Business Context and Reporting Period
This Form 8-K is filed by Post Holdings, Inc. on May 5, 2012. The filing addresses a material restatement of previously issued financial statements for the fiscal year ended September 30, 2011, and the fiscal quarter ended December 31, 2011. Post Holdings became an independent public company on February 3, 2012, following a tax-free spin-off from Ralcorp Holdings, Inc. During the periods subject to restatement, Post was a wholly-owned subsidiary of Ralcorp.
Key Financial Metrics and Impact
The filing identifies an accounting error related to the goodwill impairment analysis for the Post brand cereal business. Specifically, an error in deferred tax liabilities resulted in an understatement of the net book value of net assets. Consequently, the previously recorded goodwill impairment charge was understated.
- Additional Impairment Charge: An additional after-tax impairment charge of approximately $54 million should have been recorded in the fourth quarter of fiscal 2011.
- Revenue, Liquidity, and Cash Flow: The filing explicitly states that the errors do not affect the Company's revenue, liquidity, or cash flow.
- Debt Covenants: The errors do not impact compliance with financial covenants under the Company's credit facility or indenture.
Material Changes and Restatement Details
The Audit Committee of Post Holdings, Inc. concluded that the financial statements in the Form 10 Registration Statement (fiscal year ended September 30, 2011) and the Form 10-Q (quarter ended December 31, 2011) should no longer be relied upon. The Company will restate these statements to reflect the necessary accounting corrections. The error had no impact on the statement of operations for the period ended December 31, 2011, nor will it impact the statement of operations for the period ended March 31, 2012.
Management Commentary, Risks, and Contingencies
Internal Control Weakness: Ralcorp management determined that a material weakness in internal control over financial reporting existed as of September 30, 2011, and December 31, 2011. As a subsidiary at the time, this material weakness also existed at Post Holdings. Post management is now responsible for establishing its own internal controls following the spin-off.
Credit Facility Discussions: The Company has informed the administrative agent under its senior secured credit facilities of the intention to restate. Discussions have been initiated regarding the possibility of obtaining waivers and/or amendments to address these issues.
Forward-Looking Statements: The filing contains forward-looking statements subject to risks and uncertainties, as detailed in the attached press release (Exhibit 99.1).
Key Facts for Investor Verification
- Verify the specific adjustments to the restated financial statements once filed.
- Confirm the outcome of discussions with the administrative agent regarding credit facility waivers or amendments.
- Monitor the Company's progress in remediating the material weakness in internal controls over financial reporting.
- Review the attached press release (Exhibit 99.1) for additional details on the restatement and forward-looking statements.