BellRing Brands, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2022. The filing reports annual results; it does not provide a clear standalone fiscal fourth-quarter financial summary. BellRing became an independent public company in March 2022 following its spin-off from Post Holdings.
Business context
BellRing sells convenient nutrition products, primarily under Premier Protein and Dymatize, including ready-to-drink (RTD) shakes and beverages, powders, and nutrition bars. Premier Protein generated 81.0% of fiscal 2022 net sales; RTD shakes and other beverages represented 79.0%. The U.S. accounted for 88.7% of sales. Costco and Walmart, including Sam’s Club, together represented approximately 63.5% of sales.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $1,371.5 million | $1,247.1 million |
| Gross profit / gross margin | $421.8 million / 30.7% | $386.2 million / 31.0% |
| Operating profit / operating margin | $212.4 million / 15.5% | $168.0 million / 13.5% |
| Net earnings, including redeemable noncontrolling interest | $116.0 million | $114.4 million |
| Net earnings available to common stockholders | $82.3 million | $27.6 million |
| Diluted earnings per share | $0.88 | $0.70 |
| Cash provided by operating activities | $21.0 million | $226.1 million |
- Sales increased 10%. Higher selling prices and lower promotional spending more than offset lower volumes: Premier Protein volume fell 8%, mainly amid supply constraints; Dymatize volume fell 5%, partly reflecting price-related elasticity and product discontinuations.
- Operating profit rose 26%, despite $140.5 million of higher net product costs, including raw material, freight, and manufacturing costs. Gross margin declined slightly.
- Common-stockholder earnings and EPS comparisons are affected by the March 2022 spin-off, which ended the prior-period redeemable noncontrolling-interest allocation; weighted-average common shares also rose from 39.5 million to 93.5 million.
- Operating cash flow fell $205.1 million, primarily reflecting increased inventory, receivables and timing differences in payables, as well as higher tax and interest payments. Cash and equivalents were $35.8 million at year-end, versus $152.6 million a year earlier.
- Debt principal totaled $939.0 million: $840.0 million of 7.00% senior notes due March 2030 and $99.0 million drawn on the revolving facility. The revolver had $151.0 million of remaining capacity; its September 30, 2022 rate was 8.50%. The company reported compliance with its 6.00:1.00 maximum total net leverage covenant.
- Current assets were $421.3 million and current liabilities $143.5 million. Purchase commitments totaled $679.0 million, including $406.5 million due in fiscal 2023.
Material changes, outlook, and risks
- The spin-off and refinancing materially changed the capital and tax structure. BellRing issued $840.0 million of 7.00% notes to Post, repaid its former term loan, and established a $250.0 million revolving facility. The filing recorded a $17.6 million debt-extinguishment and refinancing loss.
- Management expects positive operating cash flows and believes available cash, operating cash flow, and potential future credit facilities will meet foreseeable needs. It planned no significant capital expenditures for fiscal 2023. The filing gives no specific numerical fiscal 2023 sales or earnings guidance.
- Management expects inflationary pressures and supply constraints to continue into fiscal 2023. Low RTD-shake inventory, below-normal service levels, allocations, and missed sales were linked to contract-manufacturer production shortfalls and delayed capacity expansion. The company had taken pricing actions on nearly all products.
- Supply concentration is significant: one contract manufacturer supplied approximately 64.7% of Premier Protein RTD shakes in FY2022, and its manufacturing agreement was due to expire December 31, 2022 while being renegotiated. A single supplier also provided packaging and equipment for 11-ounce shakes.
- In the fourth quarter, a contract manufacturer initiated a voluntary recall of Premier Protein products made at one facility from December 8, 2021 through July 9, 2022. Management did not expect a material financial impact.
- Joint Juice litigation remains a contingency. A New York jury verdict resulted in a $12.9 million judgment, which Premier Nutrition appealed; other related cases remained pending. The company accrued $16.0 million for these matters at year-end and recorded $8.0 million of legal-matter expense during FY2022.
- Other notable FY2022 items included $14.5 million of spin-off-related expenses. FY2021 included $29.9 million of accelerated amortization following the discontinuation of the Supreme Protein brand.
- Key risks include dependence on RTD shakes and a small number of manufacturers, suppliers, and customers; input-cost inflation and limited ability to pass costs through; high leverage; product safety and litigation exposure; and restrictions and potential tax liabilities associated with the spin-off. The company reported no goodwill impairment for FY2022.
Important facts for investors to verify
- Whether the renewed manufacturing agreement and added capacity resolve the RTD-shake supply constraints and improve fill rates in fiscal 2023.
- How pricing, input inflation, promotional activity, and lower volumes affect margins and demand.
- Working-capital trends, especially inventory and receivables, and their impact on cash generation and liquidity.
- Debt service, revolver usage, leverage-covenant headroom, and the ability to fund planned repurchases and other commitments.
- Developments in the Joint Juice appeal and remaining cases, and the ultimate cost or effect of the product recall.
- Spin-off-related tax obligations and continuing service arrangements with Post. The auditor issued an unqualified opinion on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.