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Quarterly report which provides a continuing view of a company's financial position

brbr-20200331
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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 March 31, 2020
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
https://cdn.kscope.io/e4f4805193ee09922d20fd4c812a63eb-brbr-20200331_g1.jpg
BellRing Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware83-4096323
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 par valueBRBRNew 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 May 4, 2020
Class B Common Stock, $0.01 Par Value - 1 share as of May 4, 2020



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


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
March 31,
Six Months Ended
March 31,
2020201920202019
Net Sales  $257.5  $216.5  $501.5  $402.3  
Cost of goods sold  169.3  137.5  322.0  257.7  
Gross Profit  88.2  79.0  179.5  144.6  
Selling, general and administrative expenses  47.5  32.6  84.0  59.8  
Amortization of intangible assets  5.6  5.6  11.1  11.1  
Operating Profit  35.1  40.8  84.4  73.7  
Interest expense, net  14.3    25.9    
Earnings before Income Taxes  20.8  40.8  58.5  73.7  
Income tax expense  2.2  9.8  8.1  17.6  
Net Earnings Including Redeemable Noncontrolling Interest  18.6  31.0  50.4  56.1  
Less: Net earnings attributable to redeemable noncontrolling interest  14.4  31.0  40.2  56.1  
Net Earnings Available to Class A Common Stockholders  $4.2  $  $10.2  $  
Earnings per share of Class A Common Stock:  
Basic  $0.11  $  $0.26  $  
Diluted  $0.11  $  $0.26  $  
Weighted-Average shares of Class A Common Stock Outstanding:  
Basic  39.4    39.4    
Diluted  39.5    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
March 31,
Six Months Ended
March 31,
2020201920202019
Net Earnings Including Redeemable Noncontrolling Interest$18.6  $31.0  $50.4  $56.1  
Hedging adjustments:
Net loss on derivatives(11.0)   (10.4)   
Reclassifications to net earnings(0.2)   (0.2)   
Foreign currency translation adjustments:
Unrealized foreign currency translation adjustments(0.3) (0.4) 0.2  (0.7) 
Tax benefit on other comprehensive loss
Net loss on derivatives0.8    0.8    
Total Other Comprehensive Loss Including Redeemable Noncontrolling Interest(10.7) (0.4) (9.6) (0.7) 
Less: Comprehensive income attributable to redeemable noncontrolling interest  6.2  30.6  32.5  55.4  
Total Comprehensive Income Available to Class A Common Stockholders$1.7  $  $8.3  $  
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


2

BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
March 31,
2020
September 30, 2019
ASSETS
Current Assets  
Cash and cash equivalents  $76.7  $5.5  
Receivables, net  111.2  68.4  
Inventories  151.2  138.2  
Prepaid expenses and other current assets  10.4  7.4  
Total Current Assets  349.5  219.5  
Property, net  10.3  11.7  
Goodwill  65.9  65.9  
Intangible assets, net  285.4  296.5  
Other assets  14.5  0.9  
Total Assets  $725.6  $594.5  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities  
Current portion of long-term debt  $35.0  $  
Accounts payable  56.5  61.7  
Other current liabilities  36.5  31.0  
Total Current Liabilities  128.0  92.7  
Long-term debt  756.4    
Deferred income taxes  12.8  14.1  
Other liabilities  29.7  1.3  
Total Liabilities  926.9  108.1  
Redeemable noncontrolling interest  1,661.9    
Stockholders’ Equity  
Preferred stock      
Common stock  0.4    
Accumulated deficit  (1,859.1)   
Net investment of Post Holdings, Inc.    489.0  
Accumulated other comprehensive loss  (4.5) (2.6) 
Total Stockholders’ Equity  (1,863.2) 486.4  
Total Liabilities and Stockholders’ Equity  $725.6  $594.5  
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3

BELLRING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Six Months Ended
March 31,
20202019
Cash Flows from Operating Activities  
Net earnings including redeemable noncontrolling interest  $50.4  $56.1  
Adjustments to reconcile net earnings including redeemable noncontrolling interest to net cash flow (used in) provided by operating activities: 
Depreciation and amortization  12.8  12.7  
Non-cash stock-based compensation expense  1.1    
Deferred income taxes  (3.4) 2.6  
Other, net  2.5  5.5  
Other changes in operating assets and liabilities:  
Increase in receivables  (42.7) (25.1) 
Increase in inventories  (12.9) (34.5) 
Increase in prepaid expenses and other current assets  (2.7) (1.8) 
Decrease in other assets  1.2  0.1  
Decrease in accounts payable and other current liabilities  (11.4) (14.7) 
Increase in non-current liabilities    0.7  
Net Cash (Used in) Provided by Operating Activities (5.1) 1.6  
Cash Flows from Investing Activities  
Additions to property  (1.2) (1.4) 
Net Cash Used in Investing Activities  (1.2) (1.4) 
Cash Flows from Financing Activities  
Proceeds from issuance of long-term debt  871.0    
Proceeds from issuance of common stock, net of issuance costs  524.4    
Repayments of long-term debt  (1,298.7)   
Payments of debt issuance costs and deferred financing fees  (9.6)   
Distributions to Post Holdings, Inc., net  (9.5) (8.0) 
Net Cash Provided by (Used in) Financing Activities 77.6  (8.0) 
Effect of Exchange Rate Changes on Cash and Cash Equivalents  (0.1) (0.2) 
Net Increase (Decrease) in Cash and Cash Equivalents 71.2  (8.0) 
Cash and Cash Equivalents, Beginning of Year  5.5  10.9  
Cash and Cash Equivalents, End of Period  $76.7  $2.9  
 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
March 31,
As Of and For The
Six Months Ended
March 31,
2020201920202019
Preferred Stock  
Beginning and end of period  $  $  $  $  
Common Stock  
Beginning of period  0.4        
Issuance of common stock      0.4    
End of period  0.4    0.4    
Additional Paid-in Capital  
Beginning of period  0.3        
Non-cash stock-based compensation expense  0.8    1.1    
Redemption value adjustment to redeemable noncontrolling interest  (1.1)   (1.1)   
End of period          
Accumulated Deficit  
Beginning of period  (2,276.9)       
Net earnings available to Class A Common Stockholders  4.2    10.2    
Distribution declared to Post Holdings, Inc.  (11.7)   (11.7)   
Issuance of common stock      (0.4)   
Initial public offering  4.7    (2,112.4)   
Reclassification of net investment of Post Holdings, Inc.      524.4    
Redemption value adjustment to redeemable noncontrolling interest  420.6    (269.2)   
End of period  (1,859.1)   (1,859.1)   
Net Investment of Post  
Beginning of period    474.2  489.0  453.1  
Net earnings attributable to Post Holdings, Inc.    31.0  5.5  56.1  
Initial public offering      29.9    
Reclassification of net investment of Post Holdings, Inc.      (524.4)   
Net decrease in net investment of Post Holdings, Inc.    1.5    (2.5) 
End of period    506.7    506.7  
Accumulated Other Comprehensive Loss  
Hedging Adjustments, net of tax  
Beginning of period
0.2        
Net change in hedges, net of tax
(2.5)   (2.3)   
End of period
(2.3)   (2.3)   
Foreign Currency Translation Adjustments  
Beginning of period  (2.2) (1.7) (2.6) (1.4) 
Foreign currency translation adjustments    (0.4) 0.4  (0.7) 
End of period  (2.2) (2.1) (2.2) (2.1) 
Total Stockholders’ Equity  $(1,863.2) $504.6  $(1,863.2) $504.6  
 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, represents 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 (the “LLC 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
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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.
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 (the “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 and six months ended March 31, 2020, $14.4 and $40.2 of the consolidated net earnings of BellRing LLC were allocated to the NCI, respectively, of which zero and $5.5 reflects the entitlement of Post to 100% of the consolidated net earnings of BellRing LLC prior to the IPO, respectively, and $14.4 and $34.7 reflects the entitlement of Post to 71.2% of the consolidated net earnings of BellRing LLC subsequent to the IPO, respectively. For the three and six months ended March 31, 2019, $31.0 and $56.1 of the consolidated net earnings of BellRing LLC were allocated to the NCI, respectively, to reflect the entitlement of Post to 100% of the consolidated net earnings of BellRing LLC prior to the IPO.
NOTE 2 — RECENTLY 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.
Recently Issued
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by this ASU do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and effective for all entities as of March 12, 2020, the date this ASU was issued. An entity may elect to apply the amendments for contract modifications provided by this ASU as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the impact of this ASU as it relates to its debt and hedging relationships that reference LIBOR.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU provides guidance on the measurement of credit losses for most financial assets
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and certain other instruments. This ASU replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates.This ASU is effective for annual periods beginning after December 15, 2019 and interim periods therein (i.e., BellRing’s financial statements for the year ending September 30, 2021), with early adoption permitted. The Company is currently evaluating the timing and impact of adopting this ASU.
Recently Adopted
In February 2016, the FASB issued 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 these ASUs. For additional information, refer to Note 12.
NOTE 3 — REVENUE
The following table presents net sales by product for the three and six months ended March 31, 2020 and 2019.
Three Months Ended
March 31,
Six Months Ended
March 31,
2020201920202019
Shakes and other beverages$211.4  $166.4  $411.2  $302.3  
Powders30.6  29.7  59.6  62.1  
Nutrition bars13.0  16.7  26.9  32.8  
Other2.5  3.7  3.8  5.1  
   Net Sales$257.5  $216.5  $501.5  $402.3  

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, 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. For the three and six months ended March 31, 2019, allocated costs were $3.2 and $5.5, respectively, including $1.7 and $2.9, respectively, of costs related to the separation from Post. Allocated costs were included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Operations. Costs related to the separation from Post were $0.3 and $1.8 for the three and six months ended March 31, 2020, respectively.
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 for the three and six months ended March 31, 2020 were $0.5 and $1.0, respectively, and stock-based compensation expense related to Post’s stock-based compensation plans for the three and six months ended March 31, 2020 were $0.8 and $1.9, respectively. MSA fees and stock-based compensation expense were reported in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Operations.
The Company sells certain products to Post and its subsidiaries. For the periods 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 periods subsequent to the IPO, these transactions were based upon pricing governed by
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agreements between the Company and Post and its subsidiaries. These transactions were consistent with prices of similar arm's-length transactions during all periods. During each of the three and six months ended March 31, 2020 and 2019, 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 govern the ongoing relationship between the Company and Post. These agreements included the LLC 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 incurs 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 $1.7, respectively, at March 31, 2020, 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. The Company also had a payable to Post of $5.3 at March 31, 2020 related to the quarterly tax distribution from BellRing LLC to Post pursuant to the terms of the LLC Agreement. This amount was included in “Other current liabilities” on the Condensed Consolidated Balance Sheet. During the three and six months ended March 31, 2020, BellRing LLC paid $6.4 to Post for the quarterly tax distribution.
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 $10.9 at March 31, 2020, and were recorded in “Other liabilities” on the Condensed Consolidated Balance Sheet.
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 (“OCI”) or loss and distributions or dividends or (ii) the redemption value. As of March 31, 2020, the carrying amount of the NCI was recorded at its redemption value of $1,661.9. Changes in the redemption value of the NCI are recorded to additional paid-in capital, to the extent available, and “Accumulated deficit” on the Condensed Consolidated Balance Sheet.
As of March 31, 2020, 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 of BellRing LLC were allocated to the NCI to reflect the entitlement of Post to a portion of the consolidated net earnings.
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The following table summarizes the changes to the Company’s NCI. The period ended March 31, 2020 represents the period beginning October 21, 2019, the effective date of the IPO, and ending March 31, 2020 (see Note 1).
Three Months Ended
March 31, 2020
Period Ended March 31, 2020
Beginning of period  $2,075.2  $  
Net earnings attributable to NCI after IPO  14.4  34.7  
Net change in hedges, net of tax  (7.9) (7.5) 
Foreign currency translation adjustments  (0.3) (0.2) 
Impact of IPO    1,364.6  
Redemption value adjustment to NCI  (419.5) 270.3  
End of period  $1,661.9  $1,661.9  
The following table summarizes the effects of changes in ownership in BellRing LLC on BellRing Inc.’s equity. The period ended March 31, 2020 represents the period beginning October 21, 2019, the effective date of the IPO, and ending March 31, 2020 (see Note 1).
Three Months Ended
March 31, 2020
Period Ended March 31, 2020
Net earnings available to Class A Common Stockholders  $4.2  $10.2  
Transfers to NCI:  
Impact of IPO    1,364.6  
Redemption value adjustment to NCI  (419.5) 270.3  
Changes from net earnings available to Class A Common Stockholders and transfers to NCI  $(415.3) $1,645.1  

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.
The effective income tax rate was 10.6% and 13.8% during the three and six months ended March 31, 2020, respectively, and 24.0% and 23.9% during the three and six months ended March 31, 2019, respectively. The decreases in the effective income tax rate compared to each of the prior year periods were primarily due to the Company taking into account for U.S. federal, state and local income tax purposes its 28.8% distributive share of the items of income, gain, loss and deduction of BellRing LLC in the periods 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 estimated annual effective income tax rate for the full fiscal year adjusted for the impact of discrete items occurring during the interim periods.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted and signed into law. Based on the Company’s review of the CARES Act provisions, it has determined that there were no significant tax impact during the three and six months ended March 31, 2019, respectively, and any tax impacts to the Company have been accounted for.
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. In addition, “Net earnings available to Class A Common Stockholders for diluted earnings per share” in the table below has been adjusted for diluted net earnings per share attributable to NCI, to the extent it is dilutive.
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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. The period ended March 31, 2020 represents the period beginning October 21, 2019, the effective date of the IPO, and ending March 31, 2020 (see Note 1). There were no shares of Class A Common Stock outstanding during the three or six months ended March 31, 2019, and as such, no computation of basic and diluted earnings per share has been provided.
Three Months Ended
March 31, 2020
Period Ended March 31, 2020
Net earnings available to Class A Common Stockholders for basic earnings per share$4.2  $10.2  
Dilutive impact of net earnings attributable to NCI    
Net earnings available to Class A Common Stockholders for diluted earnings per share$4.2  $10.2  
Weighted-average shares for basic earnings per share (in millions)39.4  39.4  
Total dilutive restricted stock units (in millions)0.1    
Weighted-average shares for diluted earnings per share (in millions)39.5  39.4  
Basic earnings per share of Class A Common Stock$0.11  $0.26  
Diluted earnings per share of Class A Common Stock$0.11  $0.26  
Weighted-average shares for diluted earnings per share excluded 0.1 million equity awards for both the three months ended March 31, 2020 and the period ended March 31, 2020, respectively, as they were anti-dilutive.
NOTE 8 — INVENTORIES
March 31,
2020
September 30, 2019
Raw materials and supplies  $19.7  $26.4  
Work in process  0.1  0.1  
Finished products  131.4  111.7  
   Inventories  $151.2  $138.2  

NOTE 9 — PROPERTY, NET
March 31,
2020
September 30, 2019
Property, at cost  $21.1  $21.1  
Accumulated depreciation  (10.8) (9.4) 
   Property, net$10.3  $11.7  

NOTE 10 — GOODWILL
The components of “Goodwill” on the Condensed Consolidated Balance Sheets at both March 31, 2020 and September 30, 2019 are presented in the following table.
Goodwill, gross  $180.7  
Accumulated impairment losses  (114.8) 
   Goodwill  $65.9  

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NOTE 11 — INTANGIBLE ASSETS, NET
Total intangible assets are as follows:
March 31, 2020September 30, 2019
Carrying
Amount
Accumulated
Amortization
Net
Amount
Carrying
Amount
Accumulated
Amortization
Net
Amount
Customer relationships$209.4  $(71.2) $138.2  $209.4  $(65.5) $143.9  
Trademarks and brands213.4  (66.2) 147.2  213.4  (60.8) 152.6  
Other intangible assets3.1  (3.1)   3.1  (3.1)   
   Intangible assets, net  $425.9  $(140.5) $285.4  $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 1 year to 7 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 the 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 Statements 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
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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.
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 was accounted for as a lease.
The following table presents the balance sheet location of the Company’s operating leases as of March 31, 2020.
March 31,
2020
ROU assets:
   Other assets$13.4  
Lease liabilities:
   Other current liabilities$2.6  
   Other liabilities12.0  
      Total lease liabilities$14.6  
The following table presents maturities of the Company’s operating lease liabilities as of March 31, 2020, presented under ASC Topic 842.
March 31,
2020
Remaining Fiscal 2020$1.7  
Fiscal 20212.8  
Fiscal 20222.8  
Fiscal 20232.5  
Fiscal 20242.0  
Thereafter4.8  
   Total future minimum payments16.6  
   Less: Implied interest(2.0) 
      Total lease liabilities$14.6  
The following table presents future minimum rental payments under the Company’s noncancellable operating leases as of September 30, 2019, presented under ASC Topic 840.
September 30, 2019
Fiscal 2020$2.7  
Fiscal 20212.7  
Fiscal 20222.7  
Fiscal 20232.7  
Fiscal 20241.9  
Thereafter4.7  
   Total future minimum payments$17.4  
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As reported under ASC Topic 842, operating lease expense for the three and six months ended March 31, 2020 was $0.9 and $2.0, respectively, which included immaterial variable lease costs and short-term lease costs in both periods. As reported under ASC Topic 840, rent expense for the three and six months ended March 31, 2019 was $0.9 and $1.6, respectively. Operating cash flows for amounts included in the measurement of the Company’s operating lease liabilities for the six months ended March 31, 2020 were $1.8. ROU assets obtained in exchange for operating lease liabilities during the six months ended March 31, 2020 were immaterial. The weighted average remaining lease term of the Company’s operating leases as of March 31, 2020 was approximately 6 years and the weighted average incremental borrowing rate was 4.2% as of March 31, 2020.
NOTE 13 — DERIVATIVE FI