAMBLE

The purpose of the Plan is to enhance the profitability and value of BellRing Brands, Inc. (the “Company”) for the benefit of its stockholders by providing a nonqualified deferred compensation program to attract and retain qualified Directors who have made or will make important contributions to the success of the Company.




2




Article I

DEFINITIONS
As used in this Plan, the following capitalized words and phrases have the meanings indicated, unless the context requires a different meaning:
1.1    Account” means the bookkeeping account established for each Participant to reflect amounts credited to such Participant under the Plan.
1.2    Acquiring Person” means any person or group of Affiliates or Associates who is or becomes the beneficial owner, directly or indirectly, of 20% or more of the outstanding Stock.
1.3    AffiliateorAssociate” shall have the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
1.4    Allocation Date” means each day the New York Stock Exchange is open for business.
1.5    Beneficiary” means the person or persons designated by a Participant, or otherwise entitled, to receive any amount credited to his or her Account that remains undistributed at his or her death.
1.6    Board” means the Board of Directors of the Company.
1.7    Change in Control means any of the following:
(i)    Individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board.
(ii)    An individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) directly or indirectly acquires or beneficially owns (as defined in Rule 13d-3 under the Exchange Act, or any successor rule thereto) (in each case, together with such individual’s, entity’s or group’s prior ownership of the Company) the right to direct the vote with respect to more than 50% of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (“Voting Control”), provided, however, that the following acquisitions and beneficial ownership shall not constitute a Change in Control;
(A)    any direct or indirect acquisition or beneficial ownership by the Company, Post Holdings, Inc. or any of its and their subsidiaries,

(B)    the direct or indirect acquisition or beneficial ownership of additional securities of the Company entitled to vote generally in the election of directors or of the right to direct the vote of such securities by an individual, entity or group who already beneficially owns Voting Control, or

3




(C)    any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of more of its subsidiaries.
(iii)    Consummation of a reorganization, merger, share exchange or consolidation (a “Business Combination”), unless in each case following such Business Combination:
(A)    all or substantially all of the individuals, entities or groups who were the beneficial owners of Voting Control immediately prior to such Business Combination beneficially own, directly or indirectly, the right to direct the vote with respect to more than 50% of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors or other governing body, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company through one or more subsidiaries);
(B)    no individual, entity or group (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, the right to direct the vote with respect to more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors or other governing body, as the case may be, of the entity resulting from such Business Combination, except to the extent that such individual, entity or group beneficially owned Voting Control prior to the Business Combination; and
(C)    at least a majority of the members of the board of directors or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, approving such Business Combination.
(iv)    The Company shall sell or otherwise dispose of all or substantially all of the assets of the Company (in one transaction or a series of transactions).
(v)    The stockholders of the Company shall approve a plan to liquidate or dissolve the Company and the Co