Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
_______________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-35305  
______________________

POST HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_______________________
Missouri
 
45-3355106
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
2503 S. Hanley Road, St. Louis, Missouri
 
63144
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (314) 644-7600
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $.01 par value
 
New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
_______________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     x   Yes     ¨   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     ¨   Yes     x   No
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 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.     x   Yes     ¨   No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files.)     x   Yes     ¨   No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of these terms in Rule 12b-2 of the Exchange Act.  
Large accelerated filer
 
x
 
Accelerated filer
 
¨
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     ¨   Yes     x   No
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of March 31, 2014, the last day of the registrant’s second quarter, was $2,089,903,627.
Number of shares of Common Stock, $.01 par value, outstanding as of November 14, 2014: 44,859,942 
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement for its annual meeting of shareholders, to be filed with the Securities and Exchange Commission within 120 days after September 30, 2014, are incorporated by reference into Part III of this report.
 


TABLE OF CONTENTS


 
 
 
PART I
 
 
 
 
 
 
PART II
 
 
 
 
 
 
PART III
 
 
 
 
 
 
PART IV
 
 
 
 
 
 



i
Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), 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 by the use of terms and phrases such as “believe,” “should,” “expect,” “project,” “estimate,” “anticipate,” “aim,” “intend,” “plan,” “will,” “can,” “may,” or similar expressions elsewhere in this report. Our results of operations and financial condition 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 high leverage and substantial debt, including covenants that restrict the operation of our business;
•
our ability to service our outstanding debt or obtain additional financing, including unsecured debt;
•
our ability to continue to compete in our product markets and our ability to retain our market position;
•
our ability to identify and complete acquisitions, manage our growth and integrate acquisitions;
•
changes in our cost structure, management, financing and business operations;
•
significant volatility in the costs of certain raw materials, commodities, packaging or energy used to manufacture our products;
•
our ability to maintain competitive pricing, introduce new products or successfully manage our costs;
•
our ability to successfully implement business strategies to reduce costs;
•
impairment in the carrying value of goodwill or other intangibles;
•
the loss or bankruptcy of a significant customer;
•
allegations that our products cause injury or illness, product recalls and product liability claims and other litigation;
•
our ability to anticipate and respond to changes in consumer preferences and trends;
•
changes in economic conditions and consumer demand for our products;
•
disruptions in the U.S. and global capital and credit markets;
•
labor strikes, work stoppages or unionization efforts;
•
legal and regulatory factors, including advertising and labeling laws, changes in food safety and laws and regulations governing animal feeding operations;
•
our ability to comply with increased regulatory scrutiny related to certain of our products and/or international sales;
•
the ultimate impact litigation may have on us, including the lawsuit (to which Michael Foods is a party) alleging violations of federal and state antitrust laws in the egg industry;
•
our reliance on third party manufacturers for certain of our products;
•
disruptions or inefficiencies in supply chain;
•
our ability to recognize the expected benefits of the closing of our Modesto, California manufacturing facility;
•
fluctuations in foreign currency exchange rates;
•
consolidations in the retail grocery and foodservice industries;
•
change in estimates in critical accounting judgments and changes to or new laws and regulations affecting our business;
•
losses or increased funding and expenses related to our qualified pension plans;
•
loss of key employees;
•
our ability to protect our intellectual property;
•
changes in weather conditions, natural disasters, disease outbreaks and other events beyond our control;
•
our ability to successfully operate our international operations in compliance with applicable laws and regulations;
•
our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, including with respect to acquired businesses;
•
business disruptions caused by information technology failures and/or technology hacking; and


1
Table of Contents

•
other risks and uncertainties included under “Risk Factors” in this document.
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 document to conform these statements to actual results or to changes in our expectations.


2
Table of Contents

PART I
ITEM 1.    BUSINESS
INTRODUCTION
Post Holdings, Inc. is a Missouri corporation incorporated on September 22, 2011. Our principal executive offices are located at 2503 S. Hanley Road, St. Louis, Missouri 63144. We are a consumer packaged goods holding company, operating in the center-of-the-store, refrigerated, active nutrition and private label food categories . Unless otherwise stated or the context otherwise indicates, all references in this Form 10-K to “Post,” “the Company,” “us,” “our” or “we” mean Post Holdings, Inc. and its consolidated subsidiaries and, for periods prior to our separation from Ralcorp Holdings, Inc. (“Ralcorp”), the Branded Cereal Business of Ralcorp.
On February 3, 2012, Post completed its legal separation via a tax free spin-off (the “Spin-Off”) from Ralcorp (Ralcorp was subsequently acquired by ConAgra Foods, Inc. on January 29, 2013). On February 6, 2012, Post common stock began trading on the New York Stock Exchange under the ticker symbol “POST.” In 2012, we had a single operating segment, and in 2013, Post operated in three reportable segments. As a result of acquisitions, during fiscal 2014, Post operated in five reportable segments: Post Foods, Michael Foods, Active Nutrition, Private Brands and Attune Foods. Financial segment information for the five reportable segments for fiscal 2014 is contained in this Annual Report.
For fiscal 2014, the Post Foods segment predominately included the Post branded ready-to-eat cereal business. The Michael Foods segment consisted of our June 2014 acquisition of MFI Holding Corporation and produces value-added egg products, refrigerated potato products and cheese and other dairy case products. The Active Nutrition segment included the business of Premier Nutrition Corporation (“PNC”), which we acquired in September 2013, and Dymatize Enterprises, LLC (“Dymatize”), which we acquired in February 2014. Our Private Brands segment consisted of Dakota Growers Pasta Company, Inc. (“Dakota Growers”) and Golden Boy Foods Ltd. (“Golden Boy”), which we acquired in January 2014 and February 2014, respectively. The Attune Foods segment included premium natural and organic cereals and snacks and includes the business of Attune Foods, Inc. (“Attune”), which we acquired substantially all of the assets of in December 2012, and certain assets of the Hearthside Food Solutions private label and branded cereal, granola and snack businesses, which we acquired in May 2013.
For fiscal 2015, we have realigned our organization and will operate in three groups of businesses: Consumer Brands, Michael Foods and Private Label. The Consumer Brands business includes the Post Foods branded cereal operations and the active nutrition businesses of PNC and Dymatize, as well as the PowerBar and Musashi brands, which we acquired in October 2014. The Michael Foods business is comprised of the Michael Foods egg products, cheese and potato businesses as well as the business of Dakota Growers, both of which have a large foodservice focus. The Private Label business includes the businesses of Golden Boy, Attune and American Blanching Company, which we acquired in November 2014. Actual reportable segment determinations have not yet been made for fiscal 2015.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which we refer to as MD&A, under Item 7 of this report contains financial and other information concerning our business developments and operations and are incorporated into this Item 1.
Additional information about us, including our Form 10, Forms 10-K, Forms 10-Q, Forms 8-K, other securities filings (and amendments thereto), press releases and other important announcements, is available at our website at www.postholdings.com or the Security and Exchange Commission’s (“SEC”) website at www.sec.gov (for securities filings only). These documents can be printed free of charge as soon as reasonably practicable after their electronic filing with the SEC. Our Corporate Governance Guidelines, Global Standards of Business Conduct, Director Code of Ethics, and the charters of the Audit and Corporate Governance and Compensation Committees of our board of directors are also available on our website, from which they can be printed free of charge. All of these documents are also available to shareholders at no charge upon request sent to our corporate secretary (2503 S. Hanley Road, St. Louis, Missouri 63144-2503, Telephone: 314-644-7600). The information on our website is not part of this report.
Our Businesses
Post Foods
The Post Foods business manufactures, markets and sells branded and private label ready-to-eat cereal products. The ready-to-eat cereal category is one of the most prominent categories in the food industry. According to Nielsen’s expanded All Outlets Combined (xAOC) information, the category was approximately $8.8 billion for the 52-week period ended October 25, 2014. Post Foods leverages the strength of its brands, category expertise, and over a century of institutional knowledge to create a diverse portfolio of cereals. Our Post Foods business is the third largest seller of ready-to-eat cereals in the United States with a 11.1% share of retail sales (based on retail dollar sales) for the 52-week period ended October 25, 2014, based on Nielsen’s xAOC information. Nielsen’s xAOC is representative of food, drug and mass merchandisers (including Walmart), some club retailers (Sam’s Club & BJs), some dollar retailers (Dollar General, Family Dollar & Dollar Tree) and military.


3
Table of Contents

Our brands include  Honey Bunches of Oats , the fourth largest brand of ready-to-eat cereal in the United States with a 4.5% xAOC dollar market share for the 52-week period ended October 25, 2014, as well as  Pebbles ,  Great Grains ,  Grape-Nuts ,  Post Shredded Wheat ,  Oh's , Honeycomb ,  Golden Crisp ,  Post Raisin Bran ,  Alpha-Bits  and  Shreddies . Post Foods’ products are primarily manufactured through a flexible production platform at three owned facilities.
In fiscal 2014, our Post Foods business operated as a single reportable segment. In fiscal 2015, the Post Foods business will be combined with our Active Nutrition business to operate as one combined Consumer Brands Group, focusing on our branded products.
Michael Foods
Our Michael Foods segment includes the business of MFI Holding Corporation, which we acquired in June 2014. Through this segment, we produce and/or distribute products in three divisions: egg products, refrigerated potato products and cheese and other dairy case products. Michael Foods produces and distributes egg products to the foodservice, retail and food ingredient markets and refrigerated potato products to the foodservice and retail grocery markets in North America. Michael Foods also markets a broad line of refrigerated grocery products to United States retail grocery outlets, including branded and private label cheese, bagels, butter, muffins and ethnic foods. Its major customers include foodservice distributors, restaurant chains and major retail grocery chains.
Egg Products.  Michael Foods’ egg products business produces and distributes numerous egg products under the  Better’n Eggs ,  All Whites ,  Papetti’s , Abbotsford Farms , Inovatech , Excelle , Emulsa ,  EasyEggs  and  Table Ready  brands, among others. The principal value-added egg products are pasteurized, extended shelf-life liquid eggs, egg white-based egg products and hardcooked and precooked egg products. The business’ other egg products include frozen, liquid and dried products that are used as ingredients in other food products, as well as organic and cage-free egg products. Michael Foods distributes its egg products to food processors and foodservice customers throughout North America, with limited international sales in the Far East, South America and Europe. The extended shelf-life liquid eggs (Michael Foods’ largest selling product line) and other egg products are marketed to a wide variety of foodservice and food ingredient customers. We are also a supplier of egg white-based products sold in the U.S. retail and foodservice markets. Through this business, we operate ten egg products production facilities located in the United States and Canada, some of which are fully integrated, from the production and maintenance of laying flocks through the processing of egg products.
Refrigerated Potato Products.  Michael Foods’ refrigerated potato products are produced and sold to both the foodservice and retail markets. Refrigerated potato products are marketed to foodservice customers under a variety of brands, including  Simply Potatoes ,  Diner’s Choice  and  Farm Fresh , with the  Simply Potatoes  and  Diner’s Choice  brands being used for retail refrigerated potato products. The business’ products consist of shredded hash browns and diced, sliced, mashed and other specialty potato products. This business maintains a main processing facility in Minnesota, with a smaller facility located in Nevada.
Cheese and Other Dairy Case Products.  Michael Foods’ cheese and other dairy-case products business markets a wide range of refrigerated grocery products directly to retailers and wholesale warehouses. The products are marketed principally under the  Crystal Farms  brand; other trademarks include  Crescent Valley ,  Westfield Farms  and  David’s Deli . Our strategy in this business has been to offer quality branded products at a good value relative to national brands.  Crystal Farms  brand cheese is positioned in the “mid-tier” pricing category and is priced below national brands such as  Kraft  and  Sargento  and above store brands (private label). The refrigerated products, which consist principally of cheese, bagels, butter, muffins and ethnic foods, are supplied by various vendors to the business’ specifications. Through this business, we operate a cheese packaging facility in Lake Mills, Wisconsin, which processes and packages various cheese products for the  Crystal Farms  brand and for various private label customers. The business does not produce cheese. We use both company-owned and leased facilities as well as independent distributors. We sell products to a large number of retail stores, a majority of which are served via customers’ warehouses. We also maintain a fleet of refrigerated tractor-trailers to deliver products to our retail customers from nine distribution centers.
In fiscal 2014, our Michael Foods business operated as a single reportable segment. In fiscal 2015, because the businesses primarily distribute products to foodservice customers, the legacy Michael Foods business will be combined with our Dakota Growers business to operate as one combined Michael Foods Group.
Active Nutrition
For the 2014 fiscal year, our Active Nutrition segment includes the business of PNC, which we acquired in September 2013, and Dymatize, which we acquired in February 2014. Through this segment, we market and distribute premium protein beverages and bars under the Premier Protein brand and protein powders and bars under the  Dymatize  and  Supreme Protein  brands. Our Active Nutrition business also includes the  Joint Juice  brand, which sells ready-to-drink beverages and other liquid-based solutions in the joint health space.
The Dymatize products are primarily manufactured at a facility owned by us, and our Premier Protein and Joint Juice products are manufactured under co-manufacturing agreements at various third party facilities located in the United States. Our Active


4
Table of Contents

Nutrition products are primarily sold in grocery, drug, specialty, online and club stores. On October 1, 2014, we acquired the PowerBar and Musashi brands from Nestlé S.A. This acquisition provides us with a platform to participate in the approximately $22 billion global sports nutrition and weight loss category. The  PowerBar  and  Musashi  branded products consist of premium bars, powders and gels sold in the United States and international markets.
In fiscal 2014, our Active Nutrition business operated as a single reportable segment. In fiscal 2015, the Active Nutrition business will be combined with our Post Foods business to operate as one combined Consumer Brands Group, focusing on our branded products.
Private Brands
With the acquisitions of Dakota Growers and Golden Boy in January 2014 and February 2014, respectively, we have established an expanded presence in the private label category. Dakota Growers manufactures and distributes pasta to the retail, foodservice and ingredient channels. Dakota Growers, with two manufacturing plants, has vertically integrated durum wheat milling and pasta production capabilities and produces over 150 different shapes of pasta products. Dakota Growers is a leader in the approximately $2+ billion North American retail pasta market. The Golden Boy business manufactures and distributes private label peanut butter and other nut butters, baking nuts, raisins and other dried fruit, and trail mixes, with sales to grocery retailers, food ingredient and foodservice channels primarily in the United States and Canada. Golden Boy also co-manufactures a limited amount of peanut butter and other nut butters for certain brand owners. The Golden Boy business also provides us with the ability to further participate in the rapidly growing natural and organic categories.
In fiscal 2014, our Dakota Growers and Golden Boy businesses operated as a single reportable segment, Private Brands. In fiscal 2015, the Golden Boy business will be combined with our Attune Foods business to operate as one combined Private Label Group. On November 1, 2014 we acquired American Blanching Company (“ABC”). ABC is a manufacturer of peanut butter for national brands, private label retail and industrial markets and provides peanut blanching, granulation and roasting services for the commercial peanut industry. In fiscal 2015, we expect to report the ABC operations as part of the Private Label Group.
Attune Foods
Our Attune Foods segment includes the business of Attune Foods, Inc., which we acquired in December 2012, as well as certain assets of the branded and private label cereal, granola and snacks business of Hearthside Food Solutions, which we acquired in May 2013. Through this segment, we manufacture and market branded premium natural and organic cereals and snacks, including Uncle Sam high fiber cereals, Attune chocolate probiotic bars and Erewhon gluten-free cereals and organic graham crackers. Attune Foods also includes the Golden Temple , Peace Cereal , Sweet Home Farm and Willamette Valley Granola Company brands as well as a private label granola business. Attune Foods’ products are largely sold through the natural/specialty channels, as well as in the bulk foods section of both conventional and natural/specialty retailers. Attune Foods’ manufacturing facility in Eugene, Oregon provides us the ability to manufacture a wide variety of product and package formats. Attune Foods’ products are also manufactured under co-manufacturing agreements at various third party facilities located in the United States.
In fiscal 2014, our Attune business operated as a single reportable segment, Attune Foods. In fiscal 2015, the Attune Foods business will be combined with our Golden Boy business to operate as one combined Private Label Group.
Sales and Marketing
Each of our businesses has developed marketing strategies specific to each existing or new product line and that emphasize high quality products and customer service. For certain of our products, we have consumer-targeted marketing campaigns, which include television, digital and print advertisements, coupon offers, co-marketing arrangements with complementary consumer product companies and co-op advertising with select retail customers. We also use traditional outdoor, print and digital advertising and social media, as well as more targeted grass roots programs such as sampling events and business drops in order to increase brand awareness and loyalty at both national and local levels. Our Internet and social media efforts are used to educate consumers about the nutritional value of our products as well as for product promotion and consumer entertainment.
Our Post Foods segment sells products primarily through an internal sales staff and broker organizations. We also occasionally sell Post Foods’ products to military, Internet and foodservice channels and may utilize broker, distribution or similar arrangements for sales of Post Foods products outside the United States. Our Michael Foods segment aligns its sales and marketing effort by customer and by distribution channel, with a dedicated team for each of the foodservice, retail and food ingredient channels. This has helped cement key customer relationships and allowed Michael Foods to optimize promotion plans and pricing solutions. Our Active Nutrition segment uses a flexible sales model that combines a national direct sales force and broker network. Our Private Brands segment primarily sells its products through internal sales staff and broker organizations. Our Attune Foods segment’s sales and marketing functions are led by an internal staff supported by a strong broker network that services the natural/specialty and conventional grocery channels.



5
Table of Contents

Research and Development
Our research and development capabilities span ingredients, grains and packaging technologies; new product and process development, as well as analytical support; bench-top and pilot plant capabilities; and research support to operations. We incurred expenses of approximately $ 10.2 million, $8.6 million and $7.9 million during the fiscal years ended September 30, 2014 , 2013 and 2012 , respectively, for research and development activities.
Raw Materials
Raw materials used in our businesses consist of ingredients and packaging materials. The principal ingredients for most of our businesses are agricultural commodities, including wheat, oats, other grain products, vegetable oils, fruits, peanuts, almonds and other tree nuts, milk and soy based proteins, cocoa, corn syrup and sugar. We also buy significant amounts of grain to feed layer hens. Additionally, the principal ingredients for the Michael Foods business are eggs, potatoes, cheese and other dairy products. The principal packaging materials are linerboard cartons, corrugated boxes, plastic containers, flexible and beverage packaging and cartonboard.
We purchase raw materials from local, regional, national and international suppliers. With respect to the egg products division of our Michael Foods segment, a portion of the division’s egg needs are satisfied by production from our own hens, with the balance being purchased under third-party egg procurement contracts and in the spot market. Our Attune Foods segment identifies raw material sources to ensure that its products meet the standards and certification requirements for non-GMO, organic and gluten-free. Prices paid for raw materials can fluctuate widely due to weather conditions, feed costs, labor disputes, government policies and regulations, industry consolidation, economic climate, energy shortages, transportation delays, commodity market prices, currency fluctuations and other unforeseen circumstances. The supply of raw materials can be impacted by the same factors that can impact their price. We continuously monitor worldwide supply and cost trends of these raw materials to enable us to take appropriate action to obtain ingredients and packaging needed for production. Although the prices of the principal raw materials can be expected to fluctuate, we believe such raw materials to be in adequate supply and generally available from numerous sources.
Cereal processing ovens and most of the Michael Foods production facilities are generally fueled by natural gas or propane, which are obtained from local utilities or other local suppliers. Electricity and steam (generated in on-site, gas-fired boilers) are also used in our processing facilities. Short-term standby propane storage exists at several plants for use in the event of an interruption in natural gas supplies. Oil may also be used to fuel certain operations at various plants in the event of natural gas shortages or when its use presents economic advantages. In addition, considerable amounts of diesel fuel are used in connection with the distribution of our products.
Trademarks and Intellectual Property
We own a number of trademarks that are critical to the success of our businesses. Our Post Foods business’ key trademarks include Post ® , Honey Bunches of Oats ® , Post Selects ® , Great Grains ® , Spoon Size ® Shredded Wheat , Oh's ® , Grape-Nuts ® and Honeycomb ® . The key trademarks for our Michael Foods business include Papetti’s ® , All Whites ® , Better’n Eggs ® , Easy Eggs ® , Table Ready ® , Abbotsford Farms ® , Simply Potatoes ® and Crystal Farm s ® . Our Active Nutrition segment's key trademarks include Premier Protein ® , Joint Juice ® , Dymatize ® , Supreme Protein ® , PowerBar ® and Musashi ® , and the key trademarks for our Attune Foods segment are Attune ® , Uncle Sam ® , Erewhon ® , Peace Cereal ® and Sweet Home Farm ® . Our trademarks are in most cases protected through registration in the United States and most other markets where the related products are sold.
Our Pebbles ™ products are sold under trademarks that have been licensed from a third party pursuant to a long-term license agreement that covers the sale of all Pebbles branded cereal products in the United States, Canada and several other international markets.
Similarly, we own several patents in North America. While our patent portfolio as a whole is material to our business, no one patent or group of related patents is material to our business. In addition, we have proprietary trade secrets, technology, know-how processes, and other intellectual property rights that are not registered.
Seasonality
Demand for certain of our products may be influenced by holidays, changes in seasons or other events. For example, demand for our egg products, cheese and snacking and baking nuts tends to increase during the holiday season, which may result in increased net sales during the first quarter of our fiscal year.
Working Capital
A description of our working capital practices is included in the Liquidity and Capital Resources section of MD&A in Item 7 of this report. Receipts from goods sold, supplemented as required by borrowings, provide for our operating expenses and working capital needs.



6
Table of Contents

Customers
We sell Post Foods’ products primarily to grocery, mass merchandise, supercenters, club store and drug store customers. We also sell to military, Internet and food service channels. Our Michael Foods’ primary customers include foodservice distributors, national restaurant chains, retail grocery stores and major food processors. Our Active Nutrition segment’s customers are predominately warehouse club stores, grocery stores, drug stores, convenient stores and supplement stores. Our Private Brands segment’s products are sold to grocery store, foodservice and food ingredient customers. Attune Foods’ products are primarily sold in natural/specialty grocery stores as well as conventional grocery stores.
Our largest customer, Walmart, accounted for approximately 11% of our consolidated net sales in fiscal 2014.  No other customer accounted for more than 10% of our fiscal 2014 consolidated net sales, but certain of our segments depend on sales to large customers.  For example, the largest customer of our Post Foods business, Walmart, accounted for approximately 24% of Post Foods’ net sales in fiscal 2014. Additionally, the largest customers of our Michael Foods business, Sysco and US Foods, accounted for approximately 17% and 13%, respectively, of Michael Foods’ net sales in fiscal 2014, and the largest customers of our Active Nutrition business, Costco and Sam’s Club, accounted for approximately 36% and 15%, respectively, of the Active Nutrition segment’s net sales in fiscal 2014.
For the fiscal years ended September 30, 2014 , 2013 and 2012 , sales to locations outside of the United States were approximately 13%, 14% and 14% of total net sales, respectively. For fiscal year 2014, the amount includes the sales of recent acquisitions including Dakota Growers, Golden Boy, Dymatize and Michael Foods.
Competition
The consumer foods industry is highly competitive, and the food categories in which we participate are also very competitive and are highly sensitive to both pricing and promotion. Many of our principal competitors in these categories may have substantially more financial, marketing and other resources. Competition is based on product quality, price, effective promotional activities, and the ability to identify and satisfy dynamic, emerging consumer preferences. Our principal strategies for competing in each of our segments include effective customer relationships, category insights, superior product quality, product innovation, an efficient supply chain and price. In addition, in many of our product categories, we compete not only with widely advertised branded products, but also with private label products. The industries in which we operate are expected to remain highly competitive in the foreseeable future.
Governmental Regulation and Environmental Matters
We are subject to regulation by federal, state, local and foreign governmental entities and agencies. Our activities in Canada, Germany and Australia are subject to local and national regulations similar to those applicable to our business in the United States. As a producer and distributor of goods for human consumption, our operations must comply with stringent production, storage, distribution, labeling and marketing standards administered by the Food and Drug Administration (“FDA”), Department of Commerce and Federal Trade Commission in the United States as well as similar regulatory agencies in Canada, Germany and Australia. Products that do not meet regulatory standards may be considered to be adulterated and/or misbranded and subject to recall. Additionally, following the recent adoption of the Food Safety Modernization Act, the FDA is developing additional regulations focused on prevention of food contamination, more frequent inspection of high-risk facilities, increased record-keeping and improved tracing of food.
Our Michael Foods segment is also subject to U.S. Department of Agriculture (“USDA”) regulations regarding quality, labeling and sanitary control. The Michael Foods egg products division processing plants that break eggs, and some of our other egg-processing operations, are subject to continuous on-site USDA inspection. Our other facilities are subject to periodic inspection by the USDA, FDA and/or state regulatory authorities, such as state departments of agriculture.
Our facilities, like those of similar businesses, are subject to certain safety regulations including regulations issued pursuant to the U.S. Occupational Safety and Health Act in the United States and similar regulatory agencies in Canada, Germany and Australia. These regulations require us to comply with certain manufacturing safety standards to protect our employees from accidents. Additionally, some of the food commodities on which our business relies are subject to governmental agricultural programs. These programs have substantial effects on prices and supplies and are subject to Congressional and administrative review.
Our operations are also subject to various federal, state and local laws and regulations with respect to environmental matters, including air quality, wastewater discharge and pretreatment, storm water, waste handling and disposal, and other regulations intended to protect public health and the environment. In the United States, the laws and regulations include the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. Our foreign facilities are subject to local and national regulations similar to those applicable to us in the United States. We have made, and will continue to make, expenditures to ensure environmental compliance.



7
Table of Contents

Employees
We have approximately 7,950 employees as of November 1, 2014, of which approximately 7,500 are in the United States, approximately 270 are in Canada and approximately 180 are located in other jurisdictions, including Germany and Australia. Currently, approximately 17% of our employees are unionized. We have entered into several collective bargaining agreements on terms that we believe are typical for the industries in which we operate. Most of the unionized workers at our facilities are represented under contracts which expire at various times throughout the next several years. As these agreements expire, we believe that the agreements can be renegotiated on terms satisfactory to us. We believe that our relations with employees and their representative organizations are good.
Executive Officers
The section below provides information regarding our executive officers as of November 14, 2014:
William P. Stiritz , age 80, served as the Chairman of our Board of Directors and Chief Executive Officer from February 2012 until November 1, 2014, when he was appointed our Executive Chairman. Prior to joining Post, Mr. Stiritz served as the Chairman of the Board of Directors of Ralcorp Holdings, Inc. from 1994 until February 2012.
Robert V. Vitale , age 48, served as our Chief Financial Officer from October 2011 until November 1, 2014 when he became our President and Chief Executive Officer. He previously served as President and Chief Executive Officer of AHM Financial Group, LLC, a diversified provider of insurance brokerage and wealth management services from 2006 until 2011.
James L. Holbrook , age 55, served as our Executive Vice President and President, Post Foods from January 2014 until November 1, 2014 when he became our EVP, President and CEO, Consumer Brands Group. Previously, Mr. Holbrook served as our Executive Vice President, Marketing since October 2011. Prior to joining Post, he served as Chief Executive Officer of EMAK Worldwide, Inc., a family of marketing services agencies, from 2005 through September 2011.
James E. Dwyer, Jr. , age 56, has served as the President and CEO of our Michael Foods business since June 2014, when Post acquired Michael Foods. Effective November 1, 2014, Mr. Dwyer also serves as our EVP, President and CEO, Michael Foods Group. Prior to the acquisition, he served as the Chief Executive Officer of Michael Foods since October 2009 and its Chairman since July 2013.
Jeff A. Zadoks , age 49, served as our Senior Vice President, Chief Accounting Officer from January 2014 until November 1, 2014 when he became our Senior Vice President and Chief Financial Officer. Previously, Mr. Zadoks served as our Corporate Controller since October 2011. Prior to joining Post, Mr. Zadoks most recently served as Senior Vice President and Chief Accounting Officer at RehabCare Group, Inc., a leading provider of post-acute care in hospitals and skilled nursing facilities, from February 2010 to September 2011, and as Vice President and Corporate Controller from December 2003 until January 2010.
Diedre J. Gray , age 36, served as our Senior Vice President – Legal and Corporate Secretary from December 2011 until September 2012 when she became our Senior Vice President, General Counsel and Corporate Secretary. Effective November 1, 2014, Ms. Gray serves as our Senior Vice President, General Counsel and Administration as well as our Corporate Secretary. Prior to joining Post, Ms. Gray most recently served as Associate General Counsel and Assistant Secretary at MEMC Electronic Materials, Inc. (now SunEdison, Inc.), a semiconductor and solar wafer manufacturing company. Previously, Ms. Gray was an attorney at Bryan Cave LLP from 2003 to 2010.
Available Information
We make available free of charge through our website (www.postholdings.com) reports we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet site containing these reports and proxy and information statements at http://www.sec.gov. Any materials we file can be read and copied online at that site or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10:00 a.m. and 3:00 p.m. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
ITEM 1A.    RISK FACTORS
In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could have a material adverse effect on our business, financial condition and results of operations. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operation, financial condition or results.


8
Table of Contents

Risks Related to Our Business
We operate in categories with strong competition.
The food and beverage industry is highly competitive. Our competitors may have substantial financial, marketing and other resources. Increased competition can reduce our sales due to loss of market share or the need to reduce prices to respond to competitive and customer pressures. In most product categories, we compete not only with widely advertised branded products, but also with private label and store brand products. A strong competitive response from one or more of our competitors to our marketplace efforts, or a shift in consumer preferences to competitors’ products, could result in us reducing pricing, increasing marketing or other expenditures or losing market share. Our profits could decrease if a reduction in prices or increased costs are not counterbalanced with increased sales volume.
We must identify changing consumer preferences and develop and offer food products to meet these preferences.
Consumer preferences evolve over time. The success of our food products depends on our ability to identify the tastes and dietary habits of consumers and to offer products that appeal to their preferences, including concerns of consumers regarding health and wellness, obesity, product attributes and ingredients, including carbohydrate content and processed ingredients. Introduction of new products and product extensions requires significant development and marketing investment. If our products fail to meet consumer preferences, or we fail to introduce new and improved products on a timely basis, the return on that investment will be less than anticipated and our strategy to grow sales and profits with investments in marketing and innovation will be less successful. Similarly, demand for our products could be affected by consumer concerns or perceptions regarding the health effects of our products or certain ingredients.
Our business strategy depends on us identifying and completing additional acquisitions and other strategic transactions. We may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.
We continuously evaluate and may in the future enter into additional strategic transactions. Any such transaction could happen at any time, could be material to our business and could take any number of forms, including, for example, an acquisition, investment or merger, for cash or in exchange for our equity securities.
Evaluating potential transactions and integrating businesses requires additional expenditures (including legal, accounting and due diligence expenses, higher administrative costs to support the acquired entities, information technology, personnel and other integration expenses) a nd may divert the attention of our management from ordinary operating matters. The success of these potential transactions will depend, in part, on our ability to realize the anticipated growth opportunities and cost synergies through the successful integration of the businesses we acquire with our existing businesses. Even if we are successful in integrating acquired businesses, we cannot assure that these integrations will result in the realization of the full benefit of any anticipated growth opportunities or cost synergies or that benefits will be realized within the expected time frames. In addition, acquired businesses may have unanticipated liabilities or contingencies.
Our corporate development activities may present financial and operational risks, including integrating or separating personnel and financial and other systems, and may have adverse effects on existing business relationships with suppliers and customers. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to certain intangible assets and increased operating expenses, all of which could singly or collectively adversely affect our results of operations and financial condition.  
Economic downturns could limit consumer demand for our products.
The willingness of consumers to purchase our products depends in part on general or local economic conditions. In periods of economic uncertainty, consumers may purchase less of our products and may forego certain purchases altogether. In those circumstances, we could experience a reduction in sales of our products. In addition, as a result of economic conditions or competitive actions, we may be unable to raise our prices sufficiently to protect profit margins. Any of these events could have an adverse effect on our results of operations.
Commodity price volatility and higher energy costs could negatively impact profits.
The primary commodities used by our businesses include wheat, semolina, nuts, sugar, edible oils, corn, oats, cocoa, milk and soy based protein. The supply and price of these ingredients are subject to market conditions and are influenced by many factors beyond our control, including weather patterns affecting ingredient production, governmental programs and regulations, insects, and plant diseases. Our primary packaging includes linerboard cartons, corrugated boxes, and flexible beverage packaging. In addition, our manufacturing operations use large quantities of natural gas and electricity. The cost of such commodities may fluctuate widely and we may experience shortages in commodity items as a result of commodity market fluctuations, availability, increased demand, weather conditions and natural disasters, as well as other factors outside of our control. Higher prices for natural gas, electricity and fuel may also increase our production and delivery costs. Changes in the prices charged for our products may lag behind changes in our energy and commodity costs. Accordingly, changes in commodity or energy costs may limit our ability to maintain existing margins and have a material adverse effect on our operating profits. Competitive pressures often limit our


9
Table of Contents

ability to increase prices in response to higher input costs. If we fail to hedge and prices subsequently increase, or if we institute a hedge and prices subsequently decrease, our costs may be greater than anticipated or greater than our competitors’ costs, and our financial results could be adversely affected.
Our Michael Foods segment's operating results are significantly affected by egg, potato and cheese prices and the prices of corn and soybean meal, which are the primary grains fed to laying hens. Historically, the prices of these raw materials have fluctuated widely. In addition, the Michael Foods cheese and butter products are affected by milk price supports established by the USDA. Although steps can be taken to mitigate the effects of changes in raw material costs, fluctuations in prices are outside the control of the Michael Foods business, and changes in the price of such items may have a material adverse effect on the Michael Foods business, prospects, results of operations and financial condition. An inability to keep selling prices in line with input costs may result in lower operating profit margins.
Impairment in the carrying value of intangible assets could negatively impact our net worth. If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be required to record additional impairment charges, which may be significant.
Our balance sheet includes a significant amount of intangible assets, including goodwill, trademarks, trade names and other acquired intangibles. Intangibles and goodwill expected to contribute indefinitely to our cash flows are not amortized, but our management reviews them for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying value may be impaired. Impairments to intangible assets may be caused by factors outside our control, such as increasing competitive pricing pressures, lower than expected revenue and profit growth rates, changes in industry EBITDA and revenue multiples, changes in discount rates based on changes in cost of capital (interest rates, etc.) or the bankruptcy of a significant customer. These factors, along with other internal and external factors, could negatively impact our net worth and could have a significant impact on our fair valuation determination, which could then result in a material impairment charge in our results of operations. In fiscal 2013 we had an impairment of trademark intangible assets. During fiscal 2014, we had an impairment of goodwill and trademark intangible assets. We could have additional impairments in the future. See further discussion of these impairment losses in MD&A and Notes 2 and 6 of “Notes to Consolidated Financial Statements” of our audited consolidated financial statements contained in this report.
Unsuccessful implementation of business strategies to reduce costs may adversely affect our results of operations.
Many of our costs, such as raw materials, energy and freight, are outside our control. Therefore, we must seek to reduce costs in other areas, such as through operating efficiency. If we are not able to complete projects designed to reduce costs and increase operating efficiency on time or within budget, our operating profits may be adversely impacted. In addition, if the cost-saving initiatives we have implemented or any future cost-saving initiatives do not generate the expected cost savings and synergies, our results of operations may be adversely affected.
Our Active Nutrition and Michael Foods products are subject to a higher level of regulatory scrutiny, resulting in increased costs of operations and delays in product sales .
Our products and operations are subject to the laws and regulations of the federal FDA, the USDA, and other applicable laws and regulations. Some of our Active Nutrition products are regulated by the FDA as dietary supplements, which are subject to different FDA regulations and level of regulatory scrutiny. Certain of Michael Foods’ products, specifically the egg products, are also subject to higher scrutiny by the FDA and USDA, as well as continuous on-site inspections. It is also possible that federal, state or foreign enforcement authorities might take regulatory or enforcement action, which could result in significant fines or penalties. If we are found to be significantly out of compliance, the FDA could issue a warning letter and/or institute enforcement actions that could result in substantial delays in production or even a temporary shutdown in manufacturing and product sales while the non-conformances are rectified. Also, we may have to recall products and temporarily cease their manufacture and distribution, which would increase our costs and reduce our revenues. Any product liability claims resulting from the failure to comply with applicable laws and regulations would be expensive to defend and could result in substantial damage awards against us or harm our reputation. Any of these events would negatively impact our revenues and costs of operations.
Our Active Nutrition business has significant international sales. The production and marketing of our Active Nutrition products are currently subject to extensive regulation and review by numerous governmental authorities in the United States and will face similar regulation from governmental authorities outside of the United States.
Our inability to raise prices may adversely affect our results of operations.
Our ability to raise prices for our products may be adversely affected by a number of factors, including but not limited to industry supply, market demand and promotional activity by competitors. If we are unable to increase prices for our products as may be necessary to cover cost increases, our results of operations could be adversely affected. In addition, price increases typically generate lower sales volumes as customers purchase fewer units. If these losses are greater than expected or if we lose distribution as a result of a price increase, our results of operations could be adversely affected.


10
Table of Contents

Loss of a significant customer may adversely affect our results of operations.
A limited number of customer accounts represents a large percentage of our consolidated net sales. Our largest customer, Walmart accounted for approximately 11% of our net sales in fiscal 2014 . Walmart is also the largest customer of our Post Foods business, accounting for approximately 24% of Post Foods’ net sales in fiscal 2014. Additionally, the largest customers of our Michael Foods business, Sysco and US Foods, accounted for approximately 17% and 13%, respectively, of Michael Foods’ net sales in fiscal 2014, and the largest customers of our Active Nutrition business, Costco and Sam’s Club, accounted for approximately 36% and 15%, respectively, of the Active Nutrition segment’s net sales in fiscal 2014.   The success of our businesses depends, in part, on our ability to maintain our level of sales and product distribution through high-volume food distributors, retailers, super centers and mass merchandisers. The competition to supply products to these high-volume stores is intense. Currently, we do not have long-term supply agreements with a substantial number of our retail customers, including our largest customers. These high-volume stores and mass merchandisers frequently reevaluate the products they carry. A decision by our major customers to decrease the amount of merchandise purchased from us, sell a national brand on an exclusive basis or change the manner of doing business with us could reduce our revenues and materially adversely affect our results of operations. In the event of a loss of any of our large customers, or the bankruptcy or serious financial difficulty of any of our large customers, our sales may be adversely affected.
Consolidation among the retail grocery and foodservice industries may hurt profit margins.
Over the past several years, the retail grocery and foodservice industries have undergone significant consolidations and mass merchandisers are gaining market share. As this trend continues and such customers grow larger, they may seek to use their position to improve their profitability through improved efficiency, lower pricing, increased reliance on their own brand name products, increased emphasis on generic and other value brands and increased promotional programs. If we are unable to respond to these requirements, our profitability or volume growth could be negatively impacted. Additionally, if the surviving entity is not a customer, we may lose significant business once held with the acquired retailer.
If our products become adulterated, misbranded or mislabeled or become contaminated, we might need to recall those items and may experience product liability claims if consumers are injured.
Selling food products and nutritional supplements involves a number of legal and other risks, including product contamination, spoilage, product tampering, allergens or other adulteration. Additionally, many of the inputs used to make certain of our products, particularly eggs, raw potatoes and peanuts, are vulnerable to contamination by pathogens—naturally occurring disease-producing organisms—such as salmonella. We may need to recall some or all of our products if they become adulterated, mislabeled or misbranded. This could result in destruction of product inventory, negative publicity, temporary plant closings, substantial costs of compliance or remediation and increased scrutiny by federal and state regulatory agencies. Should consumption of any product cause injury, we may be liable for monetary damages as a result of a judgment against us. In addition, adverse publicity, including claims, whether or not valid, that our products or ingredients are unsafe or of poor quality may discourage consumers from buying our products or cause production and delivery disruptions. Any of these events, including a significant product liability claim against us, could result in a loss of consumer confidence in our food products. This could have an adverse effect on our financial condition, results of operations and/or cash flows.
Pending and future litigation may lead us to incur significant costs.
We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, false or deceptive advertising, employment matters, environmental matters or other aspects of our business. In addition, we may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, which could have a material adverse effect on our financial position, cash flows or results of operations. The outcome of litigation is often difficult to predict, and the outcome of pending or future litigation may have a material adverse effect on our financial position, cash flows or results of operations.
In addition to ordinary course of business litigation risk, Michael Foods is currently subject to a lawsuit alleging violations of federal and state antitrust laws in connection with the production and sale of shell eggs and egg products, and seeking unspecified damages. If Michael Foods cannot resolve this matter favorably, it could be subject to (i) monetary damages and/or (ii) injunctive relief. If injunctive relief were to be granted, depending on its scope, it could affect the manner in which Michael Foods operates. The defense of these actions and any other actions brought in the future, is time consuming and diverts management’s attention. Even if Michael Foods is ultimately successful in defending such matters, Michael Foods is likely to incur significant fees, costs and expenses as long as they are ongoing.
While Michael Foods has insurance programs in place, the potential liabilities associated with these litigation matters, or those that could arise in the future, could be excluded from coverage or, if covered, could exceed the coverage provided by such programs. In addition, insurance carriers may seek to rescind or deny coverage with respect to pending or future claims or lawsuits. If we do not have sufficient coverage under our policies, or if coverage is denied, we may be required to make material payments to settle litigation or satisfy any judgment. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.


11
Table of Contents

Disruption of our supply chain could have an adverse effect on our business, financial condition and results of operations.
In coordination with our suppliers, business partners and contract manufacturers, our ability to make, move and sell products is critical to our success. Damage or disruption to our collective manufacturing or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, disease, fire or explosion, terrorism, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain.
We are party to certain transition services agreements, and if such services are not provided or if we cannot replace such services after expiration or termination of the transition services agreements, we may incur significant costs, which could adversely affect our financial condition and results of operations.
We are a party to a number of transition services agreements under which a third party is providing certain transitional services to us, including finance/accounting, operations, information technology, facilities, procurement, sales and marketing, and other services for a period of time. These services may not be sufficient to meet our needs. After these agreements expire or if they are otherwise terminated, if we have not established our own support for these services, we may not be able to obtain these services at favorable prices or on favorable terms, if at all.  Any failure or significant downtime in the services being provided to us during the transitional period could negatively impact our results of operations or prevent us from performing administrative or other services on a timely basis, which could adversely affect our results of operations and financial condition.
We are currently dependent on third party manufacturers to manufacture many products for our business. Our business could suffer as a result of a third-party manufacturer’s inability to produce our products for us on time and to our specifications.
Our business relies on independent third parties for the manufacture of many products, such as protein bars and shakes and certain cereal and granola products. The business could be materially affected if we fail to develop or maintain our relationships with these third parties, if these parties fail to comply with governmental regulations applicable to the manufacturing of our products, or if one of these third parties ceases doing business with us or goes out of business. Additionally, we cannot be certain that we will not experience operational difficulties with these third-party manufacturers, such as increases in manufacturing costs, reductions in the availability of production capacity, errors in complying with merchandise specifications, insufficient quality control and failure to meet production deadlines. The inability of a third party manufacturer to ship orders in a timely manner, in desirable quantities or to meet our safety, quality and social compliance standards or regulatory requirements could have a material adverse impact on our business.
The termination or expiration of current co-manufacturing arrangements could reduce our sales volume and adversely affect our results of operations.
Our businesses periodically enter into co-manufacturing arrangements. The terms of these agreements vary but are generally for relatively short periods of time. Volumes produced under each of these agreements can fluctuate significantly. Our future ability to enter into co-manufacturing arrangements is not guaranteed, and a decrease in current co-manufacturing levels could have a significant negative impact on sales volume.
Termination of our material licenses would have a material adverse effect on our business.
We manufacture and market our Pebbles ™ products in the United States, Canada and several other locations pursuant to a long-term intellectual property license agreement. This license gives us the exclusive right (subject only to an exception regarding the sale of similar products in amusement and theme parks) to use the Flintstones characters in connection with breakfast cereal and to sell all Pebbles ™ branded cereal products in those regions. If we were to breach any material term of this license agreement and not timely cure the breach, the licensor could terminate the agreement. If the licensor were to terminate our rights to use the Flintstones characters or the Pebbles ™ brand for this or any other reason, the loss of such rights could have a material adverse effect on our business.
Global capital and credit market issues could negatively affect our liquidity, increase our costs of borrowing and disrupt the operations of our suppliers and customers.
U.S. and global credit markets have, from time to time, experienced significant dislocations and liquidity disruptions which caused the spreads on prospective debt financings to widen considerably. These circumstances materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive and in certain cases resulted in the unavailability of certain types of debt financing. Events affecting the credit markets have also had an adverse effect on other financial markets in the U.S., which may make it more difficult or costly for us to raise capital through the issuance of common stock or other equity securities or refinance our existing debt, sell our assets or borrow more money if necessary. Our business could also be negatively impacted if our suppliers or customers experience disruptions resulting from tighter capital and credit markets or a slowdown in the general economy. Any of these risks could impair our ability to fund our operations or limit our ability to expand our business or increase our interest expense, which could have a material adverse effect on our financial results.


12
Table of Contents

Changing currency exchange rates may adversely affect our earnings and financial position.
We have operations and assets in the United States as well as foreign jurisdictions, and a portion of our contracts and revenues are denominated in foreign currencies. Our consolidated financial statements are presented in U.S. dollars. We therefore must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates. Consequently, fluctuations in the value of foreign currencies may negatively affect the value of these items in our consolidated financial statements. To the extent we fail to manage our foreign currency exposure adequately, we may suffer losses in value of our net foreign currency investment, and our consolidated results of operations and financial position may be negatively affected.
Violations of laws or regulations, as well as new laws or regulations or changes to existing laws or regulations, could adversely affect our business.
The food production and marketing industry is subject to a variety of federal, state, local and foreign laws and regulations, including food safety requirements related to the ingredients, manufacture, processing, storage, marketing, advertising, labeling and distribution of our products as well as those related to worker health and workplace safety. Our activities, both in and outside of the United States, are subject to extensive regulation. In the United States we are regulated by, among other federal and state authorities, the FDA, USDA, U.S. Federal Trade Commission and the U.S. Departments of Commerce and Labor. We are also regulated by similar authorities abroad. Governmental regulations also affect taxes and levies, healthcare costs, energy usage, immigration and other labor issues, any and/or all of which may have a direct or indirect effect on our business or those of our customers or suppliers. In addition, because we market and advertise our products, we could be the target of claims relating to alleged false or deceptive advertising under federal, state and foreign laws and regulations and may be subject to initiatives to limit or prohibit the marketing and advertising of our products to children. Changes in these laws or regulations or the introduction of new laws or regulations could increase the costs of doing business for us or our customers or suppliers or restrict our actions, causing our results of operations to be adversely affected. A specific example is a possible future law which could require us to alter cage hen sizes similar to those introduced in various state legislatures. Further, if we are found to be out of compliance with applicable laws and regulations in these areas, we could be subject to civil remedies, including fines, injunctions or recalls, as well as potential criminal sanctions, any and/or all of which could have a material adverse effect on our business.
Changing rules and regulations applicable to public companies impose significant costs and obligations on us.
As a publicly traded company, we are subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is listed. These entities, including the Public Company Accounting Oversight Board, the SEC and the New York Stock Exchange, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress. Our efforts to comply with these requirements may result in an increase in expenses and a diversion of management’s time.
We may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel or experience turnover of our management team.
We are highly dependent on our ability to attract and retain qualified personnel to operate and expand our business. If we lose one or more members of our senior management team, or if we fail to attract new employees, our business and financial position, results of operations or cash flows could be harmed.
Changes in weather conditions, natural disasters and other events beyond our control can adversely affect our results of operations.
Changes in weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes, tornadoes, fires or pestilence, may affect the cost and supply of commodities and raw materials, including grains, eggs, potatoes, tree nuts, corn syrup and sugar. Additionally, these events can result in reduced supplies of raw materials and longer recoveries of usable raw materials. Competing manufacturers can be affected differently by weather conditions and natural disasters depending on the location of their suppliers and operations. Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, could adversely affect our business and results of operations, and/or require additional resources to restore our supply chain.
Unusual agricultural diseases (such as avian influenza) and/or pests could harm our business.
Many of our business activities are subject to a variety of agricultural risks, including disease and pests which can adversely affect the quality and quantity of the raw materials we use, as well as the food products we produce and distribute. In particular, avian influenza occasionally affects the domestic poultry industry, leading to hen deaths. A virulent form of avian influenza emerged in Southeast Asia several years ago and spread elsewhere in the Eastern Hemisphere. It caused deaths in wild bird populations and, in limited instances, domesticated fowl flocks. It was also linked to illness and death among some persons who were in contact with diseased fowl. It is unclear if this form of avian influenza will manifest itself in North America, or if sheltered flocks, such as ours, have significant exposure risk. However, a manifestation of avian influenza in our sheltered flocks could have a material


13
Table of Contents

adverse effect on our business. To protect against this risk, we utilize biosecurity measures at our layer locations. Nevertheless, disease and pests could affect a substantial portion of our production facilities in any year and could have a material adverse effect on our business, prospects, results of operations and financial condition.
Labor strikes or work stoppages by our employees could harm our business.
Some of our full-time production and maintenance employees are covered by collective bargaining agreements. A dispute with a union or employees represented by a union could result in production interruptions caused by work stoppages. If a strike or work stoppage were to occur, our results of operations could be adversely affected. In addition, we could be subject to unionization efforts at our non-union facilities. Increased unionization of our workforce could lead to disruptions in our business, increases in our operating costs and/or constraints on our operating flexibility.
In the event of a work stoppage, we have contingency plans in place to manufacture products in other locations to mitigate disruption to the business. However, there are limitations inherent in any plan to mitigate disruption to our business in the event of a work stoppage and, particularly in the case of a prolonged work stoppage, there can be no assurance that it would not have a material adverse effect on our results of operations.
Increases in costs of medical and other employee health and welfare benefits may reduce our profitability.
With approximately 7,950 employees, our profitability is substantially affected by costs of medical and other health and welfare benefits for current employees. These costs can vary substantially as a result of changes in health care laws, costs and experience. These factors may increase the cost of providing medical and other employee health and welfare benefits. We can provide no assurance that we will succeed in limiting future cost increases. If we do not succeed, our profitability could be negatively affected.
We may experience losses or be subject to increased funding and expenses to our qualified pension plans, which could negatively impact profits.
We maintain qualified defined benefit plans in the United States and Canada for our Post Foods business, and we are obligated to ensure that these plans are funded in accordance with applicable regulations. In the event the assets in which we invest do not perform according to expectations, or the valuation of the projected benefit obligation increases due to changes in interest rates or other factors, we may be required to make significant cash contributions to these plans and recognize increased expense on our financial statements. Further, we provide superannuation benefits to Australian employees.  Superannuation is a long-term retirement investment vehicle that provides tax advantages to employees allowing them to save for retirement. Superannuation contributions consist of employer contributions and voluntary employee contributions and are subject to government regulations that may require us to increase our contributions, which could negatively impact our profits.
Technology failures could disrupt our operations and negatively impact our business.
We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements. We increasingly rely on information technology systems to process, transmit and store electronic information. For example, our production and distribution facilities and inventory management utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion of the communications between our personnel, customers and suppliers depends on information technology. Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. Such interruptions could negatively impact our business.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and to maintain and protect the related automated and manual control processes, we could be subject to billing and collection errors, business disruptions, or damage resulting from security breaches. If any of our significant information technology systems suffer severe damage, disruption, or shutdown, and our business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results. In addition, there is a risk of business interruption, litigation risks, and reputational damage from leakage of confidential information.
Our intellectual property rights are valuable and any inability to protect them could reduce the value of our products and brands.
We consider our intellectual property rights, particularly our trademarks, but also our patents, trade secrets, copyrights and licenses, to be a significant and valuable aspect of our business. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements, third party nondisclosure and assignment agreements and the policing of third party misuses of our intellectual property. Our failure to obtain or maintain


14
Table of Contents

adequate protection of our intellectual property rights, or any change in law or other changes that serve to lessen or remove the current legal protections of intellectual property, may diminish our competitiveness and could materially harm our business.
We face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend; cause us to cease making, licensing or using products that incorporate the challenged intellectual property; require us to redesign or rebrand our products or packaging, if feasible; divert management’s attention and resources; or require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. Additionally, a successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements or stop the sale of certain products, any and/or all of which could have a negative impact on our operating profits and harm our future prospects.
Media campaigns related to food production present risks .
Media outlets, including new social media platforms, provide the opportunity for individuals or organizations to publicize inappropriate or inaccurate stories or perceptions about us or the food industry. Such practices have the ability to cause damage to our brands, the industry generally, or consumers’ perceptions of us or the food production industry and may result in negative publicity and adversely affect our financial results.
We are subject to environmental laws and regulations that can impose significant costs and expose us to potential financial liabilities.
We are subject to extensive and frequently changing federal, state, local and foreign laws and regulations relating to the protection of human health and the environment, including those limiting the discharge and release of pollutants into the environment and those regulating the transport, use, treatment, storage, disposal and remediation of, and exposure to, solid and hazardous wastes and materials. In addition, our Michael Foods business is subject to particular federal and state environmental requirements governing animal feeding operations involving the management of animal waste, which have become the subject of increasing regulatory scrutiny. Certain environmental laws and regulations can impose joint and several liability without regard to fault on responsible parties, including past and present owners and operators of sites, related to cleaning up sites at which hazardous wastes or materials were disposed or released. Failure to comply with environmental laws and regulations could result in severe fines and penalties by governments or courts of law. In addition, various current and likely future federal, state, local and foreign laws and regulations could regulate the emission of greenhouse gases, particularly carbon dioxide and methane. We cannot predict the impact that such regulation may have, or that climate change may otherwise have, on our business.
Future events, such as new or more stringent environmental laws and regulations, any new environmental claims, the discovery of currently unknown environmental conditions requiring response action or more vigorous enforcement or a new interpretation of existing environmental laws and regulations, might require us to incur additional costs that could have a material adverse effect on our financial results.
Our international operations subject us to additional risks.
As a result of recent acquisitions, we now have larger operations outside of the United States. We are accordingly subject to a number of risks relating to doing business internationally, any of which could significantly harm our business. These risks include:
•
restriction on the transfer of funds to and from foreign countries, including potentially negative tax consequences;
•
exchange controls and currency exchange rates;
•
increased exposure to general market and economic conditions outside the United States;
•
additional political risk;
•
compliance with anti-corruption regulations (including the U.S. Foreign Corrupt Practices Act); and
•
foreign tax treaties and policies.
Our financial performance on a U.S. dollar denominated basis is subject to fluctuations in currency exchange rates. Our principal exposure is to the Canadian dollar.
Our actual operating results may differ significantly from our guidance.
From time to time, we release guidance regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in such release and the factors described under “Forward-Looking Statements” in our current and periodic reports filed with the SEC. Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our


15
Table of Contents

independent registered public accounting firm nor any other independent expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.
Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the suggested ranges. The principal reason that we release this data is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from the guidance. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances described in this report could result in actual operating results being different than the guidance, and such differences may be adverse and material.
Our historical financial results as a business segment of Ralcorp may not be representative of our results as a separate, stand-alone company.
A portion of the historical financial information we have included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and other filings and press releases has been derived from the consolidated financial statements and accounting records of Ralcorp. Our historical financial information accordingly does not necessarily reflect what our financial position, results of operations or cash flows would have been had we operated as a separate, stand-alone company during the entirety of the periods presented or those that we may achieve in the future primarily as a result of the following factors:
•
Prior to the separation, our business was operated by Ralcorp as part of its broader corporate organization, rather than as an independent company. Ralcorp or one of its affiliates performed various corporate functions for us, including, but not limited to, legal, treasury, accounting, auditing, risk management, information technology, human resources, corporate affairs, tax administration, certain governance functions (including compliance with the Sarbanes-Oxley Act of 2002 and internal audit) and external reporting. Our historical financial results for period prior to the separation include allocations of corporate expenses from Ralcorp for these and similar functions. These allocations may be less than the comparable expenses we incur as a separate publicly traded company;
•
Prior to the separation, our business was integrated with the other businesses of Ralcorp. Historically, we have shared economies of scope and scale in costs, employees, vendor relationships and customer relationships. The loss of the benefits of doing business as part of Ralcorp could have an adverse effect on our results of operations and financial condition;
•
Prior to the separation, our working capital requirements and capital for our general corporate purposes, including advertising and trade promotions, research and development and capital expenditures, were satisfied as part of the corporate-wide cash management policies of Ralcorp. In connection with the separation, we incurred substantial indebtedness, as discussed in this report; and
•
The cost of capital for our business may be higher than Ralcorp’s cost of capital prior to the separation because Ralcorp’s cost of debt prior to the separation may have been lower than ours following the separation.
We incurred material costs and expenses separating from Ralcorp and establishing Post as a stand-alone, public company, which could adversely affect our profitability.
As a result of our separation from Ralcorp, we have incurred costs and expenses greater than those we incurred prior to the separation. These increased costs and expenses arose from various factors, including financial reporting, costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), information technology, tax administration and legal and human resources related functions. There can be no assurance that we will be able to reduce these costs to levels incurred prior to our separation from Ralcorp.


16
Table of Contents

If we are unable to continue to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and our stock price may suffer.
Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the United States securities laws to perform a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we are required to document and test our internal control procedures, our management is required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors are required to issue an opinion on their audit of our internal control over financial reporting.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act of 2002. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may consequently suffer. As of September 30, 2014, management had determined that our internal control over financial reporting was effective.
We have recently acquired companies that were not subject to Sarbanes-Oxley regulations and, therefore, they may lack the internal controls of a United States public company, which could ultimately affect our ability to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.
We have recently acquired companies that were not previously subject to Sarbanes Oxley regulations and accordingly were not required to establish and maintain an internal control infrastructure meeting the standards promulgated under the Sarbanes-Oxley Act of 2002. Our assessment of and conclusion on the effectiveness of our internal control over financial reporting as of September 30, 2014 did not include the internal controls of Agricore United Holdings Inc. (the sole shareholder of Dakota Growers Pasta Company, Inc.), Dymatize Enterprises, LLC, Golden Boy Foods Ltd. or MFI Holding Corporation, each of which was acquired during our fiscal year ended September 30, 2014.
Although our management will continue to review and evaluate the effectiveness of our internal controls in light of these acquisitions, we cannot provide any assurances that there will be no significant deficiencies or material weaknesses in our internal control over financial reporting. Any significant deficiencies or material weaknesses in the internal control structure of our acquired businesses may cause significant deficiencies or material weaknesses in our internal control over financial reporting, which could have a material adverse effect on our business and our ability to comply with Section 404 of the Sarbanes-Oxley Act.
Risks Related to Recent Financing Transactions
We have substantial debt and high leverage, which could have a negative impact on our financing options and liquidity position and which could adversely affect our business.
We have a significant amount of debt. We had $3,810.9 million in aggregate principal amount of total debt as of September 30, 2014 . Additionally, our secured revolving credit facility has outstanding letters of credit of $0.5 million which reduces the available borrowing capacity to $399.5 million at September 30, 2014 (all of which would be secured when drawn).
Our overall leverage and the terms of our financing arrangements could:
•
limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions;
•
make it more difficult for us to satisfy our obligations under our debt obligations;
•
limit our ability to refinance our indebtedness on terms acceptable to us or at all;
•
limit our flexibility to plan for and adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions;
•
require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements;
•
limit our ability to obtain additional financing for working capital, for capital expenditures, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity, particularly if any ratings assigned to our debt securities by rating organizations were revised downward; and
•
subject us to higher levels of indebtedness than our competitors, which may cause a competitive disadvantage and may reduce our flexibility in responding to increased competition.


17
Table of Contents

Our ability to meet expenses and debt service obligations will depend on our future performance, which will be affected by financial, business, economic and other factors, including potential changes in consumer preferences, the success of product and marketing innovation and pressure from competitors. If we do not generate enough cash to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell our assets, borrow more money or raise equity.
The agreements governing our debt, contain, or may in future financings contain, various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests, failure to comply with which could have a material adverse effect on us.
Our financing arrangements contain restrictions, covenants and events of default that, among other things, require us to maintain certain financial ratios and restrict our ability to incur additional indebtedness and to refinance our existing indebtedness. Financing arrangements which we enter into in the future could contain similar restrictions and could additionally require us to comply with similar, new or additional financial tests or to maintain similar, new or additional financial ratios. The terms of our financing arrangements and any financing arrangements which we may enter into in the future may impose various restrictions and covenants on us that could limit our ability to pay dividends, redeem our stock, respond to market conditions, provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional borrowings we may incur. These restrictions include compliance with, or maintenance of, certain financial tests and ratios and may limit or prohibit our ability to, among other things:
•
borrow money or guarantee debt;
•
create liens;
•
pay dividends on or redeem or repurchase stock or other securities;
•
make investments and acquisitions;
•
enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to us;
•
enter into new lines of business;
•
enter into transactions with affiliates; and
•
sell assets or merge with other companies.
Various risks, uncertainties and events beyond our control could affect our ability to comply with these restrictions and covenants. Failure to comply with any of the restrictions and covenants in our existing or future financing arrangements could result in a default under those arrangements and under other arrangements containing cross-default provisions and if the indebtedness thereunder is accelerated, could trigger cross-acceleration.
In addition to the limitations on our ability to incur debt contained in our credit agreement and the documents governing our other debt, including the indentures for our outstanding senior notes, our credit agreement permits us to incur additional unsecured debt only if our consolidated leverage ratio, calculated as provided in the credit agreement, would be less than 5.75 to 1.00 after giving effect to such new debt. Our consolidated leverage ratio exceeded this threshold as of September 30, 2014; however, the Credit Agreement, after giving effect to the May 1, 2014 amendment, permitted the financing transactions contemplated in connection with the Michael Foods acquisition, notwithstanding our consolidated leverage ratio. However, our ability to finance acquisitions with unsecured debt (including additional senior notes) in the future may be limited so long as our consolidated leverage ratio equals or exceeds 5.75 to 1.00.
A default would permit lenders to accelerate the maturity of the debt under these arrangements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations, including our obligations under our senior notes and the amortizing notes component of our tangible equity units. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.
To service our indebtedness and other cash needs, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to pay interest on our outstanding senior notes, to satisfy our other debt obligations, including payments on our term loan under our credit agreement, and to fund any planned capital expenditures, dividends and other cash needs will depend in part upon the future financial and operating performance of our subsidiaries and upon our ability to renew or refinance borrowings. Prevailing economic conditions and financial, business, competitive, legislative, regulatory and other factors, many of which are beyond our control, will affect our ability to make these payments.
If we are unable to make payments or refinance our debt or obtain new financing under these circumstances, we may consider other options, including:


18
Table of Contents

•
sales of assets;
•
sales of equity;
•
reduction or delay of capital expenditures, strategic acquisitions, investments and alliances; or
•
negotiations with our lenders to restructure the applicable debt.
Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to pay our indebtedness, including the senior notes and our other debt obligations, including the term loan, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our debt on commercially reasonable terms or at all.
Risks Related to Our Common Stock
Your percentage ownership in Post may be diluted in the future.
As with any publicly traded company, our shareholders’ percentage ownership in Post may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we expect will be granted to our directors, officers and employees and the accelerated vesting of other equity awards. For a more detailed description of the stock incentive plan, see “Executive Compensation.”
The market price and trading volume of our common stock may be volatile.
The market price of our common stock could fluctuate significantly for many reasons, including in response to the risk factors listed in this report or for reasons unrelated to our performance, such as reports by industry analysts, investor perceptions, or negative developments relating to our customers, competitors or suppliers, as well as general economic and industry conditions.
Provisions in our articles of incorporation and bylaws and provisions of Missouri law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.
Our articles of incorporation, bylaws and Missouri law contain provisions intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive and to incentivize prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:
•
the board of directors is divided into three classes with staggered terms;
•
the board of directors fixes the number of members on the board;
•
elimination of the rights of our shareholders to act by written consent (except when such consent is unanimous) and to call shareholder meetings;
•
rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;
•
the right of our board of directors to issue preferred stock without shareholder approval;
•
supermajority vote requirements for certain amendments to our articles of incorporation and bylaws;
•
anti-takeover provisions of Missouri law which may prevent us from engaging in a business combination with an interested shareholder, or which may deter third parties from acquiring amounts of our common stock above certain thresholds; and
•
limitations on the right of shareholders to remove directors.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
Not applicable.

ITEM 2.    PROPERTIES
We own our principal executive offices and lease corporate administrative offices in St. Louis, Missouri. The general offices and location of our principal operations for each of our businesses are set forth in the summary below. We also lease sales offices mainly in the United States and maintain a number of stand-alone distribution facilities. In addition, there is on-site warehouse space available at many of our manufacturing facilities. Utilization of manufacturing capacity varies by manufacturing plant based upon the type of products assigned and the level of demand for those products.
We own many of our manufacturing facilities. Certain of our owned real property are subject to mortgages or other applicable security interests pursuant to our financing arrangements. Management believes our facilities are suitable and adequate for the purposes for which they are used and are adequately maintained. We generally believe each location or facility provides adequate capacity for current and anticipated future customer demand.


19
Table of Contents

Post Foods
Post Foods’ main administrative office, which we lease, is located in Parsippany, New Jersey. Post Foods also leases domestic administrative and sales offices in Irvine, California and Rogers, Arkansas. Post Foods also has administrative office space in Toronto, Canada, which is also leased.
Post Foods has three owned manufacturing facilities located in Battle Creek, Michigan, Jonesboro, Arkansas and Niagara Falls, Ontario. As previously announced, the Modesto, California facility closed in the fourth fiscal quarter of 2014. We expect to sell this facility within a year.
Michael Foods
Michael Foods’ primary administrative offices, which are leased, are located in Minnetonka, Minnesota. Michael Foods owns six egg products production facilities, which are located in Iowa, Minnesota and Nebraska. The egg products business also leases three facilities in Pennsylvania and New Jersey and a facility in Canada for egg product production and/or distribution. Additionally, the egg products business owns four layer facilities located in the United States. The refrigerated potato products business’ main processing facility is located in Chaska, Minnesota, which is owned. The refrigerated potato products business also leases a smaller processing facility in Las Vegas, Nevada. Michael Foods also owns a cheese packaging facility in Lake Mills, Wisconsin for our cheese and other dairy-case products business.
Active Nutrition
The Active Nutrition segment’s PNC and PowerBar administrative offices, which are leased, are located in Emeryville, California. The Dymatize business owns a manufacturing facility with administrative office space in Farmers Branch, Texas. With the acquisition of the PowerBar and Musashi brands, which closed on October 1, 2014, we also own a manufacturing facility in Boise, Idaho. Additionally, with this acquisition, we own a manufacturing facility in Voerde, Germany, lease office space in Munich, Germany and lease a manufacturing facility and office space in Notting Hill, Australia.
Private Brands
Our Private Brands business owns manufacturing facilities in Carrington, North Dakota and New Hope, Minnesota which are used for pasta production. Private Brands recently acquired a manufacturing facility in Portales, New Mexico, which is not currently operational. With the recent acquisition of American Blanching Company, which closed on November 1, 2014, we also own a facility in Fitzgerald, Georgia. Additionally, this business leases manufacturing facilities in Troy, Alabama, Blaine, Washington, Markham, Ontario, Brampton, Ontario and Burnaby, British Columbia for snacking nuts and nut butter production. Dakota Growers leases administrative offices in St. Louis Park, Minnesota and the Burnaby, British Columbia location houses the administrative offices for the Golden Boy business.
Attune Foods
Attune Foods’ principal administrative offices and manufacturing facility are located in Eugene, Oregon. We lease the administrative office space and own the manufacturing facility. Attune Foods also has a leased sales office in Scottsdale, Arizona.

ITEM 3.    LEGAL PROCEEDINGS
Antitrust claims: In late 2008 and early 2009, some 22 class-action lawsuits were filed in various federal courts against Michael Foods, Inc. and approximately 20 other defendants (producers of shell eggs, manufacturers of processed egg products, and egg industry organizations), alleging violations of federal and state antitrust laws in connection with the production and sale of shell eggs and egg products, and seeking unspecified damages. Plaintiffs seek to represent nationwide classes of direct and indirect purchasers, and allege that defendants conspired to reduce the supply of eggs by participating in animal husbandry, egg-export and other programs of various egg-industry associations. In December 2008, the Judicial Panel on Multidistrict Litigation ordered the transfer of all cases to the Eastern District of Pennsylvania for coordinated and/or consolidated pretrial proceedings. Between late 2010 and early 2012, a number of companies, each of which would be part of the purported class in the antitrust action, brought separate actions against defendants. These “tag-along” cases, brought primarily by various grocery chains and food companies, assert essentially the same allegations as in the main action. All but one of the tag-along cases were either filed in or transferred to the Eastern District of Pennsylvania where they are being treated as related to the main action. Fact discovery concluded on April 30, 2014. The class-certification phase of the case is currently in process. Hearings on class certification are scheduled for December 2014 for direct purchaser plaintiffs and February 2015 for indirect purchaser plaintiffs.
Michael Foods received a Civil Investigative Demand (“CID”) issued by the Florida Attorney General on November 27, 2008, regarding an investigation of possible anticompetitive activities “relating to the production and sale of eggs or egg products.” The CID requested information and documents related to the pricing and supply of shell eggs and egg products, as well as Michael


20
Table of Contents

Foods’ participation in various programs of United Egg Producers. Michael Foods has fully cooperated with the Florida Attorney General’s Office to date. Further compliance is suspended pending proceedings in the civil antitrust litigation referenced above.
We do not believe it is possible to estimate the possible loss in connection with these litigated matters. Accordingly, we cannot predict what impact, if any, these matters and any results from such matters could have on our future results of operations.
Other:  We are subject to various other legal proceedings and actions arising in the normal course of our 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 and in the aggregate to our consolidated financial position, results of operations or cash flows. In addition, while 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 our consolidated financial position, results of operations or cash flows.

ITEM 4.    MINE SAFETY DISCLOSURE
Not applicable.



21
Table of Contents

PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Market Prices and Dividends
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “POST.” There were approximately 6,603 shareholders of record on November 1, 2014. We have no plans to pay cash dividends on our common stock in the foreseeable future, and the indentures governing our debt securities and our credit facilities restrict our ability to pay dividends. The range of high and low sale prices of our common stock as reported by the NYSE is set forth in the table below.
 
Year Ended September 30,
 
2014
 
2013
 
High
 
Low
 
High
 
Low
First Quarter
$
53.90

 
$
38.31

 
$
36.12

 
$
29.76

Second Quarter
60.63

 
48.81

 
43.14

 
33.72

Third Quarter
55.76

 
45.55

 
47.80

 
41.61

Fourth Quarter
51.93

 
32.87

 
49.32

 
40.15


Issuer Purchases of Equity Securities
There were no purchases of equity securities by the issuer or affiliated purchasers during the fourth quarter of fiscal 2014.
Performance Graph
The following performance graph compares the changes, for the period indicated, in the cumulative total value of $100 hypothetically invested in each of (a) Post common stock, (b) the Russell 2000 index and (c) a peer group composed of 14 U.S.-based public companies in the food and consumer packaged goods industries. The peer group companies are: B&G Foods, Inc.; Brown-Forman Corporation; Coca-Cola Bottling Co.; Cott Corporation; Darling International Inc.; Diamond Foods, Inc.; Flowers Foods, Inc.; The Hain Celestial Group, Inc.; J&J Snack Foods Corp.; Pinnacle Foods Inc.; Sanderson Farms, Inc.; Snyder’s-Lance, Inc.; Sunopta Inc. and TreeHouse Foods Inc. Compared to the prior year, changes include the removal of The Hillshire Brands Company as it was acquired during 2014 and is no longer a publicly traded company. This graph covers the period from February 6, 2012 (the first day our common stock began “when-issued” trading on the NYSE) through September 30, 2014.






















22
Table of Contents


* $100 invested on 2/6/12 in stock or index.
Performance Graph Data
 
Post ($)
 
Russell 2000 Index ($)
 
Peer
Group ($)
2/6/2012
100.00

 
100.00

 
100.00

3/30/2012
122.46

 
100.23

 
102.06

9/28/2012
111.79

 
101.10

 
112.90

3/28/2013
159.65

 
114.87

 
127.09

9/30/2013
150.13

 
129.63

 
135.92

3/31/2014
204.98

 
141.61

 
156.37

9/30/2014
123.39

 
132.99

 
157.05

The stock price performance included in this graph is not necessarily indicative of future stock price performance.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The information required under this Item 5 concerning equity compensation plan information is set out below under Item 12 and is incorporated herein by this reference.



23
Table of Contents

ITEM 6.    SELECTED FINANCIAL DATA
FIVE YEAR FINANCIAL SUMMARY
(in millions, except per share data)
 
 
Year Ended September 30,
(dollars in millions, except per share data)
 
2014 (d)

 
2013 (d)

 
2012
 
2011
 
2010
Statements of Operations Data
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,411.1

 
$
1,034.1

 
$
958.9

 
$
968.2

 
$
996.7

Cost of goods sold
 
1,789.9

 
609.2

 
530.0

 
516.6

 
553.7

Gross profit
 
621.2

 
424.9

 
428.9

 
451.6

 
443.0

Selling, general and administrative expenses
 
444.4

 
294.3

 
274.0

 
239.2

 
218.3

Amortization of intangible assets
 
70.8

 
14.6

 
12.6

 
12.6

 
12.7

Loss on foreign currency
 
14.0

 
0.1

 
0.5

 
0.3

 
0.5

Restructuring expenses (a)
 
1.1

 
3.8

 
—

 
—

 
—

Impairment of goodwill and other intangible assets (b)
 
295.6

 
2.9

 
—

 
566.5

 
19.4

Other operating expenses, net
 
3.0

 
1.4

 
2.7

 
1.6

 
1.3

Operating (loss) profit
 
(207.7
)
 
107.8

 
139.1

 
(368.6
)
 
190.8

Interest expense
 
183.7

 
85.5

 
60.3

 
51.5

 
51.5

Other expense (income)
 
35.5

 
—

 
(1.6
)
 
10.5

 
(2.2
)
(Loss) earnings before income taxes
 
(426.9
)
 
22.3

 
80.4

 
(430.6
)
 
141.5

Income tax (benefit) provision
 
(83.7
)
 
7.1

 
30.5

 
(6.3
)
 
49.5

Net (loss) earnings
 
(343.2
)
 
15.2

 
49.9

 
(424.3
)
 
92.0

Preferred stock dividends
 
(15.4
)
 
(5.4
)
 
—

 
—

 
—

Net (loss) earnings available to common stockholders
 
$
(358.6
)
 
$
9.8

 
$
49.9

 
$
(424.3
)
 
$
92.0

 
 
 
 
 
 
 
 
 
 
 
(Loss) Earnings Per Share (c)
 
 
 
 
 
 
 
 
 


Basic
 
$
(9.03
)
 
$
0.30

 
$
1.45

 
$
(12.33
)
 
$
2.67

Diluted
 
$
(9.03
)
 
$
0.30

 
$
1.45

 
$
(12.33
)
 
$
2.67

 
 
 
 
 
 
 
 
 
 
 
Statements of Cash Flows Data
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
155.8

 
$
76.8

 
$
63.2

 
$
58.7

 
$
55.4

Cash provided (used) by:
 
 
 
 
 
 
 
 
 
 
Operating activities
 
$
183.1

 
$
119.2

 
$
144.0

 
$
143.8

 
$
135.6

Investing activities
 
(3,793.6
)
 
(423.8
)
 
(30.9
)
 
(14.9
)
 
(24.3
)
Financing activities
 
3,484.2

 
648.8

 
(57.1
)
 
(132.1
)
 
(112.4
)
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
268.4

 
$
402.0

 
$
58.2

 
$
1.7

 
$
4.8

Working capital (excl. cash, cash equivalents, restricted cash and current portion of long-term debt)
 
371.5

 
82.0

 
25.1

 
(0.7
)
 
68.0

Total assets
 
7,731.1

 
3,473.8

 
2,732.3

 
2,723.2

 
3,348.0

Debt, including short-term portion
 
3,856.1

 
1,408.6

 
945.6

 
784.5

 
716.5

Other liabilities
 
182.4

 
116.3

 
129.2

 
104.9

 
90.7

Total equity
 
2,283.2

 
1,498.6

 
1,231.5

 
1,434.7

 
2,061.7

____________
(a)
For information about restructuring expenses, see Note 4 of “Notes to Consolidated Financial Statements.”
(b)
For information about the impairment of goodwill and other intangible assets, see “Critical Accounting Policies and Estimates” and Notes 2 and 6 of “Notes to Consolidated Financial Statements.”
(c)
(Loss) earnings per share for the fiscal years ended September 30, 2011 and 2010 are calculated assuming weighted-average shares outstanding of 34.4 million shares which represents the amount of common shares outstanding following the distribution of one share of Post common stock for every two shares of Ralcorp common stock and the retention of approximately 6.8 million shares by Ralcorp. For these periods, there are no dilutive shares as there were no actual shares or share-based awards outstanding prior to the distribution.
(d)
The data in these columns includes results from the fiscal 2014 and 2013 acquisitions from the respective date of acquisition through September 30, 2014. See Note 5 of “Notes to Consolidated Financial Statements.”





24
Table of Contents

ITEM 7.
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 Post Holdings, Inc. This discussion should be read in conjunction with the financial statements under Item 8, and the “Cautionary Statement on Forward-Looking Statements” on page 1.

RESULTS OF OPERATIONS
Overview
We are a consumer packaged goods holding company operating in the center-of-the-store, refrigerated, active nutrition and private label food categories. Our products are sold through a variety of channels such as grocery, club and drug stores, mass merchandisers, foodservice, ingredient and via the Internet.
On February 3, 2012, Post completed its legal separation via a tax free spin-off (the “Spin-Off”) from Ralcorp (Ralcorp was subsequently acquired by ConAgra Foods, Inc. on January 29, 2013). Post began trading on the New York Stock Exchange under the ticker symbol “POST.” In 2012, we had a single operating segment. During fiscal year 2014, Post operated in five reportable segments: Post Foods, Michael Foods, Active Nutrition, Private Brands and Attune Foods. The Post Foods segment predominately includes the Post branded ready-to-eat cereal business. The Michael Foods segment manufactures and distributes egg products and refrigerated potato products and also distributes cheese and other dairy case products to the retail, foodservice and food ingredient channels and is comprised of MFI Holding Corporation (“Michael Foods”) acquired in June 2014. The Active Nutrition segment markets and distributes high protein shakes, bars and powders as well as nutritional supplements and includes the business of Premier Nutrition Corporation (“PNC”), which was acquired in September 2013, and Dymatize Enterprises, LLC (“Dymatize”), which was acquired in February 2014. The Private Brands segment manufactures dry pasta, peanut butter and other nut butters, dried fruits and baking and snacking nuts, servicing the private label retail, foodservice and ingredient channels and consists of Dakota Growers Pasta Company, Inc. (“Dakota Growers”) and Golden Boy Foods Ltd. (“Golden Boy”), which were acquired in January 2014 and February 2014, respectively. The Attune Foods segment manufactures and distributes premium natural and organic cereals and snacks and is comprised of the businesses of Attune Foods, Inc. (“Attune”), which we acquired substantially all of the assets of in December 2012, and certain assets of the Hearthside Food Solutions private label and branded businesses, which we acquired in May 2013.
The United States retail food industry has continued to shift from traditional food retailers (those who carry a full array of refrigerated, frozen and shelf stable products) to specialty retailers who cater to consumers who migrate to either end of the value spectrum. These specialty retailers tend to focus on either value offerings for consumers looking for the maximum value of their food purchases, or catering to consumers looking for the highest quality ingredients, unique packaging or products to satisfy particular dietary needs. Additionally, trends to natural products and quick service restaurant offerings are increasing areas of consumer focus. These trends include shifting to products that are organic or natural as well as convenience offerings that provide greater portability. This changing behavior has prompted us to acquire diverse businesses to meet changing customer and consumer needs. We believe we have the necessary portfolio of products available to address these trends and to continue to focus on consumer’s needs.
The following table summarizes key data and items affecting comparability that we believe are important for you to consider as you read the consolidated results analysis discussions below.


25

 
Year Ended September 30,
(dollars in millions, except per share data)
2014
 
2013
 
2012
Net Sales
$
2,411.1

 
$
1,034.1

 
$
958.9

Gross Profit
621.2

 
424.9

 
428.9

Operating (Loss) Profit
(207.7
)
 
107.8

 
139.1

(Loss) Net Earnings
(343.2
)
 
15.2

 
49.9

 
 
 
 
 
 
Diluted (Loss) Earnings per Share
$
(9.03
)
 
$
0.30

 
$
1.45

 
 
 
 
 
 
Inventory Valuation Adjustments on Acquired Businesses
$
26.1

 
$
1.4

 
$
—

Accelerated Depreciation on Plant Closure
8.0

 
9.6

 
—

Restructuring Expenses
1.1

 
3.8

 
—

Amortization Expense
70.8

 
14.6

 
12.6

Loss on Foreign Currency
14.0

 
0.1

 
0.5

Acquisition Related Costs
29.7

 
5.7

 
—

Integration Costs
5.3

 
—

 
—

Spin-Off Non-Recurring Costs
2.6

 
8.9

 
12.5

Impairment of Goodwill and Other Intangible Assets
295.6

 
2.9

 
—

Interest Expense, net
183.7

 
85.5

 
60.3

Summary of 2014 compared to 2013
Financial results in fiscal 2014 benefitted from volume and net sales gains when compared to fiscal 2013, fueled by acquisitions as well as volume growth within our Post Foods business. Net sales within our Post Foods business were negatively impacted in fiscal 2014 by lower average net selling prices resulting from a continuing shift of mix and package sizes to products with lower net selling prices, liquidation sales and higher trade promotion spending. Despite the top line revenue growth, operating profit decreased significantly for the year ended September 30, 2014, primarily due to the impairment of goodwill and other intangible assets. Excluding the impact of impairments in both fiscal 2014 and 2013, operating profit decreased approximately 21% as several other items negatively impacted operating results relative to fiscal 2013. These items include inventory valuation adjustments on acquired businesses, acquisition and integration related costs, higher losses on foreign currency primarily related to hedges on the purchase price of Golden Boy, which was denominated in Canadian Dollars and increased amortization expense for intangible assets from acquisitions, partially offset by lower restructuring expenses and accelerated depreciation related to the closure of our Modesto, California facility and lower Spin-Off non-recurring costs.
Summary of 2013 compared to 2012
Financial results in fiscal 2013 benefitted from volume and net sales gains when compared to fiscal 2012, fueled by acquisitions as well as growth within our Post Foods business. Net sales were negatively impacted in 2013 by lower average net selling prices resulting from a continuing shift of mix and package sizes to products with lower net selling prices and from higher trade promotion spending largely for slotting fees for new product introductions. Despite the top line revenue growth, operating profit margin decreased approximately 410 basis points to $107.8 million as several items negatively impacted operating results relative to 2012. These items include acquisition related costs, restructuring expenses and accelerated depreciation related to the closure of our Modesto, California facility and impairment of intangible assets, partially offset by lower Spin-Off non-recurring costs in 2013.
Net Sales
 
 
Year Ended September 30,
(dollars in millions)
 
2014
 
2013
 
2012
Net Sales
 
$
2,411.1

 
$
1,034.1

 
$
958.9

Net sales from recent acquisitions:
 
 
 
 
 
 
Attune Foods (includes intersegment net sales)
 
93.9

 
37.8

 
—

Premier Nutrition Corporation
 
169.2

 
13.9

 
—

Dakota Growers Pasta Company
 
190.7

 
—

 
—

Dymatize Enterprises
 
124.1

 
—

 
—

Golden Boy Foods
 
186.7

 
—

 
—

Michael Foods (includes intersegment net sales)
 
684.8

 
—

 
—



26


Fiscal 2014 compared to 2013
Net sales, which increased approximately 133% to $2,411.1 million in 2014, were positively impacted by acquisitions and higher volumes, partially offset by a continuing shift of product mix to products with lower net selling prices, liquidation sales and higher trade promotion spending in our Post Foods segment. Excluding the impact of acquisitions, net sales decreased 2% despite volume growth of 1.4% within our Post Foods business. Volume increases have been driven by growth in our Pebbles, Honey Bunches of Oats, Golden Crisp and Honeycomb brands, partially offset by declines in our Grape-Nuts, Post Shredded Wheat and Good Morenings brands. Additionally, we had reduced volumes associated with co-manufacturing agreements.
Fiscal 2013 compared to 2012
Net sales, which increased approximately 8% to $1,034.1 million in 2013, were positively impacted by acquisitions and higher volumes, partially offset by a continuing shift of product mix to products with lower net selling prices in our Post Foods segment. Excluding the impact of acquisitions, net sales increased 2%. Volume increases were driven by growth in our Great Grains , Good Morenings, Grape-Nuts and Post Raisin Bran brands, partially offset by declines in our Post Shredded Wheat and Pebbles brands. Additionally, we had meaningful growth from new product offerings associated with private label and co-manufacturing agreements.
Margins
 
Year Ended September 30,
(% of net sales)
2014
 
2013
 
2012
Gross Profit
25.8
 %
 
41.1
%
 
44.7
%
Selling, general and administrative expenses
18.4

 
28.5

 
28.6

Amortization of intangible assets
2.9

 
1.4

 
1.3

Loss on foreign currency
0.6

 
—

 
0.1

Restructuring expenses
—

 
0.4

 
—

Impairment of goodwill and other intangible assets
12.3

 
0.3

 
—

Other operating expenses, net
0.1

 
0.1

 
0.3

Operating (Loss) Profit
(8.6
)
 
10.4

 
14.5

Fiscal 2014 compared to 2013
Gross profit margins were 25.8% in 2014 , down from 41.1% in 2013 . Gross profit margin was negatively impacted in the current year by the 2013 and 2014 acquisitions of the lower margin co-manufacturing or non-branded businesses of Attune Foods, PNC, Dakota Growers, Dymatize, Golden Boy and Michael Foods. Gross profit margin for the Post Foods business was negatively impacted by 3% lower net selling prices, partially offset by lower raw material costs of $11.1 million (primarily corn, sugar, wheat and fruits partially offset by higher costs of nuts and packaging) and lower accelerated depreciation in 2014 related to the closing of our Modesto, California facility. Gross margins for acquired businesses were also negatively impacted by inventory purchase accounting valuation adjustments of  $26.1 million  and  $1.4 million  for the years ended September 30, 2014 and 2013, respectively.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales decreased from 28.5% in 2013 to 18.4% in 2014. Excluding the impact of net sales generated by and SG&A incurred by the operating companies acquired in the current and prior year, SG&A as a percentage of net sales increased 3.3 percentage points. This increase in SG&A was primarily due to higher compensation related costs resulting from an increase in holding company head count to support the growing organization, incremental acquisition related costs of $24.0 million and $4.6 million higher cash and non-cash stock-based compensation expense for the year ended September 30, 2014. These negative impacts were partially offset by lower Spin-Off non-recurring costs of $6.3 million for the year ended September 30, 2014. Advertising and promotion costs decreased $10.6 million for the Post Foods segment for the year ended September 30, 2014.
During the years ended September 30, 2014 and 2013, losses on foreign currency were  $14.0 million and  $0.1 million , respectively. These costs relate to the remeasurement of transactions denominated in currencies other than the functional currency of the respective transacting entity. In the current year, the losses on foreign currency remeasurement are primarily driven by losses on a hedge of the CAD$320.0 million purchase price of Golden Boy.
Total amortization expense for 2014 was $70.8 million compared to $14.6 million in 2013. The increase is due to amortization recorded in the current year related to the acquired intangible assets of Attune Foods, PNC, Dakota Growers, Dymatize, Golden Boy and Michael Foods.


27

Operating profit as a percentage of net sales decreased to (8.6)% in fiscal 2014 from 10.4% in fiscal 2013. This decrease was driven by lower gross margins, increased amortization expense and increased losses on foreign currency, partially offset by lower SG&A expenses as a percentage of net sales, all of which are described above. In addition, operating profit was negatively impacted by impairment charges of $295.6 million and $2.9 million in the years ended September 30, 2014 and 2013, respectively, as well as restructuring expenses related to the closure of our Modesto, California facility. Restructuring expenses were  $1.1 million  and  $3.8 million  for the years ended September 30, 2014 and 2013, respectively.
Fiscal 2013 compared to 2012
Gross profit margins were 41.1% in 2013, down from 44.7% in 2012. Gross profit margin declines were driven by lower net selling prices, $9.6 million of accelerated depreciation related to the closing of our Modesto, California facility, and $5.3 million higher raw material costs (primarily grains, fruits and packaging partially offset by favorable sugar and nuts). Gross profit margins were also impacted by the 2013 acquisitions of the lower margin Attune and PNC businesses.
SG&A as a percentage of net sales decreased slightly from 28.6% in 2012 to 28.5% in 2013. Excluding the impact of acquisitions, SG&A as a percentage of net sales increased 0.5 percentage points. The increase in SG&A was primarily due to higher compensation related costs resulting from an increase in head count, higher cash and noncash stock based compensation expense of $7.0 million, acquisition related costs in 2013 of $2.7 million for transactions that were signed, and spending of $3.0 million in 2013 for due diligence on potential acquisitions that were not signed. These negative impacts were partially offset by lower Spin-Off non-recurring costs of $3.6 million and lower transition services agreement (“TSA”) charges in the 2013 as compared to 2012. Advertising and promotion costs decreased $10.0 million for the Post Foods segment, returning to an amount consistent with historical levels. Advertising spending was increased in 2012 to provide advertising support for our overall brand portfolio in line with our strategy to stabilize our market share in the ready-to-eat ("RTE") cereal category. Advertising and promotion spending in 2013 for acquired businesses was approximately $2.0 million.
Total amortization expense for 2013 was $14.6 million compared to $12.6 million in 2012. The increase was due to amortization recorded in the 2013 related to the acquired intangible assets of Attune Foods and PNC.
Operating profit as a percentage of net sales decreased to 10.4% in 2013 from 14.5% in 2012. This decrease was driven by lower gross margins and increased amortization expense, partially offset by slightly lower SG&A expenses as a percentage of net sales, all of which are described above. In addition to the items previously discussed, operating profit was negatively impacted in 2013 by $3.8 million million of restructuring expenses related to the closure of our Modesto, California facility as well as an impairment charge of $2.9 million related to our Post Shredded Wheat and Post brand trademarks.
Inventory Valuation Adjustments on Acquired Businesses
In the years ended September 30, 2014 and 2013, we recorded  $26.1 million  and  $1.4 million , respectively, of inventory valuation adjustments on acquired businesses. In fiscal 2014, $3.9 million relates to Dymatize, reported in the Active Nutrition segment, a total of $5.3 million relates to the acquisitions of Dakota Growers and Golden Boy, reported in the Private Brands segment, and $16.9 million relates to Michael Foods. In fiscal 2013, the amount relates to the businesses within our Attune Foods segment.
Restructuring Costs
In April 2013, we announced management’s decision to close our manufacturing facility located in Modesto, California as part of a cost savings and capacity rationalization effort. The transfer of production capabilities and closure of the plant was completed in September 2014. During the years ended September 30, 2014 and 2013, we incurred approximately $9.1 million and $13.4 million, respectively, of expenses related to the plant closing. For the year ended September 30, 2014, this includes $ 8.0 million of accelerated depreciation on plant assets recorded in “Cost of goods sold” and approximately $ 1.1 million of employee termination benefits recorded as “Restructuring expense.” For the year ended September 30, 2013, this includes $9.6 million of accelerated depreciation on plant assets recorded in “Cost of goods sold” and approximately $3.8 million of employee termination benefits recorded as “Restructuring expense.” We expect to achieve net pretax annual cash manufacturing cost savings of approximately $14.0 million which will be fully phased in with fiscal 2015.
Loss on Foreign Currency
During the years ended September 30, 2014, 2013 and 2012 we incurred  $14.0 million ,  $0.1 million  and  $0.5 million , respectively, related to the remeasurement of transactions denominated in currencies other than the functional currency of the respective transacting entity. In the current year, the net foreign currency loss is primarily driven by losses on a hedge of the CAD$320.0 million purchase price of Golden Boy.
Acquisition Related Costs
During the years ended September 30, 2014 and 2013, we incurred acquisition related expenses of approximately  $29.7 million  and  $5.7 million , respectively, recorded as “Selling, general and administrative expenses.” In fiscal year 2014, these costs


28

include $27.7 million for transactions that were signed, primarily attributable to professional service fees related to our fiscal 2014 acquisitions of Dakota Growers, Dymatize, Golden Boy and Michael Foods, as well as the announced acquisitions of the  PowerBar  and  Musashi  brands and related worldwide assets from Nestlé S.A. and American Blanching Company, and spending of $2.0 million for due diligence on potential acquisitions that were not signed or announced at the time of our annual reporting. In fiscal year 2013, these costs include $2.7 million for transactions that were signed, primarily attributable to professional service fees related to our fiscal 2013 acquisitions of the Attune Foods and PNC businesses and spending of $3.0 million for due diligence on potential acquisitions that were not signed or announced at the time of our annual reporting. There were no such costs incurred in fiscal 2012.
Integration Costs
We incurred  $5.3 million  of integration costs during the year ended September 30, 2014. These costs consist primarily of outside professional service fees related to the integration of recently acquired businesses into Post Holdings.
Spin-Off Non-Recurring Costs
In fiscal 2014, 2013 and 2012, we incurred separation related costs of $2.6 million , $8.9 million and $12.5 million , respectively. These costs are primarily related to third party professional service fees to effect the Spin-Off and professional service fees and duplicative costs incurred by Post to establish stand-alone processes and systems for activities performed by Ralcorp under the TSA. All of the costs described above are reported as a component of “Selling, general and administrative expenses.” For more information on our transactions with Ralcorp refer to Note 20 in the “Notes to Consolidated Financial Statements.”
Impairment of Goodwill and Other Intangible Assets
During fiscal 2014, we recorded non-cash impairment charges totaling  $295.6 million . These charges consisted of a goodwill impairment of  $212.6 million  and trademark impairment charges of $83.0 million. The goodwill impairment charge includes $181.3 million related to Post Foods and $31.3 million related to Dymatize, which is reported in the Active Nutrition segment. Trademark impairment charges consist of $34.4 million for our Post brand, $23.0 million for our Honey Bunches of Oats brand, $17.2 million for our Post Shredded Wheat brand and $8.4 million for our Grape-Nuts brand. During September 2013, we concluded two indefinite-lived trademarks were impaired and we recorded impairment losses of $0.2 million for our Post Shredded Wheat brand and $2.7 million for our Post brand. For more information, refer to “Critical Accounting Policies and Estimates” as well as Notes 2 and 6 in the “Notes to Consolidated Financial Statements”.
Other Expense, net
Amounts reported as “Other expense, net” on the consolidated statements of operations for the year ended September 30, 2014, consist of $35.5 million of realized and unrealized net losses related to our interest rate swaps. For additional information refer to Item 7A herein.
Interest Expense
Interest expense increased $98.2 million to $ 183.7 million for the year ended September 30, 2014 compared to fiscal 2013. The increase is driven primarily by the increase in outstanding debt through the November 2013 and March 2014 issuances of our 6.75% senior notes totaling $875.0 million, the June 2014 issuances of $630.0 million of our 6.00% senior notes, our $885.0 million term loan and the $41.8 million of the amortizing note component of our 5.25% tangible equity units (“TEUs”), as well as the prior year July 2013 issuance of an additional $350.0 million of our 7.375% senior notes, partially offset by a decrease in our weighted average interest rate. The term loan and the amortizing note component of the TEUs bear interest at rates of 3.75% and 5.25%, respectively. The decrease in the weighted average interest rate is due to a change in debt mix resulting from the current year issuances of the lower rate 6.75% senior notes, 6.00% senior notes, term loan and TEUs.
Interest expense increased $25.2 million to $85.5 million for the year ended September 30, 2013 compared to fiscal 2012. The increase was driven primarily by the increase in outstanding debt through the issuance of an additional $600.0 million of our 7.375% senior notes during fiscal 2013 as well as an increase in our weighted average interest rate. The increase in the weighted average interest rate was due to a change in debt mix with the repayment of our lower rate term loan during 2013 and the aforementioned increase in the 7.375% senior notes.
Income Taxes
The effective tax rate for fiscal 2014 was 19.6% compared to 31.8% for fiscal 2013 and 37.9% for fiscal 2012 .
The effective tax rate for fiscal 2014 was affected by approximately $70.9 million of incremental tax expense related to the non-deductible goodwill impairment loss, by approximately $0.8 million of incremental tax expense resulting from non-deductible compensation in accordance with the provisions of Internal Revenue Code (“IRC”) section 162(m), by approximately $2.8 million of incremental tax expense resulting from non-deductible outside service expenses incurred in relation to merger and acquisition transactions, by approximately $2.3 million of incremental tax expense resulting from recording a valuation allowance against


29

the net deferred tax assets of a Canadian subsidiary, and by approximately $(2.9) million of incremental tax benefit resulting from the receipt of non-taxable interest income.
The effective tax rate for fiscal 2013 was affected by approximately $0.7 million of incremental tax expense resulting from non-deductible compensation in accordance with the provisions of IRC section 162(m), and by approximately $0.2 million of incremental tax expense resulting from non-deductible outside service expenses incurred in relation to merger and acquisition transactions.
The effective tax rate for fiscal 2012 was affected by approximately $1.8 million of incremental tax expense resulting from non-deductible outside service expenses, which were incurred prior to February 3, 2012, to effect the Spin-Off. In addition, we recorded approximately $2.7 million of additional tax expense related to an uncertain tax position taken on our 2012 short-period tax return.
For fiscal 2012 and 2013, the effective tax rate was reduced by the effects of the Domestic Production Activities Deduction (DPAD), and for all three fiscal years the effective tax rate was also impacted by minor effects of shifts between the relative amounts of domestic and foreign income and state tax apportionment.
Segment Results
 
 
Year Ended September 30,
(dollars in millions)
 
2014
 
2013
 
2012
Net Sales
 
 
 
 
 
 
Post Foods
 
$
963.1

 
$
982.8

 
$
958.9

Michael Foods
 
684.8

 
—

 
—

Active Nutrition
 
293.3

 
13.9

 
—

Private Brands
 
377.4

 
—

 
—

Attune Foods
 
93.9

 
37.8

 
—

Eliminations
 
(1.4
)
 
(0.4
)
 
—

Total
 
$
2,411.1

 
$
1,034.1

 
$
958.9

 
 
 
 
 
 
 
Segment Profit (Loss)
 
 
 
 
 
 
Post Foods
 
$
186.7

 
$
187.4

 
$
184.8

Michael Foods
 
17.4

 
—

 
—

Active Nutrition
 
(1.8
)
 
1.0

 
—

Private Brands
 
14.8

 
—

 
—

Attune Foods
 
8.7

 
2.5

 
—

 
 
 
 
 
 
 
Segment Profit Margin (% of net sales)
 
 
 
 
 
 
Post Foods
 
19
 %
 
19
%
 
19
%
Michael Foods
 
3

 
n/a

 
n/a

Active Nutrition
 
(1
)
 
7

 
n/a

Private Brands
 
4

 
n/a

 
n/a

Attune Foods
 
9

 
7

 
n/a



30

Post Foods
Fiscal 2014 compared to 2013
Net sales and segment profit for the Post Foods segment for the year ended September 30, 2014 have been impacted by higher volumes and lower average net selling prices compared to the prior year. The decrease in average net selling prices in the current year is the result of higher liquidation sales of aged product and a sales mix shift to larger sized packages, which sell at a lower average price per ounce, and higher trade spending and coupon expense.
Net sales decreased 2% to $963.1 million primarily due to a 3% decline in average net selling prices partially offset by 1.4% higher volumes. Volume increases have been driven by growth in our Pebbles, Honey Bunches of Oats, Golden Crisp and Honeycomb brands, partially offset by declines in our Grape-Nuts, Post Shredded Wheat and Good Morenings brands and reduced volumes associated with co-manufacturing agreements. Additionally, we continue to see declines in the overall branded ready-to-eat cereal category (as measured by Nielsen), with the rate of category decline increasing in recent quarters, which has contributed to increased trade spend to maintain and grow market share positions.
Segment profit decreased $0.7 million to $186.7 million for the year ended September 30, 2014. The decrease was driven by lower average net selling prices as previously described, partially offset by reduced advertising and promotional spending, lower raw material costs (primarily corn, sugar, wheat and fruits), increased volumes and favorable manufacturing expense.
Fiscal 2013 compared to 2012
Net sales and segment profit for the Post Foods segment for the year ended September 30, 2013 were impacted by higher volumes and lower average net selling prices compared to the prior year. The decrease in average net selling prices was the result of a continuing shift of mix and package sizes to products with lower average net selling prices and higher trade spending, which included higher slotting fees of approximately $9.0 million resulting from a higher level of new product introductions in 2013.
Net sales increased 2% to $982.8 million for the fiscal year ended September 30, 2013 on 5% higher volumes partially offset by a 2% decline in average net selling prices. Volume increases in 2013 were driven by growth in our Great Grains , Good Morenings, Grape-Nuts and Post Raisin Bran brands, partially offset by declines in our Post Shredded Wheat and Pebbles brands. Honey Bunches of Oats volume was flat in 2013 as compared to 2012. Additionally, we had meaningful growth in 2013 from new product offerings associated with private label and co-manufacturing agreements.
Segment profit increased $2.6 million to $187.4 million for the year ended September 30, 2013. The increase was driven by volume increases and reduced advertising and promotion spending, partially offset by lower net selling prices and higher raw materials costs.
Michael Foods
The Michael Foods segment, acquired June 2, 2014, had net sales of  $684.8 million  (including $0.7 million of sales to the Private Brands segment) for the year ended September 30, 2014, a 9.0% increase compared to the comparable prior year period prior to our ownership. This increase was driven by a 7.6% increase in volumes, primarily in eggs and potatoes. Segment profit was  $17.4 million  in the year ended September 30, 2014. Segment profit was unfavorably impacted by a $16.9 million acquisition accounting related inventory valuation adjustment.
Active Nutrition
Fiscal 2014 compared to 2013
The Active Nutrition segment is comprised of the results from our PNC and Dymatize businesses acquired effective September 1, 2013 and February 1, 2014, respectively. Net sales for the Active Nutrition segment were  $293.3 million  for the year ended September 30, 2014 compared to $13.9 million in the prior year. Segment loss was $(1.8) million for the year ended September 30, 2014 compared to profit of $1.0 million in the prior year. Fluctuations in both net sales and segment profit are due to the timing of acquisitions within the Active Nutrition segment and the inclusion of additional months of results in the current year as compared to fiscal 2013. Segment profit was negatively impacted in the year ended September 30, 2014 by $3.9 million of acquisition accounting related inventory valuation adjustments. Additionally, net sales and segment profit during the current year were negatively impacted by incremental costs to address the supply chain disruptions at Dymatize and elevated input costs for milk protein concentrate.
Fiscal 2013 compared to 2012
Net sales for the Active Nutrition segment (consisting solely of the results of the acquisition of PNC in September 2013) were $13.9 million for the year ended September 30, 2013. The segment contributed $1.0 million to operating results in fiscal 2013.


31

Private Brands
The Private Brands segment is comprised of the results from our Dakota Growers and Golden Boy businesses acquired January 1, 2014 and February 1, 2014, respectively. Net sales for the Private Brands segment were  $377.4 million  for the year ended September 30, 2014. Sales have been negatively impacted in the post-acquisition period when compared to the pre-acquisition period by lower sales in the Dakota Growers business as certain customers in-sourced pasta production. Segment profit was  $14.8 million  for the year ended September 30, 2014. Segment profit was negatively impacted by a $5.3 million inventory valuation adjustment related to acquisition accounting. Segment profit has also been negatively impacted by elevated peanut and durum wheat costs in the current year.
Attune Foods
Fiscal 2014 compared to 2013
The Attune Foods segment net sales were  $93.9 million  (including $0.7 million of sales to the Post Foods segment) for the year ended September 30, 2014 compared to  $37.8 million  (including $0.4 million of sales to the Post Foods segment) for the year ended September 30, 2013. Segment profit was  $8.7 million  for the year ended September 30, 2014 compared to  $2.5 million  for the year ended September 30, 2013. Increases in both net sales and segment profit are due to the timing of acquisitions within the Attune Foods segment and the inclusion of additional months of results in the current year as compared to fiscal 2013. Segment profit was negatively impacted in the prior year by $1.4 million of acquisition accounting related inventory valuation adjustments.
Fiscal 2013 compared to 2012
Net sales for the Attune Foods segment were $37.8 million for the year ended September 30, 2013 (including $0.4 million of sales to the Post Foods segment). Segment profit of $2.5 million for the year ended September 30, 2013, was negatively impacted by acquisition accounting related inventory valuation adjustments of $1.4 million.


32

LIQUIDITY AND CAPITAL RESOURCES
In connection with funding acquisitions and managing our capital allocation, we completed the following transactions (for additional information see Note 14, Note 18 and Note 19 in the “Notes to Consolidated Financial Statements”):
Fiscal 2013
•
$600.0 million principal value of 7.375% senior notes
•
$234.0 million net proceeds through the authorization and issuance of approximately 2.4 million shares of 3.75% Series B Cumulative Perpetual Convertible Preferred Stock
Fiscal 2014
• $525.0 million principal value of 6.75% senior notes
•
$310.2 million net proceeds through the issuance of 3.0 million shares of 2.5% Series C Cumulative Perpetual Convertible Preferred Stock
•
Revolving credit facility in an aggregate available principal amount of $400.0 million, undrawn during fiscal 2014 with $0.5 million utilized under a letter of credit provision at September 30, 2014
•
$885.0 million principal value term loan
•
$350.0 million principal value of 6.75% senior notes
•
$303.5 million net proceeds through the issuance of 5.750 million shares of common stock, par value $0.01 per share, at a price to the public of $55.00 per share
•
$289.9 million net proceeds through the issuance of 6.325 million shares of common stock, par value $0.01 per share, at a price to the public of $47.70 per share
•
$278.6 million net proceeds through a public offering of 2.875 million TEUs each with a stated value of $100.00
•
$630.0 million principal value of 6.00% senior notes
The following table shows cash flow data for fiscal years 2014, 2013 and 2012, which is discussed below.
 
Year Ended September 30,
(dollars in millions)
2014
 
2013
 
2012
Cash provided by operating activities
$
183.1

 
$
119.2

 
$
144.0

Cash used in investing activities
(3,793.6
)
 
(423.8
)
 
(30.9
)
Cash provided by (used in) financing activities
3,484.2

 
648.8

 
(57.1
)
Effect of exchange rate changes on cash and cash equivalents
(7.3
)
 
(0.4
)
 
0.5

Net (decrease) increase in cash and cash equivalents
$
(133.6
)
 
$
343.8

 
$
56.5

Historically, we have generated and expect to continue to generate positive cash flows from operations, supported by favorable operating income margins. We believe our cash on hand, cash flows from operations and our current and future credit facilities will be sufficient to satisfy our future working capital, research and development activities, capital expenditures, pension contributions and other financing requirements for the foreseeable future. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures and other business and risk factors. If we are unable to generate sufficient cash flows from operations, or otherwise to comply with the terms of our credit facilities, we may be required to seek additional financing alternatives. There can be no assurance that we would be able to obtain additional financing on terms acceptable to us or at all.
Short-term financing needs primarily consist of working capital requirements, principal and interest payments on our long-term debt and dividend payments on our cumulative preferred stock. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity.
Operating Activities
Fiscal 2014 compared to 2013
Cash provided by operating activities for the fiscal year ended September 30, 2014 increased by $63.9 million compared to the fiscal year ended September 30, 2013 . This increase was primarily driven by incremental cash flows from our 2014 and 2013 acquisitions, $62.1 million of favorable working capital changes during the year ended September 30, 2014 when compared to working capital changes in fiscal 2013, as well as lower payments for federal income taxes, partially offset by higher interest


33

payments of $67.0 million in the current year and lower premium received on the issuances of our senior notes ($20.1 million in 2014 compared to $35.1 million in the prior year).
Fiscal 2013 compared to 2012
Cash provided by operating activities for the fiscal year ended September 30, 2013 decreased by $24.8 million compared to the fiscal year ended September 30, 2012. The decrease included incremental cash of $35.1 million provided by the premium received on the issuances of our senior notes in 2013. After reducing 2013 operating cash flows for this item, the decrease from the 2012 period was $59.9 million. This decrease was primarily driven by increased interest payments of $42.6 million in fiscal 2013. In fiscal 2012, prior to our spin-off from Ralcorp, we were not required to cash settle interest expense. In addition, working capital changes during the year ended September 30, 2013 were unfavorable by $19.9 million when compared to fiscal 2012, primarily as result of the timing of our trade accounts payable and advertising and promotions payments.
Investing Activities
Fiscal 2014 compared to 2013
Cash used in investing activities for fiscal 2014 increased by $3,369.8 million compared to fiscal 2013 . The increase was driven by net cash paid in fiscal 2014 for the acquisitions of Dakota Growers, Dymatize, Golden Boy and Michael Foods. Cash used in investing activities was also impacted in the current year by a $75.0 million payment, classified as an other long-term asset, made as a prepayment of the purchase price for the acquisition of the PowerBar and Musashi brands and related worldwide assets from Nestlé S.A. as well as escrow deposits of $55.0 million and $14.0 million, classified as restricted cash, related to the acquisitions of the PowerBar and Musashi brands and American Blanching Company, respectively. Partially offsetting these impacts was a $4.3 million cash inflow related to insurance proceeds received for loss of property at Michael Foods.
Capital expenditures were $115.5 million and $32.8 million in fiscal years 2014 and 2013, respectively. Expenditures in these years primarily related to the closure of our Modesto, California facility and the associated migration of production capacity from Modesto to other facilities as well as expenditures made to build out our stand-alone IT infrastructure in fiscal 2013. Fiscal 2014 and 2013 acquisitions added $43.0 million of capital expenditures in the current year.  Also in fiscal 2014, the Company purchased certain assets from a peanut butter manufacturing facility located in Portales, New Mexico, for $25.8 million.
Fiscal 2013 compared to 2012
Cash used in investing activities for fiscal 2013 increased by $392.9 million compared to fiscal 2012. The increase was driven by the fiscal 2013 acquisitions of substantially all of the assets of Attune Foods, Inc., certain assets of Hearthside Food Solutions and PNC. Net cash paid for these three acquisitions was $352.9 million. Cash used in investing activities was also impacted in 2013 by a $37.0 million cash deposit, classified as restricted cash, due upon the signing of the purchase agreement for the acquisition of Dakota Growers, announced in September 2013.
Capital expenditures were $32.8 million and $30.9 million in fiscal years 2013 and 2012, respectively. Expenditures in these years included machinery and equipment additions to our Battle Creek, Michigan plant needed to absorb production from our Modesto, California facility, as well as expenditures made to build out our stand-alone IT infrastructure in 2013 and the purchase of our corporate office building and related furniture and fixtures in 2012.
Financing Activities
Fiscal 2014 compared to 2013
Cash provided by financing activities was $3,484.2 million for fiscal 2014 compared to $648.8 million in 2013. The increase is primarily driven by proceeds from debt and equity issuances, the proceeds of which have been used to fund the purchase price of acquisitions completed during 2014.
Fiscal 2013 compared to 2012
Cash provided by financing activities was $648.8 million for fiscal 2013 compared to cash used of $57.1 million in 2012. The increase was primarily driven by proceeds received from the issuance of additional debt of $600.0 million and the net proceeds from the issuance of preferred stock of $234.0 million, partially offset by the payment of related debt issuance costs and the $170.6 million principal repayment on our term loan during the year ended September 30, 2013.
D ebt Covenants
Under the terms of the Credit Agreement we are required to comply with certain financial covenants consisting of ratios for maximum consolidated leverage and minimum interest expense coverage. As of September 30, 2014, we were in compliance with all such financial covenants. However, among other provisions, the Credit Agreement permits the Company to incur additional unsecured debt if its consolidated leverage ratio, calculated as provided in the Credit Agreement, would be less than 5.75 to 1.00 after giving effect to such new debt. The Company’s consolidated leverage ratio exceeded this threshold as of September 30, 2014; however, the Credit Agreement, after giving effect to the May 1, 2014 amendment to our credit agreement (see Note 14),


34

permitted the financing transactions completed in connection with the Michael Foods acquisition, notwithstanding our consolidated leverage ratio. However, the Company’s ability to finance acquisitions with unsecured debt (including additional senior notes) in the future may be limited so long as its consolidated leverage ratio equals or exceeds 5.75 to 1.00.
Contractual Obligations
In the normal course of business, we enter into contracts and commitments which obligate us to make payments in the future. The table below sets forth our significant future obligations by time period as of September 30, 2014 . For consideration of the table below, “Less Than 1 Year” refers to obligations due between October 1, 2014 and September 30, 2015, “1-3 Years” refers to obligations due between October 1, 2015 and September 30, 2017, “3-5 Years” refers to obligations due between October 1, 2017 and September 30, 2019, and “More Than 5 Years” refer to any obligations due after September 30, 2019.
(dollars in millions)
 Total (f)
 
Less Than 1 Year
 
1-3 Years
 
3-5 Years
 
More Than 5 Years
Debt
$
3,810.9

 
$
25.6

 
$
46.5

 
$
18.5

 
$
3,720.3

Interest on long-term debt(a)
1,740.3

 
233.4

 
463.3

 
460.4

 
583.2

Operating lease obligations(b)
51.0

 
10.4

 
17.9

 
10.0

 
12.7

Purchase obligations(c)
2,514.5

 
709.6

 
818.9

 
616.6

 
369.4

Deferred compensation obligations(d)
12.3

 
0.8

 
0.8

 
2.1

 
8.6

Net benefit obligations(e)
115.0

 
4.4

 
10.2

 
11.7

 
88.7

Total
$
8,244.0

 
$
984.2

 
$
1,357.6

 
$
1,119.3

 
$
4,782.9

____________
(a)
Interest on long-term debt is calculated using current market rates. As of September 30, 2014, we have interest rate swaps with a notional value of $1,569.5 million which will result in cash payments beginning in May 2016. Those payments have been excluded from this table.
(b)
Operating lease obligations consist of minimum rental payments under noncancelable operating leases, as shown in Note 15 of “Notes to Consolidated Financial Statements.”
(c)
Purchase obligations are legally binding agreements to purchase goods or services that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
(d)
Deferred compensation obligations have been allocated to time periods based on existing payment plans for terminated employees and the estimated timing of distributions to current employees based on age.
(e)
Benefit obligations consist of future payments related to pension and other postretirement benefits as estimated by an actuarial valuation and shown in Note 16 of “Notes to Consolidated Financial Statements.”
(f)
We have excluded from the table above $7.4 million, which also excludes interest and penalties, for certain provisions of ASC 740 “Income Taxes” associated with liabilities for uncertain tax positions due to the uncertainty as to the amount and timing of payment, if any.
COMMODITY TRENDS AND SEASONALITY
Our company is exposed to price fluctuations primarily from purchases of raw and packaging materials, fuel, and energy. Primary exposures include corn, wheat, soybean oil and meal, nuts, eggs, dairy, durum wheat, whey, milk protein concentrate, natural gas, diesel fuel, linerboard and resin. These costs have been volatile in recent years and future changes in such costs may cause our results of operations and our operating margins to fluctuate significantly. We manage the impact of cost increases, wherever possible, on commercially reasonable terms, by locking in prices on the quantities required to meet our production requirements. In addition, we offset the effect of increased costs by raising prices to our customers. However, for competitive reasons, we may not be able to pass along the full effect of increases in raw materials and other input costs as we incur them. In addition, inflationary pressures have had an adverse effect on Post through higher raw material and fuel costs. We believe that inflation has not had a material adverse impact on our operations for the years ended September 30, 2014 , 2013 and 2012 , but could have a material impact in the future if inflation rates were to significantly exceed our ability to achieve price increases.
Our results are affected by seasonal fluctuations of net sales. Shell egg, cheese and snacking and baking nut prices typically rise seasonally in the first quarter of our fiscal year due to increased demand during holiday periods.
CURRENCY
Certain sales and costs of our Canadian operations were denominated in Canadian Dollars. Consequently, profits from these businesses can be impacted by fluctuations in the value of the Canadian Dollars relative to U.S. Dollars.


35

OFF-BALANCE SHEET ARRANGEMENTS
As of September 30, 2014 and September 30, 2013, we did not have any material off-balance sheet arrangements that would be reasonably likely to have a material impact on our financial position or results of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following discussion is presented pursuant to the United States Securities and Exchange Commission’s Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” The policies below are both important to the representation of Post’s financial condition and results and require management’s most difficult, subjective or complex judgments.
Under generally accepted accounting principles in the United States, we make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, and expenses as well as the disclosure of contingent liabilities. We base estimates on past experience and on various other assumptions that are believed to be reasonable under the circumstances. Those estimates form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition - Revenue is recognized when title of goods is transferred to the customer, as specified by the shipping terms. Net sales reflect gross sales, including amounts billed to customers for shipping and handling, less sales discounts and trade allowances (including promotional price buy downs and new item promotional funding). Customer trade allowances are generally computed as a percentage of gross sales. Products are generally sold with no right of return except in the case of goods which do not meet product specifications or are damaged and related reserves are maintained based on return history. If additional rights of return are granted, revenue recognition is deferred. Estimated reductions to revenue for customer incentive offerings are based upon customer redemption history.
Business Combinations - We use the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is often required in estimating the fair value of assets acquired, particularly intangible assets. As a result, in the case of significant acquisitions we normally obtain the assistance of a third-party valuation specialist in estimating fair values of tangible and intangible assets. The fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants. While we believe those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Inventory - Inventories, other than flocks as further discussed below, are generally valued at the lower of average cost (determined on a first-in, first-out basis) or market value and have been reduced by an allowance for obsolete product and packaging materials. The estimated allowance is based on a review of inventories on hand compared to estimated future usage and sales. Flock inventory represents the cost of purchasing and raising chicken flocks to egg laying maturity. The costs included in our flock inventory include the costs of the chicks, the feed fed to the birds and the labor and overhead costs incurred to operate the pullet facilities until the birds are transferred into the laying facilities, at which time their cost is amortized to operations, as cost of goods sold, over their expected useful lives of one to two years.
Long-Lived Assets - We review long-lived assets, including leasehold improvements, property and equipment, and amortized intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.
Indefinite Lived Assets - Trademarks with indefinite lives are reviewed for impairment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate the trademark may be impaired. In assessing other intangible assets not subject to amortization for impairment, we have the option to perform a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of such an intangible asset is less than its carrying amount. If we determine that it is not more likely than not that the fair value of such an intangible asset is less than its carrying amount, then we are not required to perform any additional tests for assessing intangible assets for impairment. However, if we conclude otherwise or elect not to perform the qualitative assessment, then we are required to perform a quantitative impairment test that involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
In fiscal years 2014, 2013 and 2012, we elected not to perform a qualitative assessment and instead performed a quantitative impairment test. The estimated fair value is determined using an income-based approach (the relief-from-royalty method), which


36

requires significant assumptions for each brand, including estimates regarding future revenue growth, discount rates, and appropriate royalty rates. We estimated royalty rates based on consideration of several factors for each brand, including profit levels, research of external royalty rates by third party experts, and the relative importance of each brand to the Company. Revenue growth assumptions are based on historical trends and management’s expectations for future growth by brand. The discount rate was based on a weighted average cost of capital utilizing industry market data of similar companies.
At September 30, 2014, we recorded impairment losses of $34.4 million for our Post brand, $23.0 million for our Honey Bunches of Oats brand, $17.2 million for our Post Shredded Wheat brand and $8.4 million for our Grape-Nuts brand to record these trademarks at their estimated current fair values of $144.0 million, $243.9 million, $8.2 million and $14.9 million, respectively. Impairment charges of these Post Foods brands were primarily the result of the acceleration of declines within the branded ready-to-eat cereal category as well as the expectation that revenue and profit growth for Post Foods will be challenged in the medium to long-term. Due to repeated past impairments, continued weakness in the brand forecasts and a lack of sales growth from recent brand support efforts, as of October, 1 2014, the Post Shredded Wheat brand will be converted to a finite-lived asset and assigned a 20 year useful life. At September 30, 2014, the estimated fair values of the remaining unimpaired indefinite lived brands exceed their respective carrying values by at least 16%.
At September 30, 2013, we recorded impairment losses of $0.2 million for our Post Shredded Wheat brand and $2.7 million for our Post brand to record these trademarks at their estimated current fair values of $25.4 million and $178.4 million, respectively. At September 30, 2012, we concluded there was no impairment of trademarks with indefinite lives.
Goodwill - Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. We conduct a goodwill impairment qualitative assessment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate that goodwill may be impaired. The goodwill impairment qualitative assessment requires us to perform an assessment to determine if it is more likely than not that the fair value of the business is less than its carrying amount. The qualitative assessment considers various factors, including the macroeconomic environment, industry and market specific conditions, financial performance, cost impacts, and issues or events specific to the business. If adverse qualitative trends are identified that could negatively impact the fair value of the business, we perform a quantitative goodwill impairment test. In fiscal years 2014, 2013 and 2012, we elected not to perform a qualitative assessment and instead performed a quantitative impairment test for all reporting units.
Under the two-step quantitative impairment test, the first step of the evaluation involves comparing the current fair value of each reporting unit to its carrying value, including goodwill. The estimated fair values were determined using a combined income and market approach with a greater weighting on the income approach (75% of the calculation for all reporting units, excluding Dymatize which is 100%). The income approach is based on discounted future cash flows and requires significant assumptions, including estimates regarding future revenue, profitability, and capital requirements. The market approach (25% of the calculation or all reporting units, excluding Dymatize which is 0%) is based on a market multiple (revenue and EBITDA which stands for earnings before interest, income taxes, depreciation, and amortization) and requires an estimate of appropriate multiples based on market data. Revenue growth assumptions (along with profitability and cash flow assumptions) were based on historical trends for the reporting units and management's expectations for future growth. The discount rates were based on a risk adjusted weighted average cost of capital utilizing industry market data of businesses similar to the reporting units and based upon management judgment. For the market approach, we used estimated EBITDA and revenue multiples based on industry market data. For the Dymatize reporting unit, the market approach was not used as it was concluded that the selected industry market data was not consistent with a business with the future growth expectations of the Dymatize reporting unit.
If the fair value of a reporting unit determined in the first step of the evaluation is lower than its carrying value, we proceed to the second step, which compares the carrying value of goodwill to its implied fair value. In estimating the implied fair value of goodwill for a reporting unit, we must assign the fair value of the reporting unit (as determined in the first step) to the assets and liabilities associated with the reporting unit as if the reporting unit had been acquired in a business combination. Any excess of the carrying value of goodwill of the reporting unit over its implied fair value is recorded as impairment.
As of September 30, 2014, we recorded a total charge of $212.6 million for the impairment of goodwill. The impairment charge includes $181.3 million related to Post Foods primarily resulting from the acceleration of declines within the branded ready-to-eat (RTE) cereal category. Additionally, the expectation is that revenue and profit growth for Post Foods will be challenged in the medium to long-term. The Active Nutrition segment recognized charges of $31.3 million resulting from reduced near-term profitability related to supply chain disruptions at Dymatize and incremental remediation expenses, which were identified subsequent to the initial valuation at the acquisition date of February 1, 2014. At September 30, 2014, the estimated fair values of the remaining unimpaired reporting units exceed their carrying values in excess of 10% with the exception of Michael Foods egg and cheese units which exceeded their carrying values by 3.4% and 7.4%, respectively. Since the Michael Foods’ egg and cheese reporting units were recently acquired on June 2, 2014, the relatively small excess amounts are the result of stating the assets and liabilities of the reporting units at their fair value on the date of acquisition, which was only four months prior to the goodwill impairment assessment date.
Pension and Other Postretirement Benefits - Pension assets and liabilities are determined on an actuarial basis and are affected by the estimated market-related value of plan assets, estimates of the expected return on plan assets, discount rates, future


37

salary increases, and other assumptions inherent in these valuations. We annually review the assumptions underlying the actuarial calculations and make changes to these assumptions, based on current market conditions and historical trends, as necessary. Differences between the actual return on plan assets and the expected return on plan assets and changes to projected future rates of return on plan assets will affect the amount of pension expense or income ultimately recognized. The other postretirement benefits liability (partially subsidized retiree health and life insurance) is also determined on an actuarial basis and is affected by assumptions including the discount rate and expected trends in healthcare costs. Changes in the discount rate and differences between actual and expected healthcare costs will affect the recorded amount of other postretirement benefits expense. For both pensions and postretirement benefit calculations, the assumed discount rate is determined by projecting the plans’ expected future benefit payments as defined for the projected benefit obligation or accumulated postretirement benefit obligation, discounting those expected payments using a theoretical zero-coupon spot yield curve derived from a universe of high-quality (rated AA or better by Moody’s Investor Service) corporate bonds as of the measurement date, and solving for the single equivalent discount rate that results in the same present value. A 1% decrease in the assumed discount rate (from 4.56% to 3.56% for U.S. pension; from 4.61% to 3.61% for U.S. other postretirement benefits; from 4.25% to 3.25% for Canadian pension; and from 4.45% to 3.45% for Canadian other postretirement benefits) would have increased the recorded benefit obligations at September 30, 2014 by approximately $9.2 million for pensions and approximately $23.0 million for other postretirement benefits. The expected return on plan assets was determined based on historical and expected future returns of the various asset classes, using the target allocations of the plans. A 1% decrease in the assumed return on plan assets (from 5.99% to 4.99% for U.S. and from 6.00% to 5.00% for Canadian) would have increased the net periodic benefit cost for the pension plans by approximately $0.4 million. We expect to contribute $6.9 million to the combined pension plans and $2.1 million to our postretirement medical benefit plans in fiscal 2015. Contributions beyond 2015 remain uncertain and will significantly depend on changes in actuarial assumptions, actual return on plan assets and any legislative or regulatory changes that may affect plan funding requirements. See Note 16 of “Notes to Consolidated Financial Statements” for more information about pension and other postretirement benefit assumptions.
Stock-Based Compensation - Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period for awards expected to vest. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the expected term, expected stock price volatility, risk-free interest rate, and expected dividends. In addition, judgment is required in estimating the amount of share-based awards that are expected to be forfeited before vesting. For equity awards, the original estimate of the grant date fair value is not subsequently revised unless the awards are modified, but the estimate of expected forfeitures is revised throughout the vesting period and the cumulative stock-based compensation cost recognized is adjusted accordingly. For liability awards, the fair value is remeasured at the end of each reporting period. See Note 17 of “Notes to Consolidated Financial Statements” for more information about stock-based compensation and our related estimates.
Income Tax - We estimate income tax expense based on taxes in each jurisdiction. We estimate current tax exposures together with temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities. We believe that sufficient income will be generated in the future to realize the benefit of most of our deferred tax assets. Where there is not sufficient evidence that such income is likely to be generated, we establish a valuation allowance against the related deferred tax assets. We are subject to periodic audits by governmental tax authorities of our income tax returns. These audits generally include questions regarding our tax filing positions, including the amount and timing of deductions and the allocation of income among various tax jurisdictions. We evaluate our exposures associated with our tax filing positions, including state and local taxes, and record reserves for estimated exposures.
Based on the provisions of the Tax Allocation Agreement between Post and Ralcorp, Ralcorp retained responsibility for income tax liabilities and income tax returns related to all periods prior to the Spin-Off date of February 3, 2012. There are no open income tax audits in any of Post’s filing jurisdictions for periods subsequent to the Spin-Off date.
See Note 7 of “Notes to Consolidated Financial Statements” for more information about estimates affecting income taxes.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 3 of “Notes to Consolidated Financial Statements” for a discussion regarding recently issued accounting standards.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
In the ordinary course of business, we are exposed to commodity price risks relating to the acquisition of raw materials and fuels. We use futures contracts, options and swaps, to manage certain of these exposures when it is practical to do so. For more information, see “Commodity Trends and Seasonality” and Note 12 of “Notes to Consolidated Financial Statements.”


38
Table of Contents

Foreign Currency Risk
We have foreign currency exchange rate risk related to our Canadian entities, whose functional currency is the Canadian Dollar.
Interest Rate Risk
As of September 30, 2014, we have principal value of indebtedness of  $3,810.9 million  related to our 7.375%, 6.75% and 6.00% senior notes, our term loan, our 5.25% tangible equity units, $9.7 million of debt and capital leases assumed in the acquisition of Michael Foods and an undrawn $400.0 million Revolving Credit Facility. The revolving credit facility has outstanding letters of credit of $500,000.0 million which reduces the available borrowing capacity to $399,500,000.0 million at September 30, 2014. Of the total $3,810.9 million  outstanding indebtedness, approximately $2,927.0 million bears interest at fixed rates with a weighted-average interest rate of 6.9% and is not subject to change based on changes in market interest rates.
We have $883.9 million of variable rate debt predominately comprised of our term loan, with a remaining outstanding principal balance of $882.8 million, which bears interest at LIBOR plus a 3% spread, subject to a 0.75% LIBOR floor. The remaining $1.1 million of secured notes bear variable interest with an effective interest rate of 3.6% at September 30, 2014. In June 2014, we entered into interest rate swaps, with a two-year forward start date, with a notional value of $869.5 million. The interest rate swaps have the effect of fixing the interest rate we will incur on the expected remaining principal balance on our variable rate term loan beginning in June 2016. In addition, as of September 30, 2014 we have interest rate swaps with a $700.0 million notional amount that obligate us to pay a weighted average fixed rate of approximately 4% and receive three-month LIBOR and will result in a net settlement in July 2018.  These swaps have the effect of locking in current low interest rates for anticipated future debt issuances to fund strategic investments, refinance existing debt or other strategic purposes.
Borrowings, if any, under the Revolving Credit Facility would bear interest at the Eurodollar Rate or the Base Rate (as such terms are defined in the Credit Agreement) plus an applicable margin ranging from 2.00% to 2.50% for Eurodollar Rate-based loans and from 1.00% to 1.50% for Base Rate-based loans, depending upon our senior secured leverage ratio.





39
Table of Contents

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
 
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Fiscal Years Ended September 30, 2014, 2013 and 2012
Consolidated Statements of Comprehensive (Loss) Income for the Fiscal Years Ended September 30, 2014, 2013 and 2012
Consolidated Balance Sheets as of September 30, 2014 and 2013
Consolidated Statements of Cash Flows for the Fiscal Years Ended September 30, 2014, 2013 and 2012
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended September 30, 2014, 2013 and 2012
Notes to Consolidated Financial Statements



40
Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Post Holdings, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Post Holdings, Inc. and its subsidiaries at September 30, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2014 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our audits (which was an integrated audit in 2014 and 2013). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Dakota Growers Pasta Company, Inc.; Dymatize Enterprises, LLC; Golden Boy Foods Ltd.; and MFI Holding Company Corporation from its assessment of internal control over financial reporting as of September 30, 2014 because they were acquired by the Company in purchase business combinations during 2014. We have also excluded Dakota Growers Pasta Company, Inc.; Dymatize Enterprises, LLC; Golden Boy Foods Ltd.; and MFI Holding Company Corporation from our audit of internal control over financial reporting. Dakota Growers Pasta Company, Inc.; Dymatize Enterprises, LLC; Golden Boy Foods Ltd.; and MFI Holding Company Corporation total assets and total revenues collectively represent 38% and 49%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2014.




/s/PricewaterhouseCoopers LLP
St. Louis, Missouri    
November 26, 2014


41

POST HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
 
 
Year Ended September 30,
 
2014
 
2013
 
2012
Net Sales
$
2,411.1

 
$
1,034.1

 
$
958.9

Cost of goods sold
1,789.9

 
609.2

 
530.0

Gross Profit
621.2

 
424.9

 
428.9

 
 
 
 
 
 
Selling, general and administrative expenses
444.4

 
294.3

 
274.0

Amortization of intangible assets
70.8

 
14.6

 
12.6

Loss on foreign currency
14.0

 
0.1

 
0.5

Restructuring expenses
1.1

 
3.8

 
—

Impairment of goodwill and other intangible assets
295.6

 
2.9

 
—

Other operating expenses, net
3.0

 
1.4

 
2.7

Operating (Loss) Profit
(207.7
)
 
107.8

 
139.1

 
 
 
 
 
 
Interest expense, net
183.7

 
85.5

 
60.3

Other expense (income)
35.5

 
—

 
(1.6
)
(Loss) Earnings before Income Taxes
(426.9
)
 
22.3

 
80.4

Income tax (benefit) provision
(83.7
)
 
7.1

 
30.5

Net (Loss) Earnings
(343.2
)
 
15.2

 
49.9

Preferred stock dividends
(15.4
)
 
(5.4
)
 
—

Net (Loss) Earnings Available to Common Stockholders
$
(358.6
)
 
$
9.8

 
$
49.9

 
 
 
 
 
 
(Loss) Earnings per share:
 
 
 
 
 
Basic
$
(9.03
)
 
$
0.30

 
$
1.45

Diluted
$
(9.03
)
 
$
0.30

 
$
1.45

 
 
 
 
 
 
Weighted-Average Common Shares Outstanding:
 
 
 
 
 
Basic
39.7

 
32.7

 
34.3

Diluted
39.7

 
33.0

 
34.5

 
See accompanying Notes to Consolidated Financial Statements.
 




42
Table of Contents


POST HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
 
Year Ended September 30,
 
2014
 
2013
 
2012
Net (Loss) Earnings
$
(343.2
)
 
$
15.2

 
$
49.9

Pension and postretirement benefit adjustments, net of tax of $5.1, $(8.2) and $12.4, respectively
(10.4
)
 
14.4

 
(20.8
)
Foreign currency translation adjustments
(4.1
)
 
(2.9
)
 
(0.2
)
Total Comprehensive (Loss) Income
$
(357.7
)
 
$
26.7

 
$
28.9



See accompanying Notes to Consolidated Financial Statements.









































43
Table of Contents

POST HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)  
 
September 30,
 
2014
 
2013
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
268.4

 
$
402.0

Restricted cash
84.8

 
38.1

Receivables, net
413.7

 
83.2

Inventories
380.7

 
121.9

Deferred income taxes
27.0

 
11.9

Prepaid expenses and other current assets
44.4

 
11.0

Total Current Assets
1,219.0

 
668.1

Property, net
831.9

 
388.5

Goodwill
2,886.7

 
1,489.7

Other intangible assets, net
2,643.0

 
898.4

Deferred income taxes
—

 
2.4

Other assets
150.5

 
26.7

Total Assets
$
7,731.1

 
$
3,473.8

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
 
 
 
Current portion of long-term debt
$
25.6

 
$
—

Accounts payable
225.0

 
77.1

Other current liabilities
269.3

 
68.9

Total Current Liabilities
519.9

 
146.0

Long-term debt
3,830.5

 
1,408.6

Deferred income taxes
915.1

 
304.3

Other liabilities
182.4

 
116.3

Total Liabilities
5,447.9

 
1,975.2

 
 
 
 
Commitments and Contingencies (See Note 15)


 


 
 
 
 
Stockholders’ Equity
 
 
 
Preferred Stock, $0.01 par value, 50.0 shares authorized
 
 
 
3.75% Series B, 2.4 shares issued and outstanding
0.1

 
—

2.50% Series C, 3.2 shares issued and outstanding
Common stock, $0.01 par value, 300.0 shares authorized, 44.8 and 32.7 shares outstanding, respectively
0.5

 
0.3

Additional paid-in capital
2,669.3

 
1,517.2

(Accumulated deficit) retained earnings
(305.7
)
 
47.6

Accumulated other comprehensive loss
(27.6
)
 
(13.1
)
Treasury stock, at cost, 1.8 shares in each year
(53.4
)
 
(53.4
)
Total Stockholders’ Equity
2,283.2

 
1,498.6

Total Liabilities and Stockholders’ Equity
$
7,731.1

 
$
3,473.8

 
See accompanying Notes to Consolidated Financial Statements.


44
Table of Contents

POST HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
Year Ended September 30,
 
2014
 
2013
 
2012
Cash Flows from Operating Activities
 
 
 
 
 
Net (loss) earnings
$
(343.2
)
 
$
15.2

 
$
49.9

Adjustments to reconcile net (loss) earnings to net cash flow provided by operating activities:
 
 
 
 
 
Depreciation and amortization
155.8

 
76.8

 
63.2

Premium from issuance of long-term debt
20.1

 
35.1

 
—

Impairment of goodwill and other intangible assets
295.6

 
2.9

 
—

Unrealized loss on interest rate swaps
40.4

 
—

 
—

Loss on foreign currency
7.4

 
—

 
—

Loss on write-down of assets held for sale
5.4

 
—

 
—

Non-cash stock-based compensation expense
14.5

 
10.5

 
4.5

Deferred income taxes
(87.5
)
 
(29.1
)
 
(2.6
)
Other, net
10.6

 
0.9

 
4.1

Other changes in current assets and liabilities, net of business acquisitions:
 
 
 
 
 
Increase in receivables
(50.3
)
 
(9.7
)
 
(45.9
)
Decrease in receivable from Ralcorp
—

 
—

 
41.3

Decrease (increase) in inventories
30.7

 
(10.8
)
 
(11.7
)
(Increase) decrease in prepaid expenses and other current assets
(0.2
)
 
6.8

 
(8.7
)
Increase in accounts payable and other current and non-current liabilities
83.8

 
20.6

 
49.9

Net Cash Provided by Operating Activities
183.1

 
119.2

 
144.0

Cash Flows from Investing Activities
 
 
 
 
 
Business acquisitions, net of cash acquired
(3,564.1
)
 
(352.9
)
 
—

Additions to property
(115.5
)
 
(32.8
)
 
(30.9
)
Restricted cash
(43.3
)
 
(38.1
)
 
—

Cash advance for acquisition
(75.0
)
 
—

 
—

Insurance proceeds on loss of property
4.3

 
—

 
—

Net Cash Used in Investing Activities
(3,793.6
)
 
(423.8
)
 
(30.9
)
Cash Flows from Financing Activities
 
 
 
 
 
Proceeds from issuance of long-term debt
2,385.6

 
600.0

 
950.0

Proceeds from issuance of preferred stock, net of issuance costs
310.2

 
234.0

 
—

Proceeds from issuance of common stock, net of issuance costs
593.4

 
—

 
—

Proceeds from issuance of equity component of tangible equity units, net of issuance costs
238.1

 
—

 
—

Proceeds from issuance of debt component of tangible equity units
41.8

 
—

 
—

Payment to Ralcorp
—

 
—

 
(900.0
)
Repayments of long-term debt
(6.9
)
 
(170.6
)
 
(4.4
)
Payments of preferred stock dividends
(14.4
)
 
(4.2
)
 
—

Purchases of treasury stock
—

 
—

 
(53.4
)
Change in net investment of Ralcorp
—

 
—

 
(39.4
)
Payments of debt issuance costs
(64.0
)
 
(10.5
)
 
(17.7
)
Changes in intercompany debt
—

 
—

 
7.8

Other, net
0.4

 
0.1

 
—

Net Cash Provided by (Used in) by Financing Activities
3,484.2

 
648.8

 
(57.1
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(7.3
)
 
(0.4
)
 
0.5

Net Increase (Decrease) in Cash and Cash Equivalents
(133.6
)
 
343.8

 
56.5

Cash and Cash Equivalents, Beginning of Year
402.0

 
58.2

 
1.7

Cash and Cash Equivalents, End of Year
$
268.4

 
$
402.0

 
$
58.2

 
See accompanying Notes to Consolidated Financial Statements.


45
Table of Contents

POST HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
 
Common Stock
 
Preferred Stock
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Net Investment
 
Retained Earnings (Deficit)
 
Retirement Benefit Adjustments, net of tax
 
Foreign Currency Translation Adjustments
 
Treasury Stock
 
Total Stockholders’ Equity
Balance as of September 30, 2011
—

 
$
—

 
—

 
$
—

 
$
—

 
$
1,438.3

 
$
—

 
$
(4.6
)
 
$
1.0

 
$
—

 
$
1,434.7

Net earnings
—

 
—

 
—

 
—

 
—

 
13.3

 
36.6

 
—

 
—

 
—

 
49.9

Separation related adjustments
—

 
—

 
—

 
—

 
—

 
(182.8
)
 
—

 
(7.2
)
 
(1.0
)
 
—

 
(191.0
)
Reclassification of net investment to additional paid-in capital
—

 
—

 
—

 
—

 
1,268.8

 
(1,268.8
)
 
—

 
—

 
—

 
—

 
—

Issuance of common stock at Spin-Off
34.4

 
0.3

 
—

 
—

 
(0.3
)
 
—

 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense
—

 
—

 
—

 
—

 
4.1

 
—

 
—

 
—

 
—

 
—

 
4.1

Purchase of treasury stock
(1.7
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(53.4
)
 
(53.4
)
Net change in retirement benefits, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(13.6
)
 
—

 
—

 
(13.6
)
Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.8

 
—

 
0.8

Balance as of September 30, 2012
32.7

 
$
0.3

 
—

 
$
—

 
$
1,272.6

 
$
—

 
$
36.6

 
$
(25.4
)
 
$
0.8

 
$
(53.4
)
 
$
1,231.5

Net earnings
—

 
—

 
—

 
—

 
—

 
—

 
15.2

 
—

 
—

 
—

 
15.2

Preferred stock dividends declared
—

 
—

 
—

 
—

 
—

 
—

 
(4.2
)
 
—

 
—

 
—

 
(4.2
)
Issuance of preferred stock
—

 
—

 
2.4

 
—

 
234.0

 
—

 
—

 
—

 
—

 
—

 
234.0

Activity under stock and deferred compensation plans
—

 
—

 
—

 
—

 
0.1

 
—

 
—

 
—

 
—

 
—

 
0.1

Stock-based compensation expense
—

 
—

 
—

 
—

 
10.5

 
—

 
—

 
—

 
—

 
—

 
10.5

Net change in retirement benefits, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
—

 
14.4

 
—

 
—

 
14.4

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2.9
)
 
—

 
(2.9
)
Balance as of September 30, 2013
32.7

 
$
0.3

 
2.4

 
$
—

 
$
1,517.2

 
$
—

 
$
47.6

 
$
(11.0
)
 
$
(2.1
)
 
$
(53.4
)
 
$
1,498.6

Net earnings
—

 
—

 
—

 
—

 
—

 
—

 
(343.2
)
 
—

 
—

 
—

 
(343.2
)
Preferred stock dividends declared
—

 
—

 
—

 
—

 
(4.3
)
 
—

 
(10.1
)
 
—

 
—

 
—

 
(14.4
)
Issuance of common stock
12.1

 
0.2

 
—

 
—

 
593.2

 
—

 
—

 
—

 
—

 
—

 
593.4

Issuance of preferred stock
—

 
—

 
3.2

 
0.1

 
310.1

 
—

 
—

 
—

 
—

 
—

 
310.2

Issuance of tangible equity units
—

 
—

 
—

 
—

 
238.1

 
—

 
—

 
—

 
—

 
—

 
238.1

Activity under stock and deferred compensation plans
—

 
—

 
—

 
—

 
0.5

 
—

 
—

 
—

 
—

 
—

 
0.5

Stock-based compensation expense
—

 
—

 
—

 
—

 
14.5

 
—

 
—

 
—

 
—

 
—

 
14.5

Net change in retirement benefits, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(10.4
)
 
—

 
—

 
(10.4
)
Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(4.1
)
 
—

 
(4.1
)
Balance as of September 30, 2014
44.8

 
$
0.5

 
5.6

 
$
0.1

 
$
2,669.3

 
$
—

 
$
(305.7
)
 
$
(21.4
)
 
$
(6.2
)
 
$
(53.4
)
 
$
2,283.2

 See accompanying Notes to Consolidated Financial Statements.


46
Table of Contents

POST HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions, except share data or where indicated otherwise)

NOTE 1 — BACKGROUND
Post Holdings, Inc. (“Post” or the “Company”) is a consumer packaged goods holding company operating in the center-of-the-store, refrigerated, active nutrition and private label food categories. The Company’s products are sold through a variety of channels such as grocery, club and drug stores, mass merchandisers, foodservice, ingredient and via the Internet. Post operates in five reportable segments: Post Foods, Michael Foods, Active Nutrition, Private Brands and Attune Foods. The Post Foods segment predominately includes the Post branded ready-to-eat cereal business. The Michael Foods segment manufactures and distributes egg products and refrigerated potato products and also distributes cheese and other dairy case products to the retail, foodservice and food ingredient channels and is comprised of MFI Holding Corporation (“Michael Foods”) acquired in June 2014. The Active Nutrition segment markets and distributes high protein shakes, bars and powders as well as nutritional supplements and includes the business of Premier Nutrition Corporation (“PNC”), which was acquired in September 2013, and Dymatize Enterprises, LLC (“Dymatize”), which was acquired in February 2014. The Private Brands segment manufactures dry pasta, peanut butter and other nut butters, dried fruits and baking and snacking nuts, servicing the private label retail, foodservice and ingredient channels and consists of Dakota Growers Pasta Company, Inc. (“Dakota Growers”) and Golden Boy Foods Ltd. (“Golden Boy”), which were acquired in January 2014 and February 2014, respectively. The Attune Foods segment manufactures and distributes premium natural and organic cereals and snacks and is comprised of the businesses of Attune Foods, Inc. (“Attune”), which we acquired substantially all of the assets of in December 2012, and certain assets of the Hearthside Food Solutions private label and branded businesses, which we acquired in May 2013.
On February 3, 2012, Post completed its legal separation from Ralcorp Holdings, Inc. (“Ralcorp”) via a tax free spin-off (the “Spin-Off”). In the Spin-Off, Ralcorp shareholders of record on January 30, 2012, the record date for the distribution, received one share of Post common stock for every two shares of Ralcorp common stock held; additionally Ralcorp retained approximately 6.8 million unregistered shares of Post common stock. At the time of distribution Ralcorp entered into a series of third party financing arrangements that effectively resulted in the contribution of its net investment in Post in exchange for the aforementioned 6.8 million shares of Post common stock and a $900.0 cash distribution which was funded through the incurrence of long-term debt by Post (see Note 14). Prior to Ralcorp’s contribution of its net investment, the net investment balance decreased due to separation related adjustments in the net amount of $182.8 primarily due to differences between the $900.0 cash distribution to Ralcorp compared to the settlement of intercompany debt of $784.5 and equity investment in partnership of $60.2 that did not transfer to Post in connection with the Spin-Off.
On February 6, 2012, Post common stock began trading on the New York Stock Exchange under the ticker symbol “POST.”
Unless otherwise stated or the context otherwise indicates, all references in this Form 10-K to “Post,” “the Company,” “us,” “our” or “we” mean Post Holdings, Inc. and its consolidated subsidiaries.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation  — The consolidated financial statements include the operations of Post Holdings, Inc. and its wholly-owned subsidiaries. All intercompany transactions have been eliminated. As described in Note 1, for periods prior to the Spin-Off, these consolidated financial statements include the combined results of Post Foods, LLC and Post Foods Canada Corp., which comprised the operations of the Company prior to the Spin-Off. Transactions between the Company and Ralcorp are included in these financial statements.
Use of Estimates and Allocations — The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America, which require certain elections as to accounting policy, estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amount of net revenues and expenses during the reporting periods. Significant accounting policy elections, estimates and assumptions include, among others, pension and benefit plan assumptions, valuation assumptions of goodwill and other intangible assets, marketing programs and income taxes. Actual results could differ from those estimates.
Throughout the reported periods prior to the Spin-Off covered by these financial statements, operations of the Company were conducted and accounted for as a reportable segment within the consolidated financial statements of Ralcorp. The financial statements have been derived from Ralcorp’s historical accounting records and reflect significant allocations of direct costs and expenses (see Note 20). All of the allocations and estimates in these financial statements are based upon assumptions that management of the Company believe are reasonable. The financial statements for periods prior to the Spin-Off do not necessarily represent the financial position or results of operations of the Company had it been operated as a separate independent entity.


47

Business Combinations — The Company uses the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Cash Equivalents — Cash equivalents include all highly liquid investments with original maturities of less than three months.
Restricted Cash — Restricted cash includes deposits with third party escrow agents in connection with recently announced acquisitions that will be credited against the purchase price if the transactions close. In addition, restricted cash also includes items such as cash deposits which serve as collateral for certain commodity hedging contracts as well as the Company's high deductible workers’ compensation insurance program.
Receivables — Receivables are reported at net realizable value. This value includes appropriate allowances for doubtful accounts, cash discounts, and other amounts which the Company does not ultimately expect to collect. The Company determines its allowance for doubtful accounts based on historical losses and the economic status of, and its relationship with, its customers, especially those identified as “at risk.” A receivable is considered past due if payments have not been received within the agreed upon invoice terms. Receivables are written off against the allowance when the customer files for bankruptcy protection or is otherwise deemed to be uncollectible based upon the Company’s evaluation of the customer’s solvency.
Inventories — In connection with the acquisition of Michael Foods (see Note 5), flocks have been added as a new category of inventory for the Company. Inventories, other than flocks as further discussed below, are generally valued at the lower of average cost (determined on a first-in, first-out basis) or market. Reported amounts have been reduced by an allowance for obsolete product and packaging materials based on a review of inventories on hand compared to estimated future usage and sales. Flock inventory represents the cost of purchasing and raising chicken flocks to egg laying maturity. The costs included in our flock inventory include the costs of the chicks, the feed fed to the birds and the labor and overhead costs incurred to operate the pullet facilities until the birds are transferred into the laying facilities, at which time their cost is amortized to operations, as cost of goods sold, over their expected useful lives of one to two years.
Assets Held for Sale — Related to the closure of its Modesto, California facility, the Company has land, building and equipment classified as assets held for sale as of September 30, 2014. The Company has committed to a plan for selling the assets, is actively and reasonably marketing them utilizing a third party broker, and sale is reasonably expected within one year. An impairment loss of $5.4 was recorded to adjust the carrying value of the assets to their fair value less estimated selling costs. The loss is reported as “Other operating expenses, net” on the Consolidated Statement of Operations. At September 30, 2014, the $16.4 carrying value of the assets are included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets.
Property — Property is recorded at cost, and depreciation expense is generally provided on a straight-line basis over the estimated useful lives of the properties. Estimated useful lives range from 1 to 20  years for machinery and equipment and 3 to 39  years for buildings, building improvements and leasehold improvements. Total depreciation expense was $85.0 , $62.2 and $50.6 in fiscal 2014 , 2013 and 2012 , respectively. Any gains and losses incurred on the sale or disposal of assets are included in "Other operating expenses, net." Repair and maintenance costs incurred in connection with planned major maintenance activities are accounted for under the direct expensing method. Property consisted of: 
 
September 30,
 
2014
 
2013
Land and land improvements
$
25.6

 
$
13.0

Buildings and leasehold improvements
295.0

 
139.9

Machinery and equipment
714.2

 
436.7

Software
31.5

 
28.4

Construction in progress
54.7

 
22.5

 
1,121.0

 
640.5

Accumulated depreciation
(289.1
)
 
(252.0
)
 
$
831.9

 
$
388.5

Other Intangible Assets — Other intangible assets consist primarily of customer relationships and trademarks/brands acquired in business combinations. Amortization expense related to intangible assets, which is provided on a straight-line basis over the estimated useful lives of the assets, was $70.8 , $14.6 , and $12.6 in fiscal 2014 , 2013 and 2012 , respectively. For the intangible assets recorded as of September 30, 2014 , amortization expense of $128.2 , $127.7 , $127.7 , $127.6 , and $126.8 is scheduled for fiscal 2015, 2016, 2017, 2018 and 2019, respectively. Other intangible assets consisted of: 


48

 
September 30, 2014
 
September 30, 2013
 
Carrying
Amount
 
Accum.
Amort.
 
Net
Amount
 
Carrying
Amount
 
Accum.
Amort.
 
Net
Amount
Subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
1,743.7

 
$
(90.9
)
 
$
1,652.8

 
$
258.6

 
$
(41.0
)
 
$
217.6

Trademarks/brands
554.7

 
(43.9
)
 
510.8

 
161.5

 
(25.8
)
 
135.7

Other
24.7

 
(3.0
)
 
21.7

 
4.7

 
(0.3
)
 
4.4

 
2,323.1

 
(137.8
)
 
2,185.3

 
424.8

 
(67.1
)
 
357.7

Not subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Trademarks/brands
457.7

 
—

 
457.7

 
540.7

 
—

 
540.7

 
$
2,780.8

 
$
(137.8
)
 
$
2,643.0

 
$
965.5

 
$
(67.1
)
 
$
898.4

Recoverability of Assets — The Company continually evaluates whether events or circumstances have occurred which might impair the recoverability of the carrying value of its assets, including property, identifiable intangibles and goodwill. Trademarks with indefinite lives are reviewed for impairment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate the trademark may be impaired. The trademark impairment tests require us to estimate the fair value of the trademark and compare it to its carrying value. The estimated fair value is determined using an income-based approach (the relief-from-royalty method), which requires significant assumptions for each brand, including estimates regarding future revenue growth, discount rates, and appropriate royalty rates. Assumptions are determined after consideration of several factors for each brand, including profit levels, research of external royalty rates by third party experts and the relative importance of each brand to the Company. Revenue growth assumptions are based on historical trends and management’s expectations for future growth by brand. The discount rate is based on a weighted average cost of capital utilizing industry market data of similar companies.
In addition, definite-lived assets and indefinite-lived intangible assets are reassessed as needed when information becomes available that is believed to negatively impact the fair market value of an asset. In general, an asset is deemed impaired and written down to its fair value if estimated related future cash flows are less than its carrying amount.
At September 30, 2014, Post recorded impairment losses of $34.4 for the Post brand, $23.0 for the Honey Bunches of Oats brand, $17.2 for the Post Shredded Wheat brand and $8.4 for the Grape-Nuts brand to record these trademarks at their estimated current fair values of $144.0 , $243.9 , $8.2 and $14.9 , respectively. Due to repeated past impairments, continued weakness in the brand forecasts and a lack of sales growth from recent brand support efforts, as of October, 1 2014, the Post Shredded Wheat brand will be converted to a finite-lived asset and assigned a 20 year useful life. At September 30, 2013, we recorded impairment losses of $0.2 for our Post Shredded Wheat brand and $2.7 for our Post brand to record these trademarks at their estimated current fair values of $25.4 and $178.4 , respectively. At September 30, 2012, we concluded there was no impairment of trademarks with indefinite lives.
These fair value measurements fell within Level 3 of the fair value hierarchy as described in Note 13. The trademark and goodwill impairment losses are reported in “Impairment of goodwill and other intangible assets” on the Consolidated Statement of Operations. See Note 6 for information about goodwill impairments.
Investments — The Company funds a portion of its deferred compensation liability by investing in certain mutual funds in the same amounts as selected by the participating employees. Because management’s intent is to invest in a manner that matches the deferral options chosen by the participants and those participants can elect to transfer amounts in or out of each of the designated deferral options at any time, these investments have been classified as trading assets and are stated at fair value in “Other Assets” (see Note 13). Both realized and unrealized gains and losses on these assets are included in “Selling, general and administrative expenses” and offset the related change in the deferred compensation liability.
Stockholders’ Equity  — Stockholders’ Equity represents the initial investment contribution from Ralcorp, the par value of our common and preferred stock net of treasury stock at cost, accumulated other comprehensive loss and retained earnings. See Note 1 for additional information. Accumulated other comprehensive loss included foreign currency translation adjustments of $(6.2) , $(2.1) and $0.8 as of September 30, 2014 , 2013 and 2012 , respectively, as well as amounts related to postretirement benefit plans as presented in Note 16. In the first quarter of fiscal 2014, Post adopted ASU 2013-02, “Reporting Amounts Reclassified out of Accumulated Other Comprehensive Income.” The only reclassification out of accumulated other comprehensive income for the reported periods is amortization of actuarial (benefit) loss and prior service cost for pension and postretirement benefits totaling $(1.0) , $2.0 and $0.4 for the years ended September 30, 2014, 2013 and 2012, respectively. Amounts are primarily classified as “Cost of goods sold” on the consolidated statements of operations.
Revenue — Revenue is recognized when title of goods is transferred to the customer, as specified by the shipping terms. Net sales reflect gross sales, including amounts billed to customers for shipping and handling, less sales discounts and trade allowances (including promotional price buy downs and new item promotional funding). Customer trade allowances are generally computed


49

as a percentage of gross sales. Products are generally sold with no right of return except in the case of goods which do not meet product specifications or are damaged, and related reserves are maintained based on return history. If additional rights of return are granted, revenue recognition is deferred. Estimated reductions to revenue for customer incentive offerings are based upon customer redemption history.
Cost of Products Sold — Cost of products sold includes, among other things, inbound and outbound freight costs and depreciation expense related to assets used in production, while storage and other warehousing costs are included in “Selling, general and administrative expenses.” Storage and other warehousing costs totaled $ 65.4 , $ 41.5 and $ 40.6 in fiscal 2014 , 2013 and 2012 , respectively.
Advertising — Advertising costs are expensed as incurred except for costs of producing media advertising such as television commercials or magazine advertisements, which are deferred until the first time the advertising takes place. The amount reported as assets on the balance sheet was insignificant as of September 30, 2014 and 2013 .
Stock-based Compensation — The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards and the fair market value at each quarterly reporting date for liability awards. That cost is recognized over the period during which an employee is required to provide service in exchange for the award — the requisite service period (usually the vesting period). See Note 17 for disclosures related to stock-based compensation.
Income Tax (Benefit) Provision — Income tax (benefit) provision is estimated based on income taxes in each jurisdiction and includes the effects of both current tax exposures and the temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities. A valuation allowance is established against the related deferred tax assets to the extent that it is not more likely than not that the future benefits will be realized. Reserves are recorded for estimated exposures associated with the Company’s tax filing positions, which are subject to periodic audits by governmental taxing authorities. Interest due to an underpayment of income taxes is classified as income taxes. The Company considers the undistributed earnings of its foreign subsidiaries to be permanently invested. Since its formation in connection with the Spin-Off, the Company's foreign subsidiaries have not generated cumulative undistributed earnings. No U.S. taxes have been provided in relation to the Company's investment in its foreign subsidiaries. See Note 7 for disclosures related to income taxes.
NOTE 3 — RECENTLY ISSUED ACCOUNTING STANDARDS
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 provides a narrower definition of discontinued operations than under existing GAAP. The standard update requires that only disposals of components of an entity (or groups of components) that represent a strategic shift that has or will have a major effect on the reporting entity’s operations are reported in the financial statements as discontinued operations. The standard also provides guidance on the financial statement presentations and disclosures of discontinued operations. The ASU is effective prospectively for disposals (or classifications of businesses as held-for-sale) of components of an entity that occur in annual or interim periods beginning after December 15, 2014.
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is the new comprehensive revenue recognition standard that will supersede all existing revenue recognition guidance under GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for annual and interim periods beginning on or after December 15, 2016 (i.e. Post’s financial statements for the year ending September 30, 2018), and early adoption is not permitted. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in the ASU. The Company is currently in the process of determining the method of adoption and evaluating the impact of adopting this guidance.
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements - Going Concern". This ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity's ability to continue as a going concern and to provide disclosures in certain circumstances. The ASU is effective for annual and interim periods beginning after December 15, 2016. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
NOTE 4 — RESTRUCTURING
In April 2013, the Company announced management’s decision to close its plant located in Modesto, California as part of a cost savings and capacity rationalization effort. The transfer of production capabilities and closure of the plant was completed during September 2014.


50

Amounts related to the plant closure are shown in the following table. Costs are recognized in “Restructuring expenses” in the consolidated statements of operations with the exception of accelerated depreciation expense which is included in “Cost of goods sold.” These expenses are not included in the measure of segment performance for any segment (see Note 21).
 
Year Ended September 30, 2014
 
Year Ended September 30, 2013
 
Cumulative Incurred to Date
 
Remaining Expense Expected to be Incurred
Employee severance
$
1.1

 
$
2.1

 
$
3.2

 
$
—

Pension curtailment
—

 
1.7

 
1.7

 
—

Accelerated depreciation
8.0

 
9.6

 
17.6

 
—

 
$
9.1

 
$
13.4

 
$
22.5

 
$
—

Liabilities recorded related to restructuring activities and changes therein are as follows:
 
September 30, 2013
 
Costs Incurred and Charged to Expense
 
Cash Paid
 
September 30, 2014
Employee severance
$
2.1

 
$
1.1

 
$
(2.5
)
 
$
0.7

NOTE 5 — BUSINESS COMBINATIONS
Fiscal 2014
On January 1, 2014, Post completed its acquisition of all the stock of Agricore United Holdings Inc. (“Agricore”) from Viterra Inc. Agricore is the parent company of Dakota Growers, a manufacturer of dry pasta for the private label, foodservice and ingredient markets. The purchase price for the transaction was $370.0 in cash, subject to a working capital adjustment, which resulted in a payment at closing of $366.2 . In May 2014, a final settlement of net working capital and other adjustments was reached, resulting in a payment to the Company of $6.5 . Dakota Growers is reported in Post’s Private Brands segment (see Note 21). Based upon the preliminary purchase price allocation, the Company has recorded $127.2 of customer relationships to be amortized over a weighted-average period of 12.5 years and $22.8 to trademarks/brands to be amortized over a weighted-average period of 18.9 years. Net sales and operating profit included in the consolidated statements of operations related to this acquisition were $190.7 and $4.4 , respectively, for the year ended September 30, 2014.
On February 1, 2014, Post completed its acquisition of Dymatize, a manufacturer and marketer of premium protein powders, bars and nutritional supplements. The purchase price for the transaction was  $380.0 in cash, subject to a working capital adjustment, which resulted in a payment at closing of  $392.5 . The parties have not yet agreed on a final net working capital adjustment. The Company currently estimates the final net working capital adjustment will result in an amount due back to the Company of approximately $6.0 . In accordance with the terms of the purchase agreement, the sellers are eligible for an earn-out payment of up to $17.5 based on Dymatize’s level of performance against certain financial performance targets, as defined in the purchase agreement, during calendar year 2014. Using an option pricing model, the Company estimated the acquisition date fair value of the earn-out to be approximately $5.4 . As of September 30, 2014, the Company updated its estimate of the fair value of the earn-out and concluded the fair value was approximately $0.7 , resulting in a gain of approximately $4.7 recognized during fiscal 2014 which was recorded as a component of selling, general and administrative expenses in the consolidated statement of operations. Dymatize is reported in Post’s Active Nutrition segment (see Note 21). Based upon the preliminary purchase price allocation, the Company has recorded $136.8 of customer relationships to be amortized over a weighted-average period of 18 years and $121.1 to trademarks/brands to be amortized over a weighted-average period of 20 years. Net sales and operating loss included in the consolidated statements of operations related to this acquisition were $124.1 and $(13.7) , respectively, for the year ended September 30, 2014.
On February 1, 2014, Post completed its acquisition of Golden Boy, a manufacturer of private label peanut and other nut butters, as well as dried fruits and baking and snacking nuts. The purchase price for the transaction was CAD $320.0  in cash, subject to a working capital adjustment, which resulted in a payment at closing of approximately CAD $321.1 . In May 2014, a final settlement of net working capital and other adjustments was reached, resulting in an amount paid to the sellers of CAD $2.1 . Golden Boy is reported in Post’s Private Brands segment (see Note 21). Based upon the preliminary purchase price allocation, the Company has recorded $82.6 of customer relationships to be amortized over a weighted-average period of 11 years, $28.9 to trademarks/brands to be amortized over a weighted-average period of 20 years, and $20.0 to other intangible assets to be amortized over a weighted-average period of 11 years. Net sales and operating profit included in the consolidated statements of operations related to this acquisition were $186.7 and $10.4 , respectively, for the year ended September 30, 2014.


51

On June 2, 2014, the Company completed its acquisition of Michael Foods from affiliates of GS Capital Partners, affiliates of Thomas H. Lee Partners and other owners, which is reported as Post’s Michael Foods segment. Michael Foods manufactures and distributes egg products and refrigerated potato products and also distributes cheese and other dairy case products to the retail, foodservice and food ingredient channels. The purchase price the Company paid for the transaction was approximately $2,450.0 , subject to working capital and other adjustments which resulted in a cash payment at closing of approximately $2,539.1 . In August 2014, a final settlement of net working capital and other adjustments was reached, resulting in an amount paid to Post of $10.0 . In addition to the purchase price paid at closing, the Company will make a payment of $50.0 to the stockholders of Michael Foods on June 2, 2015. Based upon the preliminary purchase price allocation, the Company has recorded $1,126.6 of customer relationships to be amortized over a weighted-average period of 20 years and $217.7 to trademarks/brands to be amortized over a weighted-average period of 19.3 years.
On August 1, 2014, Post Foods, LLC, a subsidiary of the Company, acquired a cereal brand and related inventory for $20.4 . The brand is reported as part of the Post Foods segment. Based upon the preliminary purchase price allocation, the Company has recorded $11.8 of customer relationships to be amortized over a weighted-average period of 20 years and $2.6 to trademarks/brands to be amortized over a weighted-average period of 10 years. In addition to the intangibles acquired, we purchased $0.4 of inventory and recorded $5.6 of goodwill.
Each of the acquisitions was accounted for using the acquisition method of accounting, whereby the results of operations of each are included in the financial statements from the date of acquisition. The respective purchase prices were allocated to acquired assets and liabilities based on their estimated fair values at the date of acquisition, and any excess was allocated to goodwill, as shown in the following table and discussed above. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies and the expansion of the business into new growing segments of the industry. The Company does not expect the final fair value of goodwill related to the current year acquisitions of Dakota Growers, Golden Boy and Michael Foods to be deductible for U.S. income tax purposes. The Company estimates approximately $106.4 of tax deductible goodwill will result from the Dymatize acquisition pending final resolution of net working capital amounts and the earn-out. The Company expects the fair value of goodwill generated by the cereal brand acquisition to be fully tax deductible.
Certain estimated values, including goodwill, intangible assets and deferred taxes, are not yet finalized pending the final settlement of the purchase price and purchase price allocations and are subject to change once additional information is obtained.
 
Dakota Growers
 
Dymatize
 
Golden Boy
 
Michael Foods
Cash and cash equivalents
$
2.9

 
$
1.8

 
$
—

 
$
69.1

Restricted cash
—

 
—

 
—

 
3.4

Receivables
25.3

 
22.7

 
16.4

 
155.2

Income tax receivable
—

 
—

 
—

 
62.5

Inventories
43.4

 
41.0

 
29.8

 
175.7

Deferred income taxes
0.3

 
3.0

 
—

 
2.1

Prepaid expenses and other current assets
0.4

 
0.7

 
0.7

 
7.5

Property
86.0

 
15.7

 
10.5

 
328.3

Goodwill
160.5

 
104.1

 
154.1

 
1,186.7

Other intangible assets
150.0

 
257.9

 
131.5

 
1,344.3

Other assets
1.0

 
0.1

 
—

 
8.0

Current portion of long-term debt
—

 
—

 
—

 
(3.7
)
Accounts payable
(5.6
)
 
(17.7
)
 
(10.3
)
 
(109.0
)
Other current liabilities
(25.7
)
 
(7.9
)
 
(8.4
)
 
(79.5
)
Long-term debt
—

 
—

 
—

 
(8.4
)
Deferred income taxes
(78.4
)
 
(29.5
)
 
(33.8
)
 
(555.4
)
Other liabilities
(0.2
)
 
—

 
(2.1
)
 
(9.5
)
Total acquisition cost
$
359.9

 
$
391.9

 
$
288.4

 
$
2,577.3

Fiscal 2013
On December 31, 2012, the Company purchased substantially all of the assets of Attune Foods, Inc. for approximately $9.2 of cash.


52

On May 28, 2013, the Company completed its acquisition of certain assets of the branded and private label cereal, granola and snacks business of Hearthside Food Solutions (“Hearthside”) for approximately $159.9 of cash. The Company combined this business with the Attune business to form the Attune Foods reporting segment (see Note 21).
On September 1, 2013, the Company completed its acquisition of PNC for approximately $186.0 of cash. PNC is reported in Post’s Active Nutrition segment (see Note 21). Net sales and operating profit included in the consolidated statement of operations related to this acquisition were $169.2 and $11.9 , respectively, for the year ended September 30, 2014. During the first quarter of fiscal 2014, a final settlement of net working capital was reached, resulting in an increase in total consideration of approximately $0.1 and a corresponding increase in goodwill. In addition, during the second quarter of fiscal 2014, $1.2 of pre-acquisition net operating losses (“NOLs”) were identified and a deferred tax asset was recorded as well as a corresponding decrease to goodwill. As these adjustments did not have a significant impact on the consolidated statements of operations, balance sheets or cash flows, the financial statements have not been retrospectively adjusted.
Each of the acquisitions was accounted for using the acquisition method of accounting, whereby the results of operations of each are included in the financial statements from the date of acquisition. The respective purchase prices were allocated to acquired assets and liabilities based on their estimated fair values at the date of acquisition, and any excess was allocated to goodwill, as shown in the following table. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies and the expansion of the business into new growing segments of the industry. The Company expects that the final fair value of goodwill will be fully deductible for U.S. income tax purposes for the Attune and Hearthside acquisitions. The goodwill generated by Post’s acquisition of PNC will not be tax deductible for U.S. income tax purposes, however, certain goodwill generated by PNC business combinations in periods prior to Post’s acquisition transferred to Post and is expected to be tax deductible.  
 
Attune
 
Hearthside
 
PNC
Cash and cash equivalents
$
—

 
$
—

 
$
2.1

Receivables
0.5

 
5.5

 
11.3

Inventories
2.6

 
6.3

 
23.9

Deferred income taxes
—

 
—

 
6.9

Prepaid expenses and other current assets
0.1

 
0.2

 
2.8

Property
0.1

 
15.6

 
0.7

Goodwill
3.6

 
71.5

 
47.2

Other intangible assets
3.8

 
63.5

 
112.6

Accounts payable
(1.3
)
 
(2.1
)
 
(15.6
)
Other current liabilities
(0.2
)
 
(0.3
)
 
(2.4
)
Deferred income taxes
—

 
(0.3
)
 
(2.8
)
Other liabilities
—

 
—

 
(0.7
)
Total acquisition cost
$
9.2

 
$
159.9

 
$
186.0

The following unaudited pro forma information presents a summary of the combined results of operations of the Company and the aggregate results of all business acquired in fiscal years 2014 and 2013 for the periods presented as if the fiscal 2014 acquisitions had occurred on October 1, 2012 and the fiscal 2013 acquisitions had occurred on October 1, 2011, along with certain pro forma adjustments. These pro forma adjustments give effect to the amortization of certain definite-lived intangible assets, adjusted depreciation based upon fair value of assets acquired, interest expense related to the financing of the business combinations, and related income taxes. The following unaudited pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results. 
 
2014
 
2013
 
2012
Pro forma net sales
$
3,965.2

 
$
3,874.7

 
$
1,143.6

Pro forma net (loss) earnings available to common stockholders
$
(329.9
)
 
$
11.0

 
$
42.3

Pro forma basic (loss) earnings per share
$
(8.31
)
 
$
0.34

 
$
1.23

Pro forma diluted (loss) earnings per share
$
(8.31
)
 
$
0.33

 
$
1.23

NOTE 6 — GOODWILL
The changes in the carrying amount of goodwill by segment are noted in the following table.


53

 
Post Foods
 
Michael Foods
 
Active Nutrition
 
Private Brands
 
Attune Foods
 
Total
Balance, September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Goodwill (gross)
$
1,794.4

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,794.4

Accumulated impairment losses
(427.8
)
 
—

 
—

 
—

 
—

 
(427.8
)
Goodwill (net)
$
1,366.6

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,366.6

Goodwill acquired
—

 
—

 
48.3

 
—

 
75.1

 
123.4

Currency translation adjustment
(0.3
)
 
—

 
—

 
—

 
—

 
(0.3
)
Balance, September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Goodwill (gross)
$
1,794.1

 
$
—

 
$
48.3

 
$
—

 
$
75.1

 
$
1,917.5

Accumulated impairment losses
(427.8
)
 
—

 
—

 
—

 
—

 
(427.8
)
Goodwill (net)
$
1,366.3

 
$
—

 
$
48.3

 
$
—

 
$
75.1

 
$
1,489.7

Goodwill acquired
5.6

 
1,186.7

 
104.1

 
314.6

 
—

 
1,611.0

Impairment loss
(181.3
)
 
—

 
(31.3
)
 
—

 
—

 
(212.6
)
Purchase price true-up adjustment
—

 
—

 
(1.1
)
 
—

 
—

 
(1.1
)
Currency translation adjustment
(0.4
)
 
—

 
—

 
0.1

 
—

 
(0.3
)
Balance, September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Goodwill (gross)
$
1,799.3

 
$
1,186.7

 
$
151.3

 
$
314.7

 
$
75.1

 
$
3,527.1

Accumulated impairment losses
(609.1
)
 
—

 
(31.3
)
 
—

 
—

 
(640.4
)
Goodwill (net)
$
1,190.2

 
$
1,186.7

 
$
120.0

 
$
314.7

 
$
75.1

 
$
2,886.7

Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. The Company conducts a goodwill impairment qualitative assessment during the fourth quarter of each fiscal year following the annual forecasting process, or more frequently if facts and circumstances indicate that goodwill may be impaired. The goodwill impairment qualitative assessment requires an assessment to determine if it is more likely than not that the fair value of the business is less than its carrying amount. If adverse qualitative trends are identified that could negatively impact the fair value of the business, a qualitative goodwill impairment test is performed. In fiscal years 2014 and 2013, the Company elected not to perform a qualitative assessment and instead performed a quantitative impairment test for all reporting units.
The estimated fair value is determined using a combined income and market approach with a greater weighting on the income approach ( 75% of the calculation for all reporting units, excluding Dymatize which is 100% ). The income approach is based on discounted future cash flows and requires significant assumptions, including estimates regarding future revenue, profitability, and capital requirements. The market approach ( 25% of the calculation or all reporting units, excluding Dymatize which is 0% ) is based on a market multiple (revenue and EBITDA which stands for earnings before interest, income taxes, depreciation, and amortization) and requires an estimate of appropriate multiples based on market data.
As of September 30, 2014, the Company recorded a total charge of $212.6 for the impairment of goodwill. The impairment charge includes $181.3 related to Post Foods primarily resulting from the acceleration of declines within the branded ready-to-eat cereal category. Additionally, the expectation is that revenue and profit growth for Post Foods will be challenged in the medium to long-term. The Active Nutrition segment recognized charges of $31.3 resulting from reduced near-term profitability related to supply chain disruptions at Dymatize, which were identified subsequent to the initial valuation at the acquisition date of February 1, 2014, and incremental remediation expenses.
These fair value measurements fell within Level 3 of the fair value hierarchy as described in Note 13. The goodwill impairment losses are aggregated with trademark impairment losses in “Impairment of goodwill and other intangible assets” in the Consolidated Statement of Operations.
NOTE 7 — INCOME TAXES
The (benefit) provision for income taxes consisted of the following:


54

 
Year Ended September 30,
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal
$
0.9

 
$
33.0

 
$
30.8

State
—

 
3.2

 
2.3

Foreign
2.9

 
—

 
—

 
3.8

 
36.2

 
33.1

Deferred:
 
 
 
 
 
Federal
(80.1
)
 
(26.8
)
 
(3.2
)
State
(7.3
)
 
(1.8
)
 
(0.5
)
Foreign
(0.1
)
 
(0.5
)
 
1.1

 
(87.5
)
 
(29.1
)
 
(2.6
)
Income tax (benefit) provision
$
(83.7
)
 
$
7.1

 
$
30.5

A reconciliation of income tax (benefit) provision with amounts computed at the statutory federal rate follows:
 
Year Ended September 30,
 
2014
 
2013
 
2012
Computed tax at federal statutory rate (35%)
$
(149.4
)
 
$
7.8

 
$
28.1

Non-deductible goodwill impairment loss
70.9

 
—

 
—

Non-deductible compensation
0.8

 
0.7

 
—

Non-deductible transaction costs
2.8

 
0.2

 
1.8

Domestic production activities deduction
—

 
(2.9
)
 
(0.9
)
State income taxes, net of effect on federal tax
(6.6
)
 
1.0

 
2.0

Non-taxable interest income
(2.9
)
 
—

 
—

Valuation allowance
2.3

 
—

 
—

Other, net (none in excess of 5% of computed tax)
(1.6
)
 
0.3

 
(0.5
)
Income tax (benefit) provision
$
(83.7
)
 
$
7.1

 
$
30.5

The effective tax rate for fiscal 2014 was 19.6% compared to 31.8% for fiscal 2013 and 37.9% for fiscal 2012 .
The effective tax rate for fiscal 2014 was affected by approximately $70.9 of incremental tax expense related to the non-deductible goodwill impairment loss, by approximately $0.8 of incremental tax expense resulting from non-deductible compensation in accordance with the provisions of Internal Revenue Code (“IRC”) section 162(m), by approximately $2.8 of incremental tax expense resulting from non-deductible outside service expenses incurred in relation to merger and acquisition transactions, by approximately $2.3 of incremental tax expense resulting from recording a valuation allowance against the net deferred tax assets of a Canadian subsidiary, and by approximately $(2.9) of incremental tax benefit resulting from the receipt of non-taxable interest income.
The effective tax rate for fiscal 2013 was affected by approximately $0.7 of incremental tax expense resulting from non-deductible compensation in accordance with the provisions of IRC section 162(m), and by approximately $0.2 of incremental tax expense resulting from non-deductible outside service expenses incurred in relation to merger and acquisition transactions.
The effective tax rate for fiscal 2012 was affected by approximately $1.8 of incremental tax expense resulting from non-deductible outside service expenses, which were incurred prior to February 3, 2012, to effect the Spin-Off. In addition, Post recorded approximately $2.7 of additional tax expense related to an uncertain tax position taken on our 2012 short-period tax return.
For fiscal 2012 and 2013, the effective tax rate was reduced by the effects of the Domestic Production Activities Deduction (DPAD), and for all three fiscal years the effective tax rate was also impacted by minor effects of shifts between the relative amounts of domestic and foreign income and state tax apportionment.


55

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets (liabilities) were as follows:
 
September 30, 2014
 
September 30, 2013
 
Assets
 
Liabilities
 
Net
 
Assets
 
Liabilities
 
Net
Current:
 
 
 
 
 
 
 
 
 
 
 
Accrued vacation, incentive and severance
$
6.5

 
$
—

 
$
6.5

 
$
5.2

 
$
—

 
$
5.2

Net operating loss carryforwards, credits
7.3

 
—

 
7.3

 
—

 
—

 
—

Stock-based and deferred compensation
2.7

 
—

 
2.7

 
—

 
—

 
—

Other accrued liabilities
7.1

 
—

 
7.1

 
1.6

 
—

 
1.6

Other items
7.0

 
(3.3
)
 
3.7

 
5.4

 
(0.3
)
 
5.1

Total gross deferred income taxes, current
30.6

 
(3.3
)
 
27.3

 
12.2

 
(0.3
)
 
11.9

Valuation allowance
(0.3
)
 
—

 
(0.3
)
 
—

 
—

 
—

Total current deferred income taxes
30.3

 
(3.3
)
 
27.0

 
12.2

 
(0.3
)
 
11.9

 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent:
 
 
 
 
 
 
 
 
 
 
 
Property
—

 
(142.5
)
 
(142.5
)
 
—

 
(74.0
)
 
(74.0
)
Intangible assets
—

 
(863.1
)
 
(863.1
)
 
—

 
(297.7
)
 
(297.7
)
Pension and other postretirement benefits
42.9

 
—

 
42.9

 
37.0

 
—

 
37.0

Stock-based and deferred compensation
14.7

 
—

 
14.7

 
10.3

 
—

 
10.3

Derivative mark-to-market adjustments
15.4

 
—

 
15.4

 
—

 
—

 
—

Net operating loss carryforwards
23.4

 
—

 
23.4

 
21.6

 
—

 
21.6

Other items
1.5

 
—

 
1.5

 
0.9

 
—

 
0.9

Total gross deferred income taxes, noncurrent
97.9

 
(1,005.6
)
 
(907.7
)
 
69.8

 
(371.7
)
 
(301.9
)
Valuation allowance
(7.4
)
 
—

 
(7.4
)
 
—

 
—

 
—

Total non-current deferred income taxes
90.5

 
(1,005.6
)
 
(915.1
)
 
69.8

 
(371.7
)
 
(301.9
)
Total deferred taxes
$
120.8

 
$
(1,008.9
)
 
$
(888.1
)
 
$
82.0

 
$
(372.0
)
 
$
(290.0
)
As of September 30, 2014, Post had federal net operating loss (“NOL”) carryforwards totaling approximately $100.9 which have expiration dates beginning in fiscal 2021 and extending through fiscal 2034 . As of September 30, 2014, Post had a carryforward of approximately $3.1 related to interest expense for which the deduction was disallowed in a prior period under section 163(j) of the IRC, and this carryforward does not expire. As of September 30, 2014, Post had state NOL carryforwards totaling approximately $114.6 which have expiration dates beginning in fiscal 2015 and extending through fiscal 2034 . As of September 30, 2014, Post had NOL carryforwards in foreign jurisdictions of approximately $16.2 which have expiration dates beginning in fiscal 2026 and extending through fiscal 2034 .
All of these NOLs and carryforwards were acquired through acquisitions made during fiscal 2013 and 2014. As a result of these ownership changes, the deductibility of the NOLs is subject to limitation under section 382 of the IRC and similar limitations under state tax law. Giving consideration to the section 382 and state limitations, the Company believes it will generate sufficient taxable income to fully utilize the federal and state NOLs before they expire.
The tax benefit of NOLs in foreign jurisdictions has been offset by a valuation allowance based on management’s judgment that it is more likely than not that the benefits of those deferred tax assets will not be realized in the future.
No provision has been made for income taxes on undistributed earnings of consolidated non-U.S. subsidiaries of $1.0 at September 30, 2014 since it is our intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings.
For fiscal 2014 , 2013 and 2012 , foreign income (loss) before income taxes was $0.6 , $(2.0) and $4.5 , respectively.
Unrecognized Tax Benefits
The Company recognizes the tax benefit from uncertain tax positions only if it is “more likely than not” the tax position will be sustained on examination by the taxing authorities. The tax benefits recognized from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. To the extent the Company’s assessment of such tax positions changes, the change in estimate will be recorded in the period in which the determination is made.


56

Unrecognized tax benefits activity for the years ended September 30, 2014 and 2013 is presented in the following table:
Unrecognized tax benefits, September 30, 2012
 
$
2.7

Additions based on current tax positions
 
0.9

Reductions for prior year tax positions
 
—

Settlements with tax authorities/statute expirations
 
—

Unrecognized tax benefits, September 30, 2013
 
$
3.6

Additions based on current tax positions and acquisitions
 
4.3

Reductions for prior year tax positions
 
—

Settlements with tax authorities/statue expirations
 
(0.5
)
Unrecognized tax benefits, September 30, 2014
 
$
7.4

The amount of the net unrecognized tax benefits that, if recognized, would directly affect the effective tax rate is $6.9 at September 30, 2014. During fiscal year 2014, the Company recorded a benefit of approximately $0.5 reflecting the effect of the closing of statutes of limitations and settlements with taxing authorities. The Company expects approximately $0.5 of the unrecognized tax benefits to decrease within twelve months of the reporting date. The Company had no unrecognized tax benefits for any periods prior to fiscal 2012.
The Company classifies tax-related interest and penalties as components of income tax expense. The accrued interest and penalties are not included in the table above. The Company accrued approximately $0.9 and $0.1 of interest and penalties at September 30, 2014 and September 30, 2013, respectively. Interest was computed on the difference between the tax position recognized for financial reporting purposes and the amount previously taken on the Company’s tax returns.
Based on the provisions of the Tax Allocation Agreement between Post and Ralcorp, Ralcorp retained responsibility for income tax liabilities and income tax returns related to all periods prior to the Spin-Off date of February 3, 2012. There are no open income tax audits in any of Post’s filing jurisdictions for periods subsequent to the Spin-Off date. U.S. federal, U.S. state and Canada income tax returns for the tax years ended September 30, 2013 and September 30, 2012 are subject to examination by the tax authorities in each respective jurisdiction.
For the acquisitions made in 2013 and 2014, the seller generally retained responsibility for all income tax liabilities through the date of acquisition. With respect to the Michael Foods acquisition, Post assumed all income tax liabilities for those jurisdictions which remain subject to examination for tax years 2008 through 2013.
NOTE 8 — EARNINGS PER SHARE
Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, stock appreciation rights and restricted stock equivalents using the “treasury stock” method. The impact of potentially dilutive convertible preferred stock is calculated using the “if-converted” method. The Company’s tangible equity units (“TEUs”) (see Note 18) are assumed to be settled at the minimum settlement amount for weighted-average shares for basic earnings per share. For diluted earnings per share, the shares, to the extent dilutive, are assumed to be settled as described in Note 18.
In connection with the Spin-Off, Ralcorp stock settled stock appreciation right awards were converted to 0.3 million Post awards for certain employees and 0.1 million Post restricted shares were issued to holders of Ralcorp restricted shares. See Note 1 for further discussion of the Spin-Off.


57

 
Year Ended September 30,
 
2014
 
2013
 
2012
Net (loss) earnings
$
(343.2
)
 
$
15.2

 
$
49.9

Preferred stock dividends
(15.4
)
 
(5.4
)
 
—

Net (Loss) Earnings Available to Common Stockholders
$
(358.6
)
 
$
9.8

 
$
49.9

 
 
 
 
 
 
Weighted-average shares for basic earnings per share
39.7

 
32.7

 
34.3

Effect of dilutive securities:
 
 
 
 
 
Stock options
—

 
0.1

 
—

Stock appreciation rights
—

 
0.1

 
0.1

Restricted stock awards
—

 
0.1

 
0.1

Total dilutive securities
—

 
0.3

 
0.2

Weighted-average shares for diluted earnings per share
39.7

 
33.0

 
34.5

 
 
 
 
 
 
Basic (loss) earnings per share
$
(9.03
)
 
$
0.30

 
$
1.45

Diluted (loss) earnings per share
$
(9.03
)
 
$
0.30

 
$
1.45

For the years ended September 30, 2014, 2013 and 2012, weighted-average shares for diluted (loss) earnings per common share excludes 3.7 million , 0.3 million and 2.3 million equity awards, respectively, and for the years ended September 30, 2014 and 2013, excludes 11.0 million and 5.1 million shares, respectively related to the potential conversion of the Company’s convertible preferred stock (See Note 19) as they were anti-dilutive. For the year ended September 30, 2014 there were 1.1 million TEUs excluded from diluted earnings per share as they were anti-dilutive.
NOTE 9 — SUPPLEMENTAL OPERATIONS STATEMENT AND CASH FLOW INFORMATION
 
Year Ended September 30,
 
2014
 
2013
 
2012
Advertising and promotion expenses
$
121.8

 
$
118.4

 
$
126.4

Repair and maintenance expenses
58.6

 
41.6

 
38.6

Research and development expenses
10.2

 
8.6

 
7.9

Rent expense
11.3

 
4.8

 
4.1

Interest paid
143.3

 
76.3

 
33.7

Income taxes paid
11.9

 
25.5

 
35.8

Intercompany interest paid
—

 
—

 
17.7



58

NOTE 10 — SUPPLEMENTAL BALANCE SHEET INFORMATION
 
September 30,
 
2014
 
2013
Receivables, net
 
 
 
Trade
$
332.2

 
$
83.4

Income tax receivable
67.1

 
—

Other
15.8

 
0.1

 
415.1

 
83.5

Allowance for doubtful accounts
(1.4
)
 
(0.3
)
 
$
413.7

 
$
83.2

Inventories
 
 
 
Raw materials and supplies
$
99.2

 
$
29.2

Work in process
16.3

 
1.1

Finished products
235.8

 
91.6

Flocks
29.4

 
—

 
$
380.7

 
$
121.9

Accounts Payable
 
 
 
Trade
$
194.3

 
$
57.1

Book cash overdrafts
12.1

 
7.0

Other items
18.6

 
13.0

 
$
225.0

 
$
77.1

Other Current Liabilities
 
 
 
Advertising and promotion
$
60.9

 
$
12.6

Accrued interest
47.8

 
13.0

Compensation
32.4

 
18.9

Due to Michael Foods former owner
48.9

 
—

Miscellaneous accrued taxes
5.8

 
4.0

Deferred revenue
8.2

 
8.3

Other
65.3

 
12.1

 
$
269.3

 
$
68.9

Other Liabilities
 
 
 
Pension and other postretirement benefit obligations
$
114.1

 
$
97.8

Deferred compensation
12.3

 
13.4

Interest rate swaps
40.4

 
—

Other
15.6

 
5.1

 
$
182.4

 
$
116.3

NOTE 11 — ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
Year Ended September 30,
 
2014
 
2013
 
2012
Balance, beginning of year
$
0.3

 
$
0.3

 
$
—

Provision charged to expense
0.3

 
—

 
—

Write-offs, less recoveries
(0.2
)
 
—

 
—

Impact of acquisitions
1.0

 
—

 
—

Transfers from Ralcorp Receivables Corporation, net
—

 
—

 
0.3

Balance, end of year
$
1.4

 
$
0.3

 
$
0.3

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
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 relating to its foreign subsidiaries. The Company utilizes derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and 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.


59

Prior to the Spin-Off, Post participated in Ralcorp’s derivative instrument program which consisted of commodity contracts (options, futures and swaps) on raw material and fuel purchases. The effects of Post’s participation in Ralcorp’s derivative instrument program on the statements of operations for the year ended September 30, 2012 was a loss of $2.0 . There was no such earnings impact in 2013 or 2014. Derivative instrument gains and losses are included in “Cost of goods sold” for all periods presented. As of the Spin-Off date, Post no longer participated in the Ralcorp derivative instrument program.
The Company maintains options, futures contracts and interest rate swaps which have been designated as economic hedges of raw materials, fuel and energy purchases and variable rate debt.
As of September 30, 2014, the Company has interest rate swaps with a notional amount of $869.5 that have the effect of converting our variable interest rate term loan debt to fixed interest rates beginning in June 2016. In addition, as of September 30, 2014, the Company has interest rate swaps with a $700.0 notional amount that obligate Post to pay a weighted average fixed rate of approximately 4% and receive three-month LIBOR and will result in a net settlement in July 2018.  These swaps have the effect of locking in current low interest rates for anticipated future debt issuances to fund strategic investments, refinance existing debt or other strategic purposes. In connection with the acquisition of Michael Foods, the Company acquired additional interest rate swaps with a notional amount of $350.0 that were not settled at the closing of the acquisition and remain outstanding at September 30, 2014. The notional amounts of natural gas and heating oil futures and commodity contracts were $23.4 and $53.0 , respectively. These contracts relate to inputs that generally will be utilized within the next 12 months.
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. Commodity, natural gas and heating oil derivatives are valued using an income approach based on index prices less the contract rate multiplied by the notional amount.
The following tables present the balance sheet location and fair value of the Company’s derivative instruments on a gross and net basis as of September 30, 2014 and 2013.
 
 
 
 
Fair Value of Liabilities as of September 30, 2014
 
 
Balance Sheet Location
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
Commodity contracts
Other current liabilities
$
8.0

 
$
—

 
$
8.0

Natural gas and heating oil futures
Other current liabilities
 
0.9

 
—

 
0.9

Interest rate swaps
 
Other current liabilities
 
2.7

 
—

 
2.7

Interest rate swaps
 
Other liabilities
 
40.4

 
—

 
40.4

 
 
 
 
$
52.0

 
$
—

 
$
52.0

 
 
 
 
Fair Value of Liabilities as of September 30, 2013
 
 
Balance Sheet Location
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
Commodity contracts
Other current liabilities
 
$
0.1

 
$
—

 
$
0.1

Natural gas and heating oil futures
Other current liabilities
 
0.1

 
—

 
0.1

 
 
 
 
$
0.2

 
$
—

 
$
0.2

The following table presents the gain or loss from derivative instruments that were not designated as hedging instruments and were recorded on the Company’s Consolidated Statements of Operations for the years ended September 30, 2014 , 2013 and 2012 .


60

 
 
Location of Gain (Loss) Recognized in Earnings
 
Amount of Gain (Loss) Recognized in Earnings
 
 
2014
 
2013
 
2012
Participation in Ralcorp’s derivative program
 
Cost of goods sold
 
$
—

 
$
—

 
$
(2.0
)
Commodity contracts
 
Cost of goods sold
 
(12.4
)
 
(0.6
)
 
—

Natural gas futures
 
Cost of goods sold
 
(0.4
)
 
(0.3
)
 
0.3

Foreign exchange contracts
 
Selling, general and administrative expenses
 
(6.3
)
 
—

 
—

Interest rate swaps
 
Other expense, net
 
(35.5
)
 
—

 
—

NOTE 13 — FAIR VALUE MEASUREMENTS
The following table represents Post’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820:
 
September 30, 2014
 
September 30, 2013
 
Total
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
Assets
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation investment
$
10.2

 
$
10.2

 
$
—

 
$
8.5

 
$
8.5

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation liabilities
12.3

 
—

 
12.3

 
13.4

 
—

 
13.4

Derivative liabilities
52.0

 
—

 
52.0

 
0.2

 
—

 
0.2

 
$
64.3

 
$
—

 
$
64.3

 
$
13.6

 
$
—

 
$
13.6

The following table represents the fair value of Post’s long-term debt which is not recorded at fair value in the consolidated balance sheets, but is classified as Level 2 in the fair value hierarchy per ASC Topic 820:
 
September 30, 2014
 
September 30, 2013
Senior notes
$
2,768.2

 
$
1,450.6

Term loan
872.9

 
—

TEUs (debt component; see Note 18)
29.5

 
—

 
$
3,670.6

 
$
1,450.6

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of three levels: 
Level 1  — Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2  — Inputs are quoted prices of similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
  Level 3  — Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
The deferred compensation investment is invested primarily in mutual funds and its fair value is measured using the market approach. This investment is in the same funds and purchased in substantially the same amounts as the participants’ selected investment options (excluding Post common stock equivalents), which represent the underlying liabilities to participants in the Company’s deferred compensation plans. Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants’ selected investment options (excluding certain Post common stock equivalents to be distributed in shares) using the market approach. The Company utilizes the income approach to measure fair value for its derivative assets, which include commodity options and futures contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves and forward prices.


61

Refer to Note 12 for the classification of changes in fair value of derivative assets and liabilities measured at fair value on a recurring basis within the consolidated statements of operations.
The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, receivables and accounts payable approximate fair value because of the short maturities of these financial instruments.
NOTE 14 — LONG TERM DEBT
Long-term debt as of the dates indicated consists of the following:
 
September 30,
 
2014
 
2013
7.375% Senior Notes maturing February 2022
$
1,375.0

 
$
1,375.0

6.75% Senior Notes maturing December 2021
875.0

 
—

6.00% Senior Notes maturing December 2022
630.0

 
—

Term Loan
882.8

 
—

TEUs (see Note 18)
38.4

 
—

4.57% 2012 Series Bond maturing September 2017
4.8

 
—

Secured notes
1.1

 
—

Capital leases
3.8

 
—

 
3,810.9

 
1,375.0

Less: Current Portion
(25.6
)
 
—

Plus: Unamortized premium (discount), net
45.2

 
33.6

Total long-term debt
$
3,830.5

 
$
1,408.6

On February 3, 2012, the Company issued 7.375% senior notes in an aggregate principal amount of $775.0 to Ralcorp pursuant to a contribution agreement in connection with the internal reorganization. The 7.375% senior notes were issued pursuant to an indenture dated as of February 3, 2012 among the Company, Post Foods, LLC, as guarantor, and Wells Fargo Bank, National Association, as trustee.
On October 25, 2012, the Company issued additional 7.375% senior notes with an aggregate principal value of $250.0 at a price of 106% of par value. On July 18, 2013, the Company issued additional 7.375% senior notes with an aggregate principal value of $350.0 at a price of 105.75% of par value. The premiums related to these 7.375% senior notes are amortized as a reduction to interest expense over the term of the senior notes. Interest payments on the 7.375% senior notes are due semi-annually each February 15 and August 15. The maturity date of the 7.375% senior notes is February 15, 2022.
On November 18, 2013, the Company issued $525.0 principal value of 6.75% senior notes due in December 2021. The 6.75% senior notes were issued at par and the Company received $516.2 after paying investment banking and other fees of $8.8 , which will be deferred and amortized to interest expense over the term of the notes. On March 19, 2014, the Company issued an additional $350.0 principal value of 6.75% senior notes due in December 2021. The additional 6.75% senior notes were issued at 105.75% of par value and the Company received $364.0 after paying investment banking and other fees of $6.1 , which will be deferred and amortized to interest expense over the term of the notes. Interest payments on the 6.75% senior notes are due semi-annually each June 1 and December 1.
On June 2, 2014, the Company issued $630.0 principal value of 6.00% senior notes due in December 2022. The 6.00% senior notes were issued at par and the Company received $619.0 after paying investment banking and other fees of $11.0 , which will be deferred and amortized to interest expense over the term of the notes. Interest payments on the 6.00% senior notes are due semi-annually each June 15 and December 15.
The 7.375% senior notes, 6.75% senior notes and 6.00% senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing and future material domestic subsidiaries (other than immaterial subsidiaries or receivables finance subsidiaries). Our foreign subsidiaries do not guarantee the senior notes. These guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions). See Note 22 for additional information.
On January 29, 2014, the Company entered into a Credit Agreement as amended on May 1, 2014 (the “Credit Agreement”) among the Company, the institutions from time to time party thereto as Lenders (the “Lenders”), Barclays Bank PLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners, Barclays Bank PLC, as Syndication Agent, Credit Suisse AG, Cayman Islands Branch and Goldman Sachs Bank USA, as Documentation Agents, and Wells Fargo Bank, National Association, as Administrative Agent for the Lenders (in such capacity,


62

the “Agent”). The Credit Agreement, together with a Joinder Agreement No. 1, dated May 1, 2014, provided for a revolving credit facility in an aggregate principal amount of $400.0 (the “Revolving Credit Facility”) and potential incremental revolving and term facilities at the request of the Company and at the discretion of the Lenders, on terms to be determined and in a maximum aggregate amount not to exceed the greater of $600.0 and an amount such that the Company’s pro forma senior secured leverage ratio would not exceed 2.50 to 1.00. The outstanding amounts under the Revolving Credit Facility must be repaid on or before January 29, 2019. The Company incurred $3.6 of issuance costs in connection with the Credit Agreement. The revolving credit facility has outstanding letters of credit of $0.5 which reduces the available borrowing capacity to $399.5 at September 30, 2014.
Borrowings under the Revolving Credit Facility bear interest at the Eurodollar Rate or the Base Rate (as such terms are defined in the Credit Agreement) plus an applicable margin ranging from 2.00% to 2.50% for Eurodollar Rate-based loans and from 1.00% to 1.50% for Base Rate-based loans, depending upon the Company’s senior secured leverage ratio.
The Credit Agreement contains customary affirmative and negative covenants for agreements of this type, including delivery of financial and other information, compliance with laws, maintenance of property, existence, insurance and books and records, inspection rights, obligation to provide collateral and guarantees by new subsidiaries, preparation of environmental reports, participation in an annual meeting with the Agent and the Lenders, further assurances, satisfaction of post-closing obligations, limitations with respect to indebtedness, liens, fundamental changes, restrictive agreements, use of proceeds, amendments of organization documents, accounting changes, prepayments and amendments of indebtedness, dispositions of assets, acquisitions and other investments, sale leaseback transactions, conduct of business, transactions with affiliates, dividends and redemptions or repurchases of stock, capital expenditures, and granting liens on real property.
The Credit Agreement also contains customary financial covenants including (a) a quarterly maximum senior secured leverage ratio of 3.00 to 1.00, and (b) a quarterly minimum interest coverage ratio of 1.75 to 1.00. However, among other provisions, the Credit Agreement permits the Company to incur additional unsecured debt only if its consolidated leverage ratio, calculated as provided in the Credit Agreement, would be less than 5.75 to 1.00 after giving effect to such new debt. As of September 30, 2014, the Company’s consolidated leverage ratio exceeded this threshold. However, the Credit Agreement, after giving effect to the previously discussed amendment, permitted the Company to issue, in June 2014, the unsecured debt transactions described above in connection with the Company’s acquisition of Michael Foods.
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 $60.0 or attachments issued against a material part of the Company’s property, change in control, the invalidity of any loan document, the failure of the collateral documents to create a valid and perfected first priority lien, and certain ERISA events. Upon the occurrence of an event of default, the Agent will, at the request of, or may, with the consent of, lenders holding more than 50% in principal amount of lender commitments and outstanding loans under the Credit Agreement, cause the maturity of the loans to be accelerated and exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees for the Company’s obligations under the Credit Agreement.
On June 2, 2014, the Company entered into a Joinder Agreement No. 2 (the “Joinder No. 2”), by and among Barclays Bank PLC, the Company and the guarantors party thereto, and consented to by Wells Fargo Bank, National Association, as Administrative Agent. The Joinder No. 2 provided for, upon completion of the acquisition of Michael Foods and subject to certain other conditions, an incremental term loan of $885.0 (the “Term Loan”) under the Company’s existing Credit Agreement. Pursuant to the Joinder No. 2, the Company borrowed approximately $885.0 as a Term Loan under the Credit Agreement. The loan was issued at 99.5% of par and the Company received $860.9 after accounting for the original issue discount of $4.4 and paying investment banking and other fees of $19.7 . The outstanding amounts under the Term Loan must be repaid in quarterly principal installments of $2.2 beginning on September 30, 2014 and any remaining outstanding principal balance must be repaid in full on June 2, 2021. The Joinder No. 2 also requires the Company to make certain prepayments of principal of the Term Loan under specified circumstances.
The Company’s obligations under the Credit Agreement are unconditionally guaranteed by each of its existing and subsequently acquired or organized material domestic subsidiaries. The Company’s obligations under the Credit Agreement are secured by security interests on substantially all of the personal property assets of the Company and the Guarantors, and will be secured by the material real property assets of the Company and the Guarantors.
In February 2014, the Company paid $2.5 of financing fees to the underwriters of a financing commitment the Company entered into in September 2013 to fund our acquisition of Dakota Growers. The commitment was not exercised and the Company has expensed the full amount to interest expense for the year ended September 30, 2014. In addition, financing costs of $4.3 related to the unused bridge loan and $6.7 for the portion of the term loan commitment not used were immediately recorded to interest expense during the year ended September 30, 2014.
In connection with the acquisition of Michael Foods, the Company assumed debt consisting of a 4.57% 2012 Series Bond and the secured notes. The 4.57% 2012 Series Bond guarantees the repayment of certain industrial revenue bonds used for the expansion of the wastewater treatment facility in Wakefield, Nebraska. The bond bears interest at a rate of 4.57% and matures


63

September 15, 2017. The secured notes are variable-rate notes secured by equipment used in Michael Foods’ potato products facility and mature on November 25, 2014. At September 30, 2014, the notes had an effective interest rate of 3.6% .
At September 30, 2014, capital leases consisted of a lease, with an outstanding balance of $3.8 , on Michael Foods’ Winnipeg, Manitoba egg products processing facility which expires August 31, 2022.
Debt Covenants
The terms of the Credit Facility require the Company to comply with certain financial covenants consisting of ratios for maximum consolidated senior secured leverage and minimum consolidated interest expense coverage. As of September 30, 2014, the Company was in compliance with all such financial covenants.
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Antitrust claims: In late 2008 and early 2009, some 22 class-action lawsuits were filed in various federal courts against Michael Foods, Inc. and approximately 20 other defendants (producers of shell eggs, manufacturers of processed egg products, and egg industry organizations), alleging violations of federal and state antitrust laws in connection with the production and sale of shell eggs and egg products, and seeking unspecified damages. Plaintiffs seek to represent nationwide classes of direct and indirect purchasers, and allege that defendants conspired to reduce the supply of eggs by participating in animal husbandry, egg-export and other programs of various egg-industry associations. In December 2008, the Judicial Panel on Multidistrict Litigation ordered the transfer of all cases to the Eastern District of Pennsylvania for coordinated and/or consolidated pretrial proceedings. Between late 2010 and early 2012, a number of companies, each of which would be part of the purported class in the antitrust action, brought separate actions against defendants. These “tag-along” cases, brought primarily by various grocery chains and food companies, assert essentially the same allegations as in the main action. All but one of the tag-along cases were either filed in or transferred to the Eastern District of Pennsylvania where they are being treated as related to the main action. Fact discovery concluded on April 30, 2014. The class-certification phase of the case is currently in process. Hearings on class certification are scheduled for December 2014 for direct purchaser plaintiffs and February 2015 for indirect purchaser plaintiffs.
Michael Foods received a Civil Investigative Demand (“CID”) issued by the Florida Attorney General on November 27, 2008, regarding an investigation of possible anticompetitive activities “relating to the production and sale of eggs or egg products.” The CID requested information and documents related to the pricing and supply of shell eggs and egg products, as well as Michael Foods’ participation in various programs of United Egg Producers. Michael Foods has fully cooperated with the Florida Attorney General’s Office to date. Further compliance is suspended pending proceedings in the civil antitrust litigation referenced above.
Post does not believe it is possible to estimate the possible loss in connection with these litigated matters. Accordingly, the Company cannot predict what impact, if any, these matters and any results from such matters could have on the future results of operations.
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 and in the aggregate to the consolidated financial position, results of operations or cash flows. In addition, while 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 consolidated financial position, results of operations or cash flows.
Post's operations are also subject to various federal, state and local laws and regulations with respect to environmental matters, including air quality, wastewater discharge and pretreatment, storm water, waste handling and disposal, and other regulations intended to protect public health and the environment. In the United States, the laws and regulations include the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. The Company's foreign facilities are subject to local and national regulations similar to those applicable to us in the United States. Additionally, many of the Michael Foods facilities discharge wastewater pursuant to wastewater discharge permits. The Company disposes of waste from its internal egg production primarily by transferring it to farmers for use as fertilizer and disposes of solid waste from potato processing primarily by transferring it to one or more processors who convert it to animal feed. Post has made, and will continue to make, expenditures to ensure environmental compliance.
Lease Commitments
Future minimum rental payments under noncancelable operating leases in effect as of September 30, 2014 were $10.4 , $9.7 , $8.2 , $5.5 , $4.5 and $12.7 for fiscal 2015, 2016, 2017, 2018, 2019 and thereafter, respectively.


64

NOTE 16 — PENSION AND OTHER POSTRETIREMENT BENEFITS
Certain of the Company’s employees are eligible to participate in the Company’s qualified and supplemental noncontributory defined benefit pension plans and other postretirement benefit plans (partially subsidized retiree health and life insurance) or separate plans for Post Foods Canada Inc. The following disclosures reflect amounts related to the Company’s employees based on separate actuarial valuations, projections and certain allocations. Amounts for the Canadian plans are included in these disclosures and are not disclosed separately because they do not constitute a significant portion of the combined amounts.
Effective January 1, 2011, benefit accruals for defined benefit pension plans were frozen for all administrative employees and certain production employees.
The following table provides a reconciliation of the changes in the plans’ benefit obligations and fair value of assets over the two year period ended September 30, 2014 , and a statement of the funded status and amounts recognized in the combined balance sheets as of September 30 of both years.


65

 
Pension Benefits
 
Other Benefits
 
Year Ended
September 30,
 
Year Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of period
$
44.1

 
$
39.9

 
$
87.7

 
$
101.3

Service cost
3.5

 
4.2

 
1.9

 
2.4

Interest cost
2.2

 
1.8

 
4.5

 
4.0

Plan participants’ contributions
0.7

 
0.8

 
—

 
—

Plan changes
—

 
—

 
—

 
(3.5
)
Actuarial loss (gain)
3.7

 
(2.2
)
 
12.8

 
(14.9
)
Benefits paid
(1.9
)
 
(1.7
)
 
(1.1
)
 
(1.3
)
Curtailments
—

 
1.2

 
—

 
—

Special termination benefits
—

 
0.4

 
—

 
—

Currency translation
(0.6
)
 
(0.3
)
 
(0.6
)
 
(0.3
)
Benefit obligation at end of period
$
51.7

 
$
44.1

 
$
105.2

 
$
87.7

 
 
 
 
 
 
 
 
Change in fair value of plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of period
$
32.1

 
$
23.2

 
$
—

 
$
—

Actual return on plan assets
3.9

 
1.6

 
—

 
—

Employer contributions
7.7

 
8.5

 
1.1

 
1.3

Plan participants’ contributions
0.7

 
0.8

 
—

 
—

Benefits paid
(1.9
)
 
(1.7
)
 
(1.1
)
 
(1.3
)
Currency translation
(0.6
)
 
(0.3
)
 
—

 
—

Fair value of plan assets at end of period
41.9

 
32.1

 
—

 
—

Funded status
$
(9.8
)
 
$
(12.0
)
 
$
(105.2
)
 
$
(87.7
)
 
 
 
 
 
 
 
 
Amounts recognized in assets or liabilities
 
 
 
 
 
 
 
Other assets
$
1.2

 
$
—

 
$
—

 
$
—

Other current liabilities
—

 
—

 
(2.1
)
 
(1.9
)
Other liabilities
(11.0
)
 
(12.0
)
 
(103.1
)
 
(85.8
)
Net amount recognized
$
(9.8
)
 
$
(12.0
)
 
$
(105.2
)
 
$
(87.7
)
 
 
 
 
 
 
 
 
Amounts recognized in accumulated other comprehensive income or loss
 
 
 
 
 
 
 
Net actuarial loss (gain)
$
9.6

 
$
8.5

 
$
25.3

 
$
12.9

Prior service cost (credit)
0.9

 
1.3

 
(2.8
)
 
(5.2
)
Total
$
10.5

 
$
9.8

 
$
22.5

 
$
7.7

 
 
 
 
 
 
 
 
Weighted-average assumptions used to determine benefit obligation
 
 
 
 
 
 
 
Discount rate — U.S. plans
4.56
%
 
5.15
%
 
4.61
%
 
5.21
%
Discount rate — Canadian plans
4.25
%
 
4.87
%
 
4.45
%
 
5.01
%
Rate of compensation increase — U.S. plans
3.00
%
 
3.00
%
 
3.00
%
 
3.00
%
Rate of compensation increase — Canadian plans
2.75
%
 
2.75
%
 
2.75
%
 
2.75
%
The accumulated benefit obligation exceeded the fair value of plan assets for the domestic pension plans at September 30, 2014 and September 30, 2013. The aggregate accumulated benefit obligation for pension plans was $48.7 at September 30, 2014 and $41.7 at September 30, 2013 . The Company recorded a benefit obligation reduction of $3.5 in fiscal 2103 related to increases in beneficiary cost sharing.
The following tables provide the components of net periodic benefit cost for the plans and amounts recognized in other comprehensive income.


66

 
Pension Benefits
 
Year Ended September 30,
 
2014
 
2013
 
2012
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
3.5

 
$
4.2

 
$
3.7

Interest cost
2.2

 
1.8

 
1.5

Expected return on plan assets
(2.0
)
 
(1.7
)
 
(1.5
)
Recognized net actuarial loss
0.7

 
1.1

 
0.5

Recognized prior service cost
0.3

 
0.4

 
0.4

Curtailments/settlements/special termination benefits
—

 
1.7

 
—

Net periodic benefit cost
$
4.7

 
$
7.5

 
$
4.6

 
 
 
 
 
 
Weighted-average assumptions used to determine net benefit cost
 
 
 
 
 
Discount rate — U.S. plans (Pre-Spin)
n/a

 
n/a

 
5.05
%
Discount rate — U.S. plans (Post-Spin)
5.15
%
 
4.13
%
 
4.82
%
Discount rate — Canadian plans
4.87
%
 
4.25
%
 
5.15
%
Rate of compensation increase — U.S. plans
3.00
%
 
3.00
%
 
3.00
%
Rate of compensation increase — Canadian plans
2.75
%
 
3.00
%
 
3.00
%
Expected return on plan assets — U.S. plans
5.99
%
 
6.00
%
 
8.50
%
Expected return on plan assets — Canadian plans
6.00
%
 
6.25
%
 
6.25
%
 
 
 
 
 
 
Changes benefit obligation recognized in other comprehensive income or loss
 
 
 
 
 
Net loss (gain)
$
1.7

 
$
(2.1
)
 
$
6.3

Recognized loss
(0.7
)
 
(1.1
)
 
(0.6
)
Recognized prior service cost
(0.3
)
 
(0.4
)
 
(0.4
)
Loss adjustment due to Spin-Off
—

 
—

 
10.8

Currency translation
—

 
—

 
0.1

Total recognized in other comprehensive income or loss (before tax effects)
$
0.7

 
$
(3.6
)
 
$
16.2



67

 
Other Benefits
 
Year Ended September 30,
 
2014
 
2013
 
2012
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
1.9

 
$
2.4

 
$
2.3

Interest cost
4.5

 
4.0

 
4.1

Recognized net actuarial loss
0.4

 
1.7

 
0.6

Recognized prior service credit
(2.4
)
 
(1.1
)
 
(1.2
)
Net periodic benefit cost
$
4.4

 
$
7.0

 
$
5.8

 
 
 
 
 
 
Weighted-average assumptions used to determine net benefit cost
 
 
 
 
 
Discount rate — U.S. plans (Pre-Spin)
n/a

 
n/a

 
5.13
%
Discount rate — U.S. plans (Post-Spin)
5.21
%
 
3.96
%
 
4.86
%
Discount rate — Canadian plans
5.01
%
 
4.39
%
 
5.26
%
Rate of compensation increase — U.S. plans
3.00
%
 
3.00
%
 
3.00
%
Rate of compensation increase — Canadian plans
2.75
%
 
3.00
%
 
3.00
%
 
 
 
 
 
 
Changes in plan assets and benefit obligation recognized in other comprehensive income or loss
 
 
 
 
 
Net loss (gain)
$
12.8

 
$
(14.9
)
 
$
5.1

Recognized loss
(0.4
)
 
(1.7
)
 
(0.6
)
Prior service credit
—

 
(3.5
)
 
—

Recognized prior service credit
2.4

 
1.1

 
1.2

Loss adjustment due to Spin-Off
—

 
—

 
11.2

Currency translation
—

 
—

 
0.1

Total recognized in other comprehensive income or loss (before tax effects)
$
14.8

 
$
(19.0
)
 
$
17.0

For pension benefits, the estimated net actuarial loss and prior service cost (credit) expected to be reclassified from accumulated other comprehensive income into net periodic benefit cost during 2015 related to pension benefits are $0.9 and $0.3 , respectively. The corresponding amounts related to other postretirement benefits are $1.4 and $ (1.6) , respectively.
The expected return on pension plan assets was determined based on historical and expected future returns of the various asset classes, using the target allocation. The broad target allocations are 50% equity securities (comprised of 27.5% U.S. equities and 22.5% foreign equities), 39.5% debt securities, 10% real assets and 0.5% cash. At September 30, 2014, equity securities were 56% , debt securities were 37% , real assets were 6% and other was 1% of the fair value of total plan assets, approximately 85% of which was invested in passive index funds. At September 30, 2013, equity securities were 56% , debt securities were 38% , real assets were 5% and other was 1% of the fair value of total plan assets, approximately 85% of which was invested in passive index funds. The allocation guidelines were established based on management’s determination of the appropriate risk posture and long-term objectives.
The following table represents the pension plan’s assets measured at fair value on a recurring basis and the basis for that measurement (for more information on the fair value framework in ASC Topic 820, refer to Note 13).
 
September 30, 2014
 
September 30, 2013
 
Total
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equities
$
23.4

 
$
—

 
$
23.4

 
$
17.9

 
$
—

 
$
17.9

Bonds
2.6

 
2.6

 
—

 
2.5

 
2.5

 
—

Pooled Assets
3.0

 
—

 
3.0

 
2.2

 
—

 
2.2

Fixed income
10.0

 
—

 
10.0

 
7.5

 
—

 
7.5

Real assets
2.4

 
—

 
2.4

 
1.6

 
—

 
1.6

 
41.4

 
2.6

 
38.8

 
31.7

 
2.5

 
29.2

Cash
0.5

 
0.5

 
—

 
0.4

 
0.4

 
—

 
$
41.9

 
$
3.1

 
$
38.8

 
$
32.1

 
$
2.9

 
$
29.2

The fair value of mutual funds is based on quoted net asset values of the shares held by the plan at year end.


68

For September 30, 2014 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to domestic plans for 2015 was 8.5% and 6.4% for participants under the age of 65 and over the age of 65, respectively, declining gradually to an ultimate rate of 5% for 2022 and beyond. For September 30, 2013 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to domestic plans for 2014 was 9.0% and 6.6% for participants under the age of 65 and over the age of 65, respectively, declining gradually to an ultimate rate of 5% for 2022 and beyond. For September 30, 2014 and 2013 measurement purposes, the assumed annual rate of increase in the future per capita cost of covered health care benefits related to Canadian plans for the following fiscal year was 6.0% and 6.5% , respectively, declining gradually to an ultimate rate of 5% for 2017 and beyond. A 1% change in assumed health care cost trend rates would result in the following changes in the accumulated postretirement benefit obligation and in the total service and interest cost components for fiscal 2014.
 
Increase
 
Decrease
Effect on postretirement benefit obligation
$
22.8

 
$
(17.8
)
Effect on total service and interest cost
1.4

 
(1.1
)
As of September 30, 2014 , expected future benefit payments and related federal subsidy receipts (Medicare Part D) in the next ten fiscal years were as follows:
 
2015
 
2016
 
2017
 
2018
 
2019
 
2020-
2024
Pension benefits
$
2.3

 
$
2.3

 
$
2.1

 
$
2.0

 
$
2.1

 
$
14.2

Other benefits
2.1

 
2.7

 
3.1

 
3.6

 
4.0

 
23.2

Subsidy receipts
—

 
—

 
—

 
—

 
—

 
1.1

In addition to the contributions made as benefit payments in unfunded plans and participant contributions, the Company expects to make $6.9 of contributions to its defined benefit pension plans during fiscal 2015.
In addition to the defined benefit plans described above, the Company sponsors a defined contribution 401(k) plan under which it makes matching contributions. The Company expensed $ 7.1 , $ 2.8 and $ 1.8 for the fiscal years ended September 30, 2014 , 2013 and 2012 , respectively.
NOTE 17 — STOCK-BASED COMPENSATION
On February 3, 2012, the Company established the 2012 Long-Term Incentive Plan (the “Plan”) which permits the issuance of various stock-based compensation awards up to 6.5 million shares. The Plan allows the issuance of stock options, stock appreciation rights, performance shares, restricted stock, restricted stock units or other awards. Awards issued under the Plan have a maximum term of ten years, provided, however, that the Compensation Committee of the Board of Directors may, in its discretion, grant awards with a longer term to participants who are located outside the United States.
Total compensation cost for stock-based compensation awards recognized in the fiscal years ended 2014 , 2013 and 2012 was $ 16.6 , $ 12.0 and $ 5.0 , respectively, and the related recognized deferred tax benefit for each of those periods was approximately $ 5.4 , $ 3.9 and $ 1.9 , respectively. As of September 30, 2014 , the total compensation cost related to nonvested awards not yet recognized was $22.4 , which is expected to be recognized over a weighted average period of 2.6 years.
Stock Appreciation Rights
Information about stock-settled stock appreciation rights (“SSARs”) is summarized in the following table. Upon exercise of each right, the holder of SSARs will receive the number of shares of Post common stock equal in value to the difference between the exercise price and the fair market value at the date of exercise, less all applicable taxes. The Company uses shares from the Plan to settle SSARs exercised. The total intrinsic value of SSARs exercised was $2.4 , $1.2 and $0.1 in the fiscal years ended September 30, 2014, 2013 and 2012, respectively.
In February 2014, 2013 and 2012, the Company granted 30,000 , 35,000 and 70,000 SSARs, respectively, to its non-management members of the Board of Directors. Due to vesting provisions of these awards the Company determined that these awards had subjective acceleration rights such that the Company expensed the grant date fair value upon issuance and recognized $0.5 , $0.4 and $0.7 of related expense for the years ended September 30, 2014, 2013 and 2012, respectively.


69

 
 
Stock-Settled
Stock
Appreciation Rights
 
Weighted
Average
Exercise
Price Per Share
 
Weighted
Average
Remaining
Contractual
Term in Years
 
Aggregate
Intrinsic
Value
Outstanding at September 30, 2013
315,765

 
$
23.84

 
 
 
 
Granted
30,000

 
54.06

 
 
 
 
Exercised
(78,909
)
 
18.97

 
 
 
 
Forfeited
—

 
—

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding at September 30, 2014
266,856

 
28.68

 
6.23
 
$
2.0

Vested and expected to vest as of September 30, 2014
266,165

 
28.71

 
6.23
 
2.0

Exercisable at September 30, 2014
110,884

 
21.30

 
4.43
 
1.3

For SSARs granted to Company employees prior to the separation from Ralcorp, the assumptions used in the Black-Scholes model were based on Ralcorp’s history and stock characteristics. The following table provides the grant date fair value of each SSAR using the Black-Scholes valuation model, which uses assumptions of expected life (term), expected stock price volatility, risk-free interest rate, and expected dividends. The expected term is estimated based on the award’s vesting period and contractual term, along with historical exercise behavior on similar awards. Expected volatilities are based on historical volatility trends and other factors. The risk-free rate is the interpolated U.S. Treasury rate for a term equal to the expected term. The weighted average assumptions and grant date fair values for SSARs granted during fiscal years ended 2014, 2013 and 2012 are summarized in the table below.
 
2014
 
2013
 
2012
Expected term (in years)
6.5
 
6.5
 
6.5
Expected stock price volatility
28.3%
 
29.4%
 
29.0%
Risk-free interest rate
1.92%
 
1.26%
 
1.20%
Expected dividends
0%
 
0%
 
0%
Fair value (per SSAR)
$17.69
 
$12.19
 
$9.96
Cash Settled Stock Appreciation Rights
 
Cash-Settled
Stock
Appreciation Rights
 
Weighted
Average
Exercise
Price Per Share
 
Weighted
Average
Remaining
Contractual
Term in Years
 
Aggregate
Intrinsic
Value
Outstanding at September 30, 2013
22,214

 
$
18.10

 
 
 
 
Granted
—

 
—

 
 
 
 
Exercised
(1,586
)
 
18.10

 
 
 
 
Forfeited
—

 
—

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding at September 30, 2014
20,628

 
18.10

 
5.98
 
$
0.3

Vested and expected to vest as of September 30, 2014
20,293

 
18.10

 
5.98
 
0.3

Exercisable at September 30, 2014
13,222

 
18.10

 
5.98
 
0.2

The fair value of each cash settled stock appreciation right (“SAR”) was estimated each reporting period using the Black-Scholes valuation model, which uses assumptions of expected life (term), expected stock price volatility, risk-free interest rate, and expected dividends. The expected term is estimated based on the award’s vesting period and contractual term, along with historical exercise behavior on similar awards. Expected volatilities are based on historical volatility trends and other factors. The risk-free rate is the interpolated U.S. Treasury rate for a term equal to the expected term. Although no SARs were granted to Post employees during the fiscal years ended September 30, 2014, 2013 and 2012, the following table presents the assumptions used to remeasure the fair value of outstanding SARs at those dates.


70

 
2014
 
2013
 
2012
Expected term
2.5
 
3.5
 
4.5
Expected stock price volatility
27.6%
 
27.6%
 
30.5%
Risk-free interest rate
0.83%
 
0.82%
 
0.70%
Expected dividends
0%
 
0%
 
0%
Fair value (per right)
$15.80
 
$23.09
 
$14.15
Stock Options
 
Stock Options
 
Weighted
Average
Exercise
Price Per Share
 
Weighted
Average
Remaining
Contractual
Term in Years
 
Aggregate
Intrinsic
Value
Outstanding at September 30, 2013
2,120,000

 
$
31.62

 
 
 
 
Granted
900,000

 
40.30

 
 
 
 
Exercised
—

 
—

 
 
 
 
Forfeited
—

 
—

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding at September 30, 2014
3,020,000

 
34.21

 
8.12
 
$
3.5

Vested and expected to vest as of September 30, 2014
3,020,000

 
34.21

 
8.12
 
3.5

Exercisable at September 30, 2014
1,246,667

 
31.32

 
7.67
 
2.3

The fair value of each stock option was estimated on the date of grant using the Black-Scholes valuation model, which uses assumptions of expected life (term), expected stock price volatility, risk-free interest rate, and expected dividends. The Company uses the simplified method for estimating a stock option term as it does not have sufficient historical share options exercise experience upon which to estimate an expected term. The expected term is estimated based on the award’s vesting period and contractual term, along with historical exercise behavior on similar awards. Expected volatilities are based on historical volatility trends and other factors. The risk-free rate is the interpolated U.S. Treasury rate for a term equal to the expected term. The weighted average assumptions and fair values for stock options granted during the years ended September 31, 2014, 2013 and 2012 are summarized in the table below.
 
2014
 
2013
 
2012
Expected term
5.2
 
7.8
 
4.8
Expected stock price volatility
26.11%
 
28.32%
 
30.24%
Risk-free interest rate
1.48%
 
1.19%
 
0.77%
Expected dividends
0%
 
0%
 
0%
Fair value (per option)
$10.65
 
$11.54
 
$8.52
Restricted Stock Units
 
Restricted Stock Units
 
Weighted
Average
Grant Date Fair Value Per Share
Nonvested at September 30, 2013
298,667

 
$
31.75

Granted
57,000

 
40.30

Vested
(127,165
)
 
31.38

Forfeited
—

 
—

Nonvested at September 30, 2014
228,502

 
34.09

The grant date fair value of each restricted stock award was determined based upon the closing price of the Company’s stock on the date of grant. Of the 127,165 RSUs that vested in fiscal 2014, 104,167 will be settled at a future date within 60 days after the holder of the RSUs is no longer an executive officer of the Company. Of the 120,833 RSUs that vested in fiscal 2013, 104,167 will be settled at a future date within 60 days after the holder of the RSUs is no longer an executive officer of the Company. The total vest date fair value of restricted stock units that vested during fiscal 2014 and 2013 was $6.3 and $5.3 , respectively. No shares vested in 2012.


71

Cash Settled Restricted Stock Units
 
Cash-Settled
Restricted Stock Units
 
Weighted
Average
Grant Date Fair Value Per Share
Nonvested at September 30, 2013
144,253

 
$
38.06

Granted
101,850

 
50.15

Vested
(45,822
)
 
37.19

Forfeited
(25,668
)
 
37.77

Nonvested at September 30, 2014
174,613

 
45.38

Cash settled restricted stock awards are liability awards and as such, their fair value is based upon the closing price of the Company’s stock for each reporting period, with the exception of 49,000 units that are valued at the greater of the closing stock price or the grant price of $51.43 . Cash used by the Company to settle restricted stock units was $1.8 and $1.1 for the years ended September 30, 2014 and 2013, respectively. No such payments were made in 2012.
Deferred Compensation
Post provides for a deferred compensation plan for directors and key employees through which eligible participants may elect to defer payment of all or a portion of their compensation or bonus until some later date. Deferrals for employee participants may be made into Post common stock equivalents (Equity Option) or into a number of funds operated by The Vanguard Group Inc. with a variety of investment strategies and objectives (Vanguard Funds). Deferrals for director participants must be made into Post common stock equivalents and also receive a 33% matching contribution. Deferrals into the Equity Option are distributed in Post stock for employees and cash for directors, while deferrals into the Vanguard Funds are distributed in cash. There are no significant costs related to this deferred compensation plan. Post funds its deferred compensation liability (potential cash distributions) by investing in the Vanguard Funds in the same amounts as selected by the participating employees. Both realized and unrealized gains and losses on these investments are included in “Selling, general and administrative expenses” and offset the related change in the deferred compensation liability.
NOTE 18 — TANGIBLE EQUITY UNITS
In May 2014, the Company completed a public offering of 2.875 million TEUs, each with a stated value of $100.00 . Each TEU is comprised of a prepaid stock purchase contract and a senior amortizing note due June 1, 2017. The prepaid common stock purchase contracts were recorded as additional paid-in capital, net of issuance costs, and the senior notes have been recorded as long-term debt. Issuance costs associated with the debt component were recorded as deferred financing costs within “Prepaid expenses and other current assets” and “Other assets” on the consolidated balance sheets and are being amortized using the effective interest rate method over the term of the instrument to June 1, 2017. Post allocated the proceeds from the issuance of the TEUs to equity and debt based on the relative fair values of the respective components of each TEU. The proceeds received in the offering were $278.6 , which were net of financing fees of $8.9 . The aggregate values assigned upon issuance of each component of the TEUs were as follows (amounts in millions except price per TEU):
 
Equity Component
 
Debt Component
 
TEUs Total
Price per TEU
$
85.48

 
$
14.52

 
$
100.00

Gross proceeds
$
245.7

 
$
41.8

 
$
287.5

Issuance costs
(7.6
)
 
(1.3
)
 
(8.9
)
Net proceeds
$
238.1

 
$
40.5

 
$
278.6

 
 
 
 
 
 
Balance sheet impact (at issuance)
 
 
 
 
 
Prepaid expenses and other current assets (deferred financing fees)
$
—

 
$
0.7

 
$
0.7

Other assets (deferred financing fees)
—

 
0.6

 
0.6

Current portion of long term debt
—

 
13.3

 
13.3

Long-term debt
—

 
28.5

 
28.5

Additional paid-in capital
238.1

 
—

 
238.1



72

Each senior amortizing note has an initial principal amount of  $14.5219 , bears interest at  5.25%  per annum and will have a final installment payment date of June 1, 2017. On March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2014, Post will pay equal quarterly cash installments of  $1.3125  per amortizing note (except for the September 1, 2014 installment payment, which was  $1.35625  per amortizing note). Each installment will constitute a payment of interest and a partial repayment of principal. Unless settled earlier at the holder’s or the Company’s option, each purchase contract will automatically settle on June 1, 2017 (subject to postponement in certain limited circumstances), and Post will deliver not more than 2.0964 shares and not less than 1.7114 shares of its common stock per purchase contract, each subject to adjustment. For each purchase contract, the Company will deliver on the third business day immediately following the last trading day of the observation period a number of shares of its common stock determined as described below. The “observation period” will be the 20  consecutive trading day period beginning on, and including, the 22nd scheduled trading day immediately preceding June 1, 2017 (the “mandatory settlement date”). The number of shares of the Company’s common stock issuable upon mandatory settlement of each purchase contract (the “settlement amount”) will be equal to the sum of the “daily settlement amounts” (as defined below) for each of the 20  consecutive trading days during the relevant observation period.
The daily settlement amount for each purchase contract and for each of the 20  consecutive trading days during the observation period will consist of:
•
if the daily volume-weighted average price (“VWAP”) is equal to or greater than $58.4325  per share (the “threshold appreciation price”), subject to adjustment, a number of shares of the Company’s common stock equal to (i) 1.7114  shares of common stock, subject to adjustment (the “minimum settlement rate”)  divided by  (ii) 20;
•
if the daily VWAP is less than $58.4325  per share, subject to adjustment, but greater than $47.70  per share (the “reference price”), subject to adjustment, a number of shares of the Company’s common stock equal to (i)  $100.00   divided by  the daily VWAP  (ii) divided by  20 ; and
•
if the daily VWAP of our common stock is less than or equal to $47.70  per share, subject to adjustment, a number of shares of the Company’s common stock equal to (i) 2.0964  shares of common stock, subject to adjustment (the “maximum settlement rate”),  divided by  (ii) 20.
The initial minimum settlement rate is approximately equal to the TEU stated amount of $100.00  divided by the initial threshold appreciation price of $58.4325 per share. The initial maximum settlement rate is approximately equal to the TEU stated amount of $100.00 divided by the initial reference price of $47.70 per share.
NOTE 19 — COMMON AND PREFERRED STOCK
In February 2013, the Company authorized and issued approximately 2.4 million shares of its 3.75% Series B Cumulative Perpetual Convertible Preferred Stock. The Company received net proceeds of $234.0 after paying offering-related fees and expenses of approximately $7.5 . The preferred stock has a $0.01 par value per share and a $100.00 liquidation value per share. The preferred stock earns cumulative dividends at a rate of 3.75% per annum payable quarterly on February 15, May 15, August 15 and November 15, beginning on May 15, 2013. The preferred stock is non-voting and ranks senior to our outstanding common stock upon the Company’s dissolution or liquidation. The preferred stock has no maturity date; however, holders of the preferred stock may convert their preferred stock at an initial conversion rate of 2.1192 shares of the Company’s common stock per share of convertible preferred stock, which is equivalent to a conversion price of $47.19 per share of common stock. Additionally, on or after February 15, 2018, the Company will have the option to redeem some or all the preferred stock at a redemption price equal to 100% of the liquidation preference per share, plus accrued and unpaid dividends if the closing sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.
In December 2013, the Company authorized and issued approximately 3.0 million shares of its 2.5% Series C Cumulative Perpetual Convertible Preferred Stock. The Company also granted the initial purchasers of the preferred stock a 30-day option to purchase additional shares of preferred stock. On January 14, 2014, the initial purchasers exercised their option and purchased an additional 0.2 million shares. The Company received net proceeds of $310.2 after paying offering-related fees and expenses of approximately $9.8 . The preferred stock has a $0.01 par value per share and a $100.00 liquidation value per share. The preferred stock earns cumulative dividends at a rate of 2.5% per annum payable quarterly on February 15, May 15, August 15 and November 15, beginning on February 15, 2014. The preferred stock is non-voting and ranks senior to our outstanding common stock upon the Company’s dissolution or liquidation. The preferred stock has no maturity date; however, holders of the preferred stock may convert their preferred stock at an initial conversion rate of 1.8477 shares of the Company’s common stock per share of convertible preferred stock, which is equivalent to a conversion price of $54.12 per share of common stock. Additionally, on or after February 15, 2019, the Company will have the option to redeem some or all the preferred stock at a redemption price equal to 100% of the liquidation preference per share, plus accrued and unpaid dividends if the closing sale price of the Company’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.


73

In March 2014, the Company issued 5.75 million shares of common stock, par value $0.01 per share, at a price to the public of $55.00 per share. The Company received net proceeds of $303.5 after paying offering related fees and expenses of approximately $12.8 . In May 2014, the Company issued 6.325 million shares of common stock, par value $0.01 per share, at a price to the public of $47.70 per share. The Company received net proceeds of $289.9 after paying offering-related fees and expenses of approximately $11.8 .
NOTE 20 — TRANSACTIONS WITH FORMER OWNER
Prior to the Spin-Off, Post operated under Ralcorp’s centralized cash management system, Post’s cash requirements were provided directly by Ralcorp, and cash generated by Post was generally remitted directly to Ralcorp. Transaction systems (e.g. payroll, employee benefits and accounts payable) used to record and account for cash disbursements were generally provided by Ralcorp. Ralcorp also provided centralized demand planning, order management, billing, credit and collection services to Post. Transaction systems (e.g. revenues, accounts receivable and cash application) used to record and account for cash receipts were generally provided by centralized Ralcorp organizations. These Ralcorp systems were generally designed to track assets/liabilities and receipts/payments on a business specific basis. After the Spin-Off, Ralcorp continued to provide many of these services to Post under a transition services agreement (“TSA”) between the companies.
For periods prior to the Spin-Off, costs and expenses in the accompanying consolidated statements of operations represent direct and allocated costs and expenses related to Post. Costs for certain functions and services performed by centralized Ralcorp organizations were allocated to Post based upon reasonable activity bases (generally volume, revenues, net assets or a combination as compared to the total of Ralcorp and Post amounts) or other reasonable methods. The consolidated statements of operations include expense allocations for certain manufacturing, shipping, distribution and administration costs including information systems, procurement, accounting shared services, legal, tax, human resources, payroll, credit and accounts receivable, customer service and cash management. For the year ended September 30, 2012 , total allocated costs were $ 4.6 which are reported in “Selling, general and administrative expenses.” There were no such costs for the years ended September 30, 2014 and 2013. After the Spin-Off, costs for services provided by Ralcorp are based on agreed upon fees contained in the TSA. TSA charges were $ 0.5 , $ 5.2 and $ 8.1 , for the years ended September 30, 2014, 2013 and 2012 respectively, and were reported in “Selling, general and administrative expenses.”
Post produces certain products for sale to Ralcorp. For periods prior to the Spin-Off, the amounts related to these transactions have been included in the accompanying financial statements based upon transfer prices in effect at the time of the individual transactions which were consistent with prices of similar arm’s-length transactions. For periods subsequent to the Spin-Off, these transactions were based upon pricing governed by the TSA with Ralcorp. Net sales related to those transactions was $ 13.6 , $ 15.3 and $ 16.7 in the years ended September 30, 2014 , 2013 , and 2012 , respectively.
On February 3, 2012, we entered into an International Brokerage Management Agreement with Ralcorp pursuant to which Ralcorp agreed to act as our non-exclusive broker for our international sales and distribution, excluding Canada. During the fiscal year ended September 30, 2012, we paid Ralcorp approximately $0.2 pursuant to this agreement.
During fiscal 2012, Post incurred approximately $0.5 of outside legal and accounting fees in connection with the restatement of the Company’s financial statements for the fiscal year ended September 30, 2011 and the first fiscal quarter ended December 31, 2011 and in connection with Ralcorp’s disposition of its Post shares (see Note 1). Ralcorp agreed to reimburse Post for these costs.
On November 4, 2010, Post entered into an agreement to sell, on an ongoing basis, all of the trade accounts receivable of Post Foods, LLC to a wholly owned, bankruptcy-remote subsidiary of Ralcorp named Ralcorp Receivables Corporation (“RRC”). The accounts receivable of Post Foods Canada Corp. were not incorporated into the agreement and were not sold to RRC. The purchase price of the receivables sold was calculated with a discount factor of 1.18% . Post received a fee from RRC to service the receivables (with no significant servicing assets or liabilities). The discounts totaled $3.3 in the year ended September 30, 2012 , and were reported as a component of “Other (income) expense, net.” Servicing fee income was $0.8 in the year ended September 30, 2012, and was reported as a reduction to “Selling, general and administrative expenses.” Post terminated its agreement with RRC in December 2011.
In connection with the Spin-Off, the Company entered into a series of agreements with Ralcorp which are intended to govern the relationship between the Company and Ralcorp and to facilitate an orderly separation of the Company from Ralcorp. These agreements include a Separation and Distribution Agreement, Tax Allocation Agreement and the TSA, among others. Additionally, the Company has agreed to indemnify Ralcorp for income taxes incurred if the Company violates certain provisions of the IRS private letter ruling obtained by Ralcorp. Under certain of these agreements, the Company will incur expenses payable to Ralcorp in connection with certain administrative services provided for varying lengths of time. The Company incurred separation related costs of $2.6 , $ 8.9 and $12.5 in the years ended September 30, 2014 , 2013 and 2012 , respectively. These separation related costs incurred were primarily related to third party professional service fees to effect the Spin-Off and professional service fees and duplicative costs incurred by Post to establish stand-alone processes and systems for activities performed by Ralcorp under the


74

TSA. These costs were reported as a component of “Selling, general and administrative expenses.” See Note 1 for additional information on the Spin-Off. As of September 30, 2014 and 2013, the Company had payables of $0.1 and $1.3 , respectively, related to the net transactions from these agreements.
Derivative financial instruments and hedging
See Note 12 for a discussion of Post’s participation in Ralcorp’s derivative financial instrument and hedging program.
NOTE 21 — SEGMENTS
Management evaluates each segment’s performance based on its segment profit, which is its operating profit before impairment of intangible assets, accelerated depreciation on plant closures, restructuring expenses, loss on assets held for sale and other unallocated corporate income and expenses. During the first quarter of fiscal 2014, the Company changed its methodology for allocating certain corporate costs to segment profit. Accordingly, segment profit for the years ended September 30, 2013 and 2012 have been adjusted to align with current year presentation. 
Post’s external revenues were primarily generated by sales within the United States; foreign (primarily Canadian) sales were approximately 13% of total net sales. Sales are attributed to individual countries based on the address to which the product is shipped.
As of September 30, 2014 and 2013 , the majority of Post’s tangible long-lived assets were located in the United States; the remainder is located in Canada and has a net carrying value of approximately $ 56.0 and $ 46.1 , respectively.
In the fiscal years ended September 30, 2014 , 2013 and 2012 , one customer accounted for $ 276.8 , $206.1 and $204.2 , respectively, or approximately 11% , 20% and 21% of total net sales, respectively. Each of the segments sells products to this major customer.
The following tables present information about the Company’s operating segments, which are also its reportable segments. Note that “Additions to property and intangibles” excludes additions through business acquisitions (see Note 5).
 
 
 
Year Ended September 30,
 
 
2014
 
2013
 
2012
Net Sales
 
 
 
 
 
 
Post Foods
$
963.1

 
$
982.8

 
$
958.9

 
Michael Foods
684.8

 
—

 
—

 
Active Nutrition
293.3

 
13.9

 
—

 
Private Brands
377.4

 
—

 
—

 
Attune Foods
93.9

 
37.8

 
—

 
Eliminations
(1.4
)
 
(0.4
)
 
—

 
Total
$
2,411.1

 
$
1,034.1

 
$
958.9

Segment Profit (Loss)
 
 
 
 
 
 
Post Foods
$
186.7

 
$
187.4

 
$
184.8

 
Michael Foods
17.4

 
—

 
—

 
Active Nutrition
(1.8
)
 
1.0

 
—

 
Private Brands
14.8

 
—

 
—

 
Attune Foods
8.7

 
2.5

 
—

 
Total segment profit
225.8

 
190.9

 
184.8

General corporate expenses and other
110.3

 
66.8

 
45.7

Accelerated depreciation on plant closure
8.0

 
9.6

 
—

Losses on hedge of purchase price of foreign currency denominated acquisition
13.1

 
—

 
—

Restructuring expenses
1.1

 
3.8

 
—

Impairment of goodwill and other intangible assets
295.6

 
2.9

 
—

Loss on assets held for sale
5.4

 
—

 
—

Interest expense
183.7

 
85.5

 
60.3

Other expense, net
35.5

 
—

 
(1.6
)


75

(Loss) earnings before income taxes
$
(426.9
)
 
$
22.3

 
$
80.4

Additions to property and intangibles
 
 
 
 
 
 
Post Foods
$
37.0

 
$
24.7

 
$
21.6

 
Michael Foods
24.5

 
—

 
—

 
Active Nutrition
2.0

 
—

 
—

 
Private Brands
32.5

 
—

 
—

 
Attune Foods
9.8

 
—

 
—

 
Corporate
9.7

 
8.1

 
9.3

 
Total
$
115.5

 
$
32.8

 
$
30.9

Depreciation and amortization
 
 
 
 
 
 
Post Foods
$
51.6

 
$
58.8

 
$
60.3

 
Michael Foods
41.1

 
—

 
—

 
Active Nutrition
17.0

 
0.5

 
—

 
Private Brands
24.2

 
—

 
—

 
Attune Foods
7.0

 
2.6

 
—

 
 
Total segment depreciation and amortization
140.9

 
61.9

 
60.3

 
Accelerated depreciation on plant closure
8.0

 
9.6

 
—

 
Corporate
6.9

 
5.3

 
2.9

 
Total
$
155.8

 
$
76.8

 
$
63.2

 
 
 
 
 
 
 
September 30,
 
 
 
2014
 
2013
 
 
Assets, end of year
 
 
 
 
 
 
Post Foods
$
2,324.8

 
$
2,614.9

 
 
 
Michael Foods
3,282.4

 
—

 
 
 
Active Nutrition
607.1

 
198.0

 
 
 
Private Brands
829.1

 
—

 
 
 
Attune Foods
173.9

 
172.0

 
 
 
Corporate
513.8

 
488.9

 
 
 
Total
$
7,731.1

 
$
3,473.8

 
 


76

NOTE 22 — CONDENSED FINANCIAL STATEMENTS OF GUARANTORS
On February 3, 2012, the Company issued 7.375% senior notes due February 2022 in an aggregate principal amount of $775.0 to Ralcorp pursuant to a contribution agreement in connection with the internal reorganization. The aggregate principal amount of the 7.375% senior notes was increased to a total of $1,375.0 by subsequent issuances completed on October 25, 2012 and July 18, 2013.
On November 18, 2013, the Company issued 6.75% senior notes due December 2021 in an aggregate principal amount of $525.0 to certain qualified institutional buyers. The aggregate principal amount of the 6.75% senior notes was increased to a total of $875.0 by a subsequent issuance completed on March 19, 2014.
On June 2, 2014, the Company issued 6.00% senior notes due December 2022 in an aggregate principal amount of $630.0 to certain qualified institutional buyers.
The 7.375% senior notes, the 6.75% senior notes and the 6.00% senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing and future domestic subsidiaries, the “Guarantors.” Our foreign subsidiaries, the “Non-Guarantors,” do not guarantee the senior notes. These guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions).
Set forth below are the condensed consolidating financial statements presenting the results of operations, financial position and cash flows of the Parent Company (Post Holdings, Inc.), the Guarantors on a combined basis, the Non-Guarantors on a combined basis and eliminations necessary to arrive at the information for the Company as reported, on a consolidated basis. The Condensed Consolidating Financial Statements present the Parent Company’s investments in subsidiaries using the equity method of accounting. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among the Parent Company, the Guarantor and the Non-Guarantor subsidiaries. Post Holdings, Inc. and all of its domestic subsidiaries form a single consolidated tax group for U.S. income tax purposes. Accordingly, income tax expense has been presented on the Guarantors’ Condensed Statements of Operations using the consolidated U.S. effective tax rate for the Company. Income tax payable and deferred tax items for the consolidated U.S. tax paying group reside solely on the Parent Company’s Condensed Balance Sheet.

POST HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 
Year Ended September 30, 2014
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Sales
$
—

 
$
2,170.1

 
$
266.3

 
$
(25.3
)
 
$
2,411.1

Cost of goods sold
—

 
1,588.2

 
227.0

 
(25.3
)
 
1,789.9

Gross Profit
—

 
581.9

 
39.3

 
—

 
621.2

Selling, general and administrative expenses
7.3

 
414.3

 
22.8

 
—

 
444.4

Amortization of intangible assets
—

 
63.5

 
7.3

 
—

 
70.8

Loss on foreign currency
13.2

 
0.8

 
—

 
—

 
14.0

Restructuring expense
—

 
1.1

 
—

 
—

 
1.1

Impairment of goodwill and other intangible assets
—

 
295.6

 
—

 
—

 
295.6

Other operating expenses, net
—

 
3.0

 
—

 
—

 
3.0

Operating (Loss) Profit
(20.5
)
 
(196.4
)
 
9.2

 
—

 
(207.7
)
Interest expense
175.4

 
(0.4
)
 
8.7

 
—

 
183.7

Other expense
35.5

 
—

 
—

 
—

 
35.5

(Loss) Earnings before Income Taxes
(231.4
)
 
(196.0
)
 
0.5

 
—

 
(426.9
)
Income tax (benefit) expense
(88.7
)
 
2.3

 
2.7

 
—

 
(83.7
)
Net (Loss) Earnings before Equity in Subsidiaries
(142.7
)
 
(198.3
)
 
(2.2
)
 
—

 
(343.2
)
Equity earnings in subsidiary
(200.5
)
 
0.7

 
—

 
199.8

 
—

Net (Loss) Earnings
$
(343.2
)
 
$
(197.6
)
 
$
(2.2
)
 
$
199.8

 
$
(343.2
)
Total Comprehensive (Loss) Income
$
(357.7
)
 
$
(206.3
)
 
$
(8.1
)
 
$
214.4

 
$
(357.7
)



77

 
Year Ended September 30, 2013
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Sales
$
—

 
$
978.8

 
$
73.5

 
$
(18.2
)
 
$
1,034.1

Cost of goods sold
—

 
570.0

 
57.4

 
(18.2
)
 
609.2

Gross Profit
—

 
408.8

 
16.1

 
—

 
424.9

Selling, general and administrative expenses
7.7

 
268.8

 
17.8

 
—

 
294.3

Amortization of intangible assets
—

 
14.6

 
—

 
—

 
14.6

Loss (gain) on foreign currency
—

 
0.2

 
(0.1
)
 
—

 
0.1

Restructuring expenses
—

 
3.8

 
—

 
—

 
3.8

Impairment of goodwill and other intangible assets
—

 
2.9

 
—

 
—

 
2.9

Other operating expenses, net
—

 
1.0

 
0.4

 
—

 
1.4

Operating (Loss) Profit
(7.7
)
 
117.5

 
(2.0
)
 
—

 
107.8

Interest expense
85.5

 
—

 
—

 
—

 
85.5

(Loss) Earnings before Income Taxes
(93.2
)
 
117.5

 
(2.0
)
 
—

 
22.3

Income tax (benefit) expense
(30.0
)
 
37.7

 
(0.6
)
 
—

 
7.1

Net (Loss) Earnings before Equity in Subsidiaries
(63.2
)
 
79.8

 
(1.4
)
 
—

 
15.2

Equity earnings in subsidiary
78.4

 
—

 
—

 
(78.4
)
 
—

Net Earnings (Loss)
$
15.2

 
$
79.8

 
$
(1.4
)
 
$
(78.4
)
 
$
15.2

Total Comprehensive Income (Loss)
$
26.7

 
$
92.4

 
$
(2.5
)
 
$
(89.9
)
 
$
26.7


 
Year Ended September 30, 2012
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Sales
$
—

 
$
906.1

 
$
70.9

 
$
(18.1
)
 
$
958.9

Cost of goods sold
—

 
495.2

 
52.9

 
(18.1
)
 
530.0

Gross Profit
—

 
410.9

 
18.0

 
—

 
428.9

Selling, general and administrative expenses
3.6

 
253.6

 
16.8

 
—

 
274.0

Amortization of intangible assets
—

 
12.6

 
—

 
—

 
12.6

Loss on foreign currency
—

 
0.4

 
0.1

 
—

 
0.5

Other operating expenses, net
—

 
2.7

 
—

 
—

 
2.7

Operating (Loss) Profit
(3.6
)
 
141.6

 
1.1

 
—

 
139.1

Interest expense
42.6

 
16.2

 
1.5

 
—

 
60.3

Other expense
—

 
3.3

 
(4.9
)
 
—

 
(1.6
)
(Loss) Earnings before Income Taxes
(46.2
)
 
122.1

 
4.5

 
—

 
80.4

Income tax (benefit) expense
(17.3
)
 
46.7

 
1.1

 
—

 
30.5

Net (Loss) Earnings before Equity in Subsidiaries
(28.9
)
 
75.4

 
3.4

 
—

 
49.9

Equity earnings in subsidiary
65.5

 
—

 
—

 
(65.5
)
 
—

Net Earnings
$
36.6

 
$
75.4

 
$
3.4

 
$
(65.5
)
 
$
49.9

Total Comprehensive Income
$
22.2

 
$
55.4

 
$
2.4

 
$
(51.1
)
 
$
28.9




78

POST HOLDINGS, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
 
September 30, 2014
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
 
 
ASSETS
Current Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
246.6

 
$
15.7

 
$
10.0

 
$
(3.9
)
 
$
268.4

Restricted cash
1.1

 
79.8

 
3.9

 
—

 
84.8

Receivables, net
78.0

 
305.2

 
45.9

 
(15.4
)
 
413.7

Inventories
—

 
336.5

 
44.2

 
—

 
380.7

Deferred income taxes
27.0

 
—

 
—

 
—

 
27.0

Intercompany notes receivable
6.3

 
—

 
—

 
(6.3
)
 
—

Prepaid expenses and other current assets
11.4

 
30.4

 
2.6

 
—

 
44.4

Total Current Assets
370.4

 
767.6

 
106.6

 
(25.6
)
 
1,219.0

Property, net
—

 
775.9

 
56.0

 
—

 
831.9

Goodwill
—

 
2,732.8

 
153.9

 
—

 
2,886.7

Other intangible assets, net
—

 
2,518.5

 
124.5

 
—

 
2,643.0

Intercompany receivable
1,015.4

 
—

 
—

 
(1,015.4
)
 
—

Intercompany notes receivable
178.9

 
—

 
—

 
(178.9
)
 
—

Investment in subsidiaries
5,543.1

 
8.1

 
—

 
(5,551.2
)
 
—

Other assets
61.7

 
86.1

 
2.7

 
—

 
150.5

Total Assets
$
7,169.5

 
$
6,889.0

 
$
443.7

 
$
(6,771.1
)
 
$
7,731.1

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
22.2

 
$
3.0

 
$
0.4

 
$
—

 
$
25.6

Accounts payable
—

 
212.2

 
32.1

 
(19.3
)
 
225.0

Intercompany notes payable
—

 
—

 
6.3

 
(6.3
)
 
—

Other current liabilities
100.4

 
153.8

 
15.1

 
—

 
269.3

Total Current Liabilities
122.6

 
369.0

 
53.9

 
(25.6
)
 
519.9

Long-term debt
3,824.2

 
2.9

 
3.4

 
—

 
3,830.5

Intercompany payable
—

 
1,013.8

 
1.6

 
(1,015.4
)
 
—

Intercompany notes payable
—

 
—

 
178.9

 
(178.9
)
 
—

Deferred income taxes
883.8

 
—

 
31.3

 
—

 
915.1

Other liabilities
55.7

 
115.9

 
10.8

 
—

 
182.4

Total Liabilities
4,886.3

 
1,501.6

 
279.9

 
(1,219.9
)
 
5,447.9

Total Stockholders’ Equity
2,283.2

 
5,387.4

 
163.8

 
(5,551.2
)
 
2,283.2

Total Liabilities and Stockholders’ Equity
$
7,169.5

 
$
6,889.0

 
$
443.7

 
$
(6,771.1
)
 
$
7,731.1




79

 
September 30, 2013
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
 
 
ASSETS
Current Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
391.4

 
$
4.1

 
$
8.2

 
$
(1.7
)
 
$
402.0

Restricted cash
38.1

 
—

 
—

 
—

 
38.1

Receivables, net
0.3

 
75.9

 
10.9

 
(3.9
)
 
83.2

Inventories
—

 
115.9

 
6.0

 
—

 
121.9

Deferred income taxes
11.8

 
—

 
0.1

 
—

 
11.9

Prepaid expenses and other current assets
3.2

 
7.4

 
0.4

 
—

 
11.0

Total Current Assets
444.8

 
203.3

 
25.6

 
(5.6
)
 
668.1

Property, net
—

 
342.4

 
46.1

 
—

 
388.5

Goodwill
—

 
1,483.3

 
6.4

 
—

 
1,489.7

Other intangible assets, net
—

 
898.4

 
—

 
—

 
898.4

Intercompany receivable
391.9

 
—

 
—

 
(391.9
)
 
—

Investment in subsidiaries
2,384.0

 
—

 
—

 
(2,384.0
)
 
—

Deferred income taxes
—

 
—

 
2.4

 
—

 
2.4

Other assets
24.0

 
2.7

 
—

 
—

 
26.7

Total Assets
$
3,244.7

 
$
2,930.1

 
$
80.5

 
$
(2,781.5
)
 
$
3,473.8

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
0.5

 
$
76.9

 
$
5.3

 
$
(5.6
)
 
$
77.1

Other current liabilities
18.5

 
43.8

 
6.6

 
—

 
68.9

Total Current Liabilities
19.0

 
120.7

 
11.9

 
(5.6
)
 
146.0

Long-term debt
1,408.6

 
—

 
—

 
—

 
1,408.6

Intercompany payable
—

 
391.7

 
0.2

 
(391.9
)
 
—

Deferred income taxes
304.3

 
—

 
—

 
—

 
304.3

Other liabilities
14.2

 
94.9

 
7.2

 
—

 
116.3

Total Liabilities
1,746.1

 
607.3

 
19.3

 
(397.5
)
 
1,975.2

Total Stockholders’ Equity
1,498.6

 
2,322.8

 
61.2

 
(2,384.0
)
 
1,498.6

Total Liabilities and Stockholders’ Equity
$
3,244.7

 
$
2,930.1

 
$
80.5

 
$
(2,781.5
)
 
$
3,473.8


















80

POST HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
 
Year Ended September 30, 2014
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Cash (Used in) Provided by by Operating Activities
$
(110.6
)
 
$
294.1

 
$
1.8

 
$
(2.2
)
 
$
183.1

 
 
 
 
 
 
 
 
 
 
Cash Flows from Investing Activities
 
 
 
 
 
 
 
 
 
Business acquisitions, net of cash acquired
(3,329.1
)
 
52.2

 
(287.2
)
 
—

 
(3,564.1
)
Additions to property
—

 
(111.2
)
 
(4.3
)
 
—

 
(115.5
)
Restricted cash
37.0

 
(76.3
)
 
(4.0
)
 
—

 
(43.3
)
Cash advance for acquisition
—

 
(73.7
)
 
(1.3
)
 
—

 
(75.0
)
Insurance proceeds on loss of property
—

 
4.3

 
—

 
—

 
4.3

Proceeds from equity distributions
102.8

 
—

 
—

 
(102.8
)
 
—

Capitalization of subsidiaries
(323.7
)
 
—

 
—

 
323.7

 
—

Receipt of intercompany loan payments
—

 
0.1

 
—

 
(0.1
)
 
—

Net Cash Used in Investing Activities
(3,513.0
)
 
(204.6
)
 
(296.8
)
 
220.8

 
(3,793.6
)
 
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
 
 
 
 
 
Proceeds from issuance of Senior Notes
2,385.6

 
—

 
—

 
—

 
2,385.6

Proceeds from issuance of preferred stock, net of issuance costs
310.2

 
—

 
—

 
—

 
310.2

Proceeds from issuance of common stock, net of issuance costs
593.4

 
—

 
—

 
—

 
593.4

Proceeds from issuance of equity component of tangible equity units, net of issuance costs
238.1

 
—

 
—

 
—

 
238.1

Proceeds from issuance of debt component of tangible equity units
41.8

 
—

 
—

 
—

 
41.8

Repayments of long-term debt
(5.6
)
 
(1.3
)
 
—

 
—

 
(6.9
)
Payments of preferred stock dividend
(14.4
)
 
—

 
—

 
—

 
(14.4
)
Payments of debt issuance costs
(64.0
)
 
—

 
—

 
—

 
(64.0
)
Payments for equity distributions
—

 
(102.8
)
 
—

 
102.8

 
—

Proceeds from Parent capitalization
—

 
26.2

 
297.5

 
(323.7
)
 
—

Repayments of intercompany loans
—

 
—

 
(0.1
)
 
0.1

 
—

Other, net
0.4

 
—

 
—

 
—

 
0.4

Net Cash Provided by (Used in) by Financing Activities
3,485.5

 
(77.9
)
 
297.4

 
(220.8
)
 
3,484.2

Effect of Exchange Rate Changes on Cash and Cash Equivalents
(6.7
)
 
—

 
(0.6
)
 
—

 
(7.3
)
 
 
 
 
 
 
 
 
 
 
Net (Decrease) Increase in Cash and Cash Equivalents
(144.8
)
 
11.6

 
1.8

 
(2.2
)
 
(133.6
)
Cash and Cash Equivalents, Beginning of Year
391.4

 
4.1

 
8.2

 
(1.7
)
 
402.0

Cash and Cash Equivalents, End of Year
$
246.6

 
$
15.7

 
$
10.0

 
$
(3.9
)
 
$
268.4





81

 
Year Ended September 30, 2013
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Cash Provided by Operating Activities
$
37.7

 
$
158.3

 
$
4.8

 
$
(81.6
)
 
$
119.2

 
 
 
 
 
 
 
 
 
 
Cash Flows from Investing Activities
 
 
 
 
 
 
 
 
 
Business acquisitions, net of cash acquired
(345.8
)
 
(7.1
)
 
—

 
—

 
(352.9
)
Additions to property
—

 
(30.3
)
 
(2.5
)
 
—

 
(32.8
)
Restricted cash
(38.1
)
 
—

 
—

 
—

 
(38.1
)
Proceeds from equity distributions
39.1

 
—

 
—

 
(39.1
)
 
—

Net Cash Used in Investing Activities
(344.8
)
 
(37.4
)
 
(2.5
)
 
(39.1
)
 
(423.8
)
 
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
 
 
 
 
 
Proceeds from issuance of long-term debt
600.0

 
—

 
—

 
—

 
600.0

Proceeds from issuance of preferred stock, net of issuance costs
234.0

 
—

 
—

 
—

 
234.0

Repayments of long-term debt
(170.6
)
 
—

 
—

 
—

 
(170.6
)
Payments of preferred stock dividend
(4.2
)
 
—

 
—

 
—

 
(4.2
)
Payments of debt issuance costs
(10.5
)
 
—

 
—

 
—

 
(10.5
)
Payments for equity distributions
—

 
(119.0
)
 
—

 
119.0

 
—

Other, net
0.1

 
—

 
—

 
—

 
0.1

Net Cash Provided by (Used in) Financing Activities
648.8

 
(119.0
)
 
—

 
119.0

 
648.8

Effect of Exchange Rate Changes on Cash and Cash Equivalents
—

 
—

 
(0.4
)
 
—

 
(0.4
)
 
 
 
 
 
 
 
 
 
 
Net Increase in Cash and Cash Equivalents
341.7

 
1.9

 
1.9

 
(1.7
)
 
343.8

Cash and Cash Equivalents, Beginning of Year
49.7

 
2.2

 
6.3

 
—

 
58.2

Cash and Cash Equivalents, End of Year
$
391.4

 
$
4.1

 
$
8.2

 
$
(1.7
)
 
$
402.0



82

 
Year Ended September 30, 2012
 
Parent
 
 
 
Non-
 
 
 
 
 
Company
 
Guarantors
 
Guarantors
 
Eliminations
 
Total
Net Cash (Used in) Provided by Operating Activities
$
(3.1
)
 
$
201.5

 
$
9.8

 
$
(64.2
)
 
$
144.0

 
 
 
 
 
 
 
 
 
 
Cash Flows from Investing Activities
 
 
 
 
 
 
 
 
 
Additions to property
—

 
(29.5
)
 
(1.4
)
 
—

 
(30.9
)
Payment for equity contributions
(6.0
)
 
—

 
—

 
6.0

 
—

Proceeds from equity distributions
84.3

 
—

 
—

 
(84.3
)
 
—

Net Cash Provided by (Used in) Investing Activities
78.3

 
(29.5
)
 
(1.4
)
 
(78.3
)
 
(30.9
)
 
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
 
 
 
 
 
Proceeds from issuance of long-term debt
950.0

 
—

 
—

 
—

 
950.0

Payment to Ralcorp
(900.0
)
 
—

 
—

 
—

 
(900.0
)
Repayments of long-term debt
(4.4
)
 
—

 
—

 
—

 
(4.4
)
Purchases of treasury stock
(53.4
)
 
—

 
—

 
—

 
(53.4
)
Change in net investment of Ralcorp
—

 
(21.3
)
 
(18.1
)
 
—

 
(39.4
)
Payments of debt issuance costs
(17.7
)
 
—

 
—

 
—

 
(17.7
)
Changes in intercompany debt
—

 
—

 
7.8

 
—

 
7.8

Proceeds from equity contributions
—

 
—

 
6.0

 
(6.0
)
 
—

Payments for equity distributions
—

 
(148.5
)
 
—

 
148.5

 
—

Net Cash Used in Financing Activities
(25.5
)
 
(169.8
)
 
(4.3
)
 
142.5

 
(57.1
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
—

 
—

 
0.5

 
—

 
0.5

 
 
 
 
 
 
 
 
 
 
Net Increase in Cash and Cash Equivalents
49.7

 
2.2

 
4.6

 
—

 
56.5

Cash and Cash Equivalents, Beginning of Year
—

 
—

 
1.7

 
—

 
1.7

Cash and Cash Equivalents, End of Year
$
49.7

 
$
2.2

 
$
6.3

 
$
—

 
$
58.2




83

NOTE 23 — SUMMARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
First
 
Second
 
Third
 
Fourth
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Fiscal 2014
 
 
 
 
 
 
 
Net sales
$
297.0

 
$
438.0

 
$
633.0

 
$
1,043.1

Gross profit
114.5

 
129.4

 
148.6

 
228.7

Impairment of goodwill and other intangible assets
—

 
—

 
—

 
295.6

Net (loss) earnings
(2.4
)
 
(18.3
)
 
(35.1
)
 
(287.4
)
Net (loss) earnings available to common stockholders
(5.0
)
 
(22.6
)
 
(39.3
)
 
(291.7
)
Basic (loss) earnings per share
$
(0.15
)
 
$
(0.67
)
 
$
(0.92
)
 
$
(5.86
)
Diluted (loss) earnings per share
$
(0.15
)
 
$
(0.67
)
 
$
(0.92
)
 
$
(5.86
)
 
 
 
 
 
 
 
 
Fiscal 2013
 
 
 
 
 
 
 
Net sales
$
236.9

 
$
248.2

 
$
257.3

 
$
291.7

Gross profit
105.7

 
102.5

 
104.2

 
112.5

Impairment of goodwill and other intangible assets
—

 
—

 
—

 
2.9

Net earnings (loss)
7.6

 
5.1

 
3.4

 
(0.9
)
Net earnings (loss) available to common stockholders
7.6

 
4.3

 
1.1

 
(3.2
)
Basic earnings (loss) per share
$
0.23

 
$
0.13

 
$
0.03

 
$
(0.10
)
Diluted earnings (loss) per share
$
0.23

 
$
0.13

 
$
0.03

 
$
(0.10
)

NOTE 24 — SUBSEQUENT EVENTS
Preferred Stock Dividend
On October 22, 2014, the Company’s Board of Directors declared a quarterly dividend of $0.9375 per share, representing payment for the dividend period from the date of August 15, 2014 to November 14, 2014, on the Company’s 3.75% Series B Cumulative Perpetual Convertible Preferred Stock. The Board of Directors also declared a quarterly dividend of $0.625 per share, representing payment for the dividend period from August 15, 2014 to November 14, 2014, on the Company’s 2.5% Series C Cumulative Perpetual Convertible Preferred Stock. Both dividends were paid on November 17, 2014 to preferred shareholders of record as of November 1, 2014.
Business Combinations
On October 1, 2014, the Company completed the previously announced acquisition of the PowerBar and Musashi brands and related worldwide assets from Nestlé S.A for $150.0 subject to a working capital adjustment, which resulted in a payment at closing of  $136.1 . The parties have not yet agreed on a final net working capital adjustment. The PowerBar and Musashi brands manufacture and market premium bars, powders and gels.
On November 1, 2014, the Company completed the previously announced acquisition of American Blanching Company (“ABC”) for  $128.0 , on a debt-free, cash-free basis. ABC is a manufacturer of peanut butter for national brands, private label retail and industrial markets and provider of peanut blanching, granulation and roasting services for the commercial peanut industry.
These transactions will be accounted for as business combinations under the acquisition method of accounting. The Company will record the assets acquired and liabilities assumed at their fair values as of the respective acquisition dates. Due to the limited time since closing of the acquisitions, the valuation efforts and related acquisition accounting are incomplete at the time of filing of the consolidated financial statements. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired, including goodwill. In addition, because the acquisition accounting is incomplete, the Company is unable to provide the supplemental pro forma revenue and earnings for the combined entity, as the pro forma adjustments are expected to primarily consist of estimates for the amortization of identifiable intangible assets acquired and related income tax effects which will result from the purchase price allocation and determination of the fair values for the assets acquired and liabilities assumed.



84

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the Executive Chairman, Chief Executive Officer and Chief Financial Officer of the Company, has evaluated the effectiveness of our 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, our 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.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
During fiscal 2014, we completed the following acquisitions:
• Dakota Growers Pasta Company, Inc. in January 2014;
• Dymatize Enterprises, LLC and Golden Boy Foods Ltd. in February 2014; and
• MFI Holding Corporation in June 2014.
We have excluded these acquisitions, which were purchase business combinations, from our assessment of the effectiveness of internal control over financial reporting.  Total assets excluding goodwill (which is included in control testing) and total third party revenues for these businesses represent $3,214.5 million, or 38%, of consolidated assets and $1,186.3 million, or 49%, of consolidated revenues, respectively.
As of September 30, 2014, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based upon the criteria described in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management's assessment utilizing these criteria, our management concluded that, as of September 30, 2013, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of September 30, 2014 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears herein.
Changes in Internal Control Over Financial Reporting
We evaluated the changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2014 and concluded that the following activity has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In connection with our acquisitions in fiscal 2014, management is in the process of analyzing, evaluating and, where necessary, implementing changes in controls and procedures. As a result, the process may result in additions or changes to the Company's internal control over financial reporting. The Company's fiscal 2014 acquisitions are excluded from management's report on internal control over financial reporting as of September 30, 2014.
ITEM 9B.    OTHER INFORMATION
Not applicable.


85

PART III
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding directors under the headings “Election of Directors – Information about the Current Directors and Nominees for Election to the Board of Directors,” “Corporate Governance – Board Meetings and Committees,” and “Security Ownership of Certain Shareholders – Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s 2015 Notice of Annual Meeting and Proxy Statement is hereby incorporated by reference. Information regarding Executive Officers of the Company is included under Item 1 of Part I.
The Company has adopted a code of ethics, our “Global Standards of Business Conduct,” applicable to all corporate officers and employees, which sets forth the Company’s expectations for the conduct of business by officers and employees. The directors have adopted, and are required to abide by, the Directors Code of Ethics. Both documents are available on the Company’s website at www.postholdings.com. In the event the Company modifies either document or waivers of compliance are granted to officers or directors, the Company will post such modifications or waivers on its website or in a report on Form 8-K.
ITEM 11.    EXECUTIVE COMPENSATION
Information appearing under the headings “Compensation of Officers and Directors,” “Compensation Committee Interlocks and Insider Participation” and “Corporate Governance and Compensation Committee Report” in the Company’s 2015 Notice of Annual Meeting and Proxy Statement is hereby incorporated by reference.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The discussion of the security ownership of certain beneficial owners and management appearing under the headings “Security Ownership of Certain Shareholders” and equity compensation plan information under the heading “Equity Compensation Plan Information” in the Company’s 2015 Notice of Annual Meeting and Proxy Statement is hereby incorporated by reference.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information appearing under the heading “Certain Relationships and Related Transactions” and “Corporate Governance – Director Independence” of the Company’s 2015 Notice of Annual Meeting and Proxy Statement is hereby incorporated by reference.
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2015 Notice of Annual Meeting and Proxy Statement is hereby incorporated by reference.
PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as a part of this report:
1.
Financial Statements . The following are filed as a part of this document under Item 8.
•
Report of Independent Registered Public Accounting Firm
•
Consolidated Statements of Operations for the years ended September 30, 2014, 2013 and 2012
•
Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2014, 2013 and 2012
•
Consolidated Balance Sheets at September 30, 2014 and 2013
•
Consolidated Statements of Cash Flows for years ended September 30, 2014, 2013 and 2012
•
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2014, 2013 and 2012
•
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules . None. Schedules not included have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3.
Exhibits . See the Exhibit Index that appears at the end of this document and which is incorporated herein.


86
Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Post Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
POST HOLDINGS, INC.
 
 
 
 
 
By:
/s/ William P. Stiritz
 
By:
/s/ Robert V. Vitale
 
William P. Stiritz
 
 
Robert V. Vitale
 
Executive Chairman and Chairman of the Board
 
 
President and Chief Executive Officer
November 26, 2014
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeff A. Zadoks and Diedre J. Gray and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resolution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
/s/ William P. Stiritz
 
Executive Chairman and Chairman of the Board
(principal executive officer)
 
November 26 , 2014
William P. Stiritz
 
 
 
 
 
 
 
 
/s/ Robert V. Vitale
 
Director, President and Chief Executive Officer
(principal executive officer)
 
November 26, 2014
Robert V. Vitale
 
 
 
 
 
 
 
 
/s/ Jeff A. Zadoks
 
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
 
November 26, 2014
Jeff A. Zadoks
 
 
 
 
 
 
 
 
/s/ Jay W. Brown
 
Director
 
November 26, 2014
Jay W. Brown
 
 
 
 
 
 
 
 
 
/s/ Edwin H. Callison
 
Director
 
November 26, 2014
Edwin H. Callison
 
 
 
 
 
 
 
 
 
/s/ Gregory L. Curl
 
Director
 
November 26, 2014
Gregory L. Curl
 
 
 
 
 
 
 
 
 
/s/ William H. Danforth
 
Director
 
November 26, 2014
William H. Danforth
 
 
 
 
 
 
 
 
 
/s/ Robert E. Grote
 
Director
 
November 26, 2014
Robert E. Grote
 
 
 
 
 
 
 
 
 
/s/ David P. Skarie
 
Director
 
November 26, 2014
David P. Skarie
 
 
 
 


Table of Contents

EXHIBIT INDEX
Exhibit No.
 
Description
*2.1
 
Separation and Distribution Agreement dated as of February 2, 2012 by and among Ralcorp Holdings, Inc., the Company and Post Foods, LLC (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on February 8, 2012)
*2.2
 
Transition Services Agreement dated as of February 3, 2012 by and between Ralcorp Holdings, Inc. and the Company (Incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on February 8, 2012)
*2.3
 
Employee Matters Agreement dated as of February 3, 2012 by and between Ralcorp Holdings, Inc. and the Company (Incorporated by reference to Exhibit 2.3 to the Company’s Form 8-K filed on February 8, 2012)
*2.4
 
Contribution Agreement dated as of February 3, 2012 by and between Ralcorp Holdings, Inc. and the Company (Incorporated by reference to Exhibit 2.4 to the Company’s Form 8-K filed on February 8, 2012)
*‡2.5
 
Agreement and Plan of Merger dated as of August 1, 2013 by and among the Company, Post Acquisition Sub II, Inc., Premier Nutrition Corporation and Kristopher Wood (Incorporated by reference to Exhibit 2.5 to the Company's Form 10-K filed on November 27, 2013)
*‡2.6
 
Stock Purchase Agreement by and between Viterra Inc. and the Company dated as of September 15, 2013 (Incorporated by reference to Exhibit 2.5 to the Company's Form 10-K filed on November 27, 2014)
*‡2.7
 
Share Purchase Agreement, dated as of December 7, 2013, by and among Tricor Pacific Capital Partners (Fund IV), Limited Partnership, Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership, The Manufacturer’s Life Insurance Company, Richard Harris, 0987268 B.C. LTD, Post Holdings, Inc. and Tricor Pacific Capital Partners (Fund IV), ULC (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on December 9, 2013)
*‡2.8
 
Securities Purchase Agreement, dated as of December 8, 2013, by and among Dymatize Enterprises, LLC, TA/DEI-A Acquisition Corp., TA/DEI-B-1 Acquisition Corp., TA/DEI-B-2 Acquisition Corp., TA/DEI-B-3 Acquisition Corp., each of the persons identified as a “TA Fund” on Appendix I to the Securities Purchase Agreement, Imperial Capital, LLC, Dymatize Management Holdings, Inc., Dymatize Enterprises Equity Plan, LLC, TA Associates Management, L.P., Post Acquisition Sub III, LLC and Post Holdings, Inc. (Incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on December 9, 2013)
*‡2.9
 
Stock and Asset Purchase Agreement, dated as of February 3, 2014, by and among Gerber Products Company, Nestlé Australia Ltd, Nestlé Deutschland AG, Post Acquisition Sub IV, Inc., Post Australia Pty Ltd and Post Holdings, Inc. (Incorporated by reference to Exhibit 2.5 to the Company's Form 10-Q filed on May 9, 2014)
*‡2.10
 
Intellectual Property Purchase and License Agreement, dated as of February 3, 2014, by and among Société des Produits Nestlé S.A., Nestec S.A., Post Acquisition Sub IV, Inc. and Post Holdings, Inc. (Incorporated by reference to Exhibit 2.6 to the Company's Form 10-Q filed on May 9, 2014)

*‡2.11
 
Agreement and Plan of Merger among Post Holdings, Inc., Acquisition Sub, Inc., MFI Holding Corporation and GS Capital Partners VI Fund, L.P. dated as of April 16, 2014 (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on April 17, 2014)
**‡ 2.12
 
Stock Purchase Agreement by and among American Blanching Company, ABC Peanut Butter, LLC, Nuts Distributor of America Inc. and Post Holdings, Inc. dated as of August 7, 2014
*3.1
 
Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on February 2, 2012)
*3.2
 
Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on February 2, 2012)
*4.1
 
Indenture dated as of February 3, 2012 by and among the Company, the Guarantors (as defined) and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 8, 2012)
*4.2
 
Certificate of Designation, Preferences and Rights of 3.75% Series B Cumulative Perpetual Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 26, 2013)
*4.3
 
Indenture dated as of November 18, 2013 by and among the Company, the Guarantors (as defined) and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on November 18, 2013)



88
Table of Contents

Exhibit No.
 
Description
*4.4
 
Certificate of Designation, Preferences and Rights of 2.5% Series C Cumulative Perpetual Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on December 16, 2013)

*4.5
 
Senior Indenture dated May 28, 2014, between Post Holdings, Inc. and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on May 28, 2014)
*4.6
 
First Supplemental Indenture, dated May 28, 2014, between Post Holdings, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on May 28, 2014)
*4.7
 
Purchase Contract Agreement, dated May 28, 2014, between Post Holdings, Inc. and U.S. Bank National Association (Incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K filed on May 28, 2014)
*4.8
 
Indenture dated as of June 2, 2014 by and among the Company, the Guarantors (as defined) and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on June 2, 2014)
* † 10.1
 
Form of Management Continuity Agreement (Incorporated by referenced to Exhibit 10.2 to the Company’s Form 8-K filed on August 9, 2012)
* † 10.2
 
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.7 to Amendment No. 4 to the Company’s Form 10, filed January 25, 2012)
* † 10.3
 
Post Holdings, Inc. 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.4
 
Form of Stock Appreciation Rights Agreement (Incorporated by reference to Exhibit 10.4 1 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.5
 
Form of Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.6
 
Form of Non-Management Director Stock Appreciation Rights Agreement (Incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.7
 
Form of Non-Management Director Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.8
 
Post Holdings, Inc. Deferred Compensation Plan for Key Employees, as amended (Incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed on February 2, 2012)
*† 10.9
 
Post Holdings, Inc. Executive Savings Investment Plan, restated August 15, 2012 (Incorporated by reference to Exhibit 10.9 to the Company’s Form 10-K filed on December 13, 2012)
* † 10.10
 
Post Holdings, Inc. Supplemental Retirement Plan (Incorporated by reference to Exhibit 10.10 to the Company’s Form 8-K filed on February 2, 2012)
* † 10.11
 
Post Holdings, Inc. Deferred Compensation Plan for Non-Management Directors, as amended and restated (Incorporated by reference to Exhibit 10.11 to the Company’s Form 10-Q filed on September 14, 2012)
*10.12
 
Tax Allocation Agreement dated as of February 3, 2012 by and between Ralcorp Holdings, Inc. and the Company (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 8, 2012)
* † 10.13
 
Employment Agreement dated as of May 29, 2012 by and between William P. Stiritz and the Company (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 31, 2012)
* † 10.14
 
Non-Qualified Stock Option Agreement for Mr. Stiritz (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 31, 2012)
* † 10.15
 
Form of Non-Qualified Stock Option Agreement for Other Executive Officers of the Company (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on May 31, 2012)
* † 10.16
 
Restricted Stock Unit Agreement for Mr. Stiritz (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on May 31, 2012)
* † 10.17
 
Form of Restricted Stock Unit Agreement for Other Executive Officers of the Company (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on May 31, 2012)


89
Table of Contents

Exhibit No.
 
Description
*† 10.18
 
Senior Management Bonus Program, as amended and restated effective October 1, 2012 (Incorporated by reference to Exhibit 10.21 to the Company’s Form 10-Q filed on August 8, 2013)
*† 10.19
 
Key Management Bonus Program, as amended and restated (Incorporated by reference to Exhibit 10.22 to the Company’s Form 10-Q filed on September 14, 2012)
*10.20
 
Second Amendment and Waiver to Credit Agreement dated as of June 13, 2012, by and among the Company, the lenders named therein, and Barclays Bank PLC, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 14, 2012)
* † 10.21
 
Form of Cash-Settled Restricted Stock Unit Agreement (Incorporated by referenced to Exhibit 10.1 to the Company’s Form 8-K filed on August 9, 2012)
*10.22
 
Third Amendment and Waiver to Credit Agreement dated as of September 13, 2012, by and among the Company, the lenders named therein, and Barclays Bank PLC, as Administrative Agent (Incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K filed on December 13, 2012)
*10.23
 
Amendment to Tax Allocation Agreement dated as of September 26, 2012 by and between Ralcorp Holdings, Inc. and the Company (Incorporated by reference to Exhibit 10.26 to the Company’s Form 10-K filed on December 13, 2012)
*10.24
 
Fourth Amendment to Credit Agreement dated as of October 19, 2012, by and among the Company, the lenders named therein, and Barclays Bank PLC, as Administrative Agent (Incorporated by referenced to Exhibit 10.1 to the Company’s Form 8-K filed on October 22, 2012)
*†10.25
 
Form of Cliff Vesting Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on November 26, 2012)
*†10.26
 
Form of Cliff Vesting Restricted Stock Unit Agreement (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on November 26, 2012)
*†10.27
 
Second Amendment to the Post Holdings, Inc. Deferred Compensation Plan for Key Employees effective August 24, 2012 (Incorporated by reference to Exhibit 10.28 to the Company’s Form 10-Q filed on May 13, 2013)
*†10.28
 
Third Amendment to the Post Holdings, Inc. Deferred Compensation Plan for Key Employees effective January 29, 2013 (Incorporated by reference to Exhibit 10.29 to the Company’s Form 10-Q filed on May 13, 2013)
*†10.29
 
First Amendment to the Post Holdings, Inc. Deferred Compensation Plan for Non-Management Directors effective January 29, 2013 (Incorporated by reference to Exhibit 10.30 to the Company’s Form 10-Q filed on May 13, 2013)
*†10.30
 
First Amendment to the Post Holdings, Inc. Executive Savings Plan for Non-Management Directors effective January 29, 2013 (Incorporated by reference to Exhibit 10.31 to the Company’s Form 10-Q filed on May 13, 2013)
*†10.31
 
Post Holdings, Inc. 2012 Long Term Incentive Plan, as amended and restated (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 1, 2013)
*10.32
 
Purchase Agreement by and among the Company, Morgan Stanley & Co. LLC, Wells Fargo Securities, LLC and Credit Suisse Securities (USA) LLC, as Initial Purchasers, relating to the sale by the Company of 3.75% Series B Cumulative Perpetual Convertible Preferred Stock (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 26, 2013)
*10.33
 
Asset Purchase Agreement by and between Hearthside Foods Solutions, LLC and Post Acquisition Sub I, LLC dated as of May 8, 2013 (Incorporated by reference to Exhibit 10.34 to the Company’s Form 10-Q filed on August 8, 2013)
*†10.34
 
Amendment One to Employment Agreement dated October 15, 2013 by and between William P. Stiritz and the Company (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 17, 2013)
*†10.35
 
Non-Qualified Stock Option Agreement for Mr. Stiritz (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on October 17, 2013)
*†10.36
 
Form of amended Stock-Settled Restricted Stock Unit Agreement (Incorporated by referenced to Exhibit 10.4 to the Company’s Form 8-K filed on October 17, 2013)
*†10.37
 
Form of amended Cash-Settled Restricted Stock Unit Agreement (Incorporated by referenced to Exhibit 10.5 to the Company’s Form 8-K filed on October 17, 2013)


90
Table of Contents

Exhibit No.
 
Description
*10.38
 
Purchase Agreement, dated December 10, 2013, by and among the Company, Barclays Capital Inc. and Goldman Sachs & Co., as the Initial Purchasers, relating to the sale by the Company of 2.5% Series C Cumulative Perpetual Convertible Preferred Stock (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 16, 2013)
*10.39
 
Credit Agreement, dated January 29, 2014, among the Post Holdings, Inc., the institutions from time to time party thereto as Lenders, Barclays Bank PLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners, Barclays Bank PLC, as Syndication Agent, Credit Suisse AG, Cayman Island Branch and Goldman Sachs Bank USA, as Documentation Agents, and Wells Fargo Bank, National Association, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 3, 2014)
*10.40
 
Commitment Letter of Barclays Bank PLC, Credit Suisse AG, Credit Suisse Securities (USA) LLC, Wells Fargo Bank, National Association, WF Investment Holdings, LLC, Wells Fargo Securities, LLC and Post Holdings, Inc., dated April 16, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 17, 2014)
*10.41
 
First Amendment to Credit Agreement, dated as of May 1, 2014, by and among Post Holdings, Inc., Wells Fargo Bank, National Association, in its capacity as Administrative Agent, and the Required Lenders and the Guarantors party thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 5, 2014)
*10.42
 
Joinder Agreement No. 1, dated as of May 1, 2014, by and among Bank of America, N.A., Barclays Bank PLC, BMO Harris Financing Inc., Credit Suisse AG, Cayman Islands Branch, Goldman Sachs Bank USA, Nomura Corporate Funding Americas, LLC and Wells Fargo Bank, National Association, Post Holdings, Inc., and Wells Fargo Bank, National Association, as administrative agent (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 5, 2014)
*10.43
 
Joinder Agreement to Commitment Letter, dated as of May 2, 2014, by and among Barclays Bank PLC, Credit Suisse AG Cayman Islands Branch, Credit Suisse Securities (USA) LLC, Wells Fargo Bank, National Association, WF Investment Holdings, LLC, Wells Fargo Securities, LLC, Goldman Sachs Lending Partners LLC, Bank of Montreal, BMO Capital Markets Corp., Nomura Corporate Funding Americas, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America, N.A., SunTrust Robinson Humphrey, Inc., SunTrust Bank, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, PNC Bank, National Association, PNC Capital Markets LLC, Stifel Bank & Trust and CoBank, ACB and Post Holdings, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on May 5, 2014)
*10.44
 
Joinder Agreement No. 2, dated as of June 2, 2014, by and among the Company, the Guarantors (as defined) party thereto and Barclays Bank PLC and consented to by Wells Fargo Bank, National Association, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 2, 2014)
*†10.45
 
Form of Cash-Settled Long-Term Restricted Stock Unit Agreement (Incorporated by reference to Exhibit 10.47 to the Company’s Form 10-Q filed on August 8, 2014)
**†10.46
 
Separation and Release Agreement by and between the Company and Terence E. Block effective November 1, 2014
**†10.47
 
Non-Qualified Stock Option Agreement for Mr. Stiritz dated October 9, 2014
**†10.48

 
Amendment Two to Employment Agreement dated October 9, 2014 by and between William P. Stiritz and the Company
**23.1
 
Consent of PricewaterhouseCoopers LLP
**24.1
 
Power of Attorney (Included under Signatures)
**31.1
 
Certification of William P. Stiritz pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 26, 2014
**31.2
 
Certification of Robert V. Vitale pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 26, 2014
**31.3
 
Certification of Jeff A. Zadoks pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 26, 2014
**32.1
 
Certification of William P. Stiritz, Robert V. Vitale and Jeff A. Zadoks, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 26, 2014
**101.INS
 
XBRL Instance Document


91
Table of Contents

Exhibit No.
 
Description
**101.SCH
 
XBRL Taxonomy Extension Schema Document
**101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
**101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
**101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
*
Incorporated by reference
**
Furnished with this Form 10-K
†
These exhibits constitute management contracts, compensatory plans and arrangements.
‡
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.





92



Exhibit 2.12
EXECUTION COPY


STOCK PURCHASE AGREEMENT

BY AND AMONG

AMERICAN BLANCHING COMPANY
(the Company)
ABC PEANUT BUTTER, LLC
(the Seller)
NUTS DISTRIBUTOR OF AMERICA INC.
(the Buyer)
AND
POST HOLDINGS, INC.
(the Parent)


Dated as of August 7, 2014





TABLE OF CONTENTS
 
Page
 
 
ARTICLE I PURCHASE AND SALE OF PURCHASED SHARES
1
 
 
Section 1.1
Sale and Transfer of Purchased Shares
1
 
 
 
Section 1.2
Purchase Price
1
 
 
 
Section 1.3
Payment Direction Certificate
2
 
 
 
Section 1.4
Payment of Purchase Price
2
 
 
 
Section 1.5
Payoff of Certain Liabilities
3
 
 
 
Section 1.6
Purchase Price Calculation
3
 
 
 
Section 1.7
Post Closing Adjustment of Closing Date Payment
5
 
 
 
Section 1.8
Disputes Regarding Closing Date Balance Sheet, Calculation of the Closing Date Cash Payment Adjustment
6
 
 
 
Section 1.9
Escrow Agreement
8
 
 
 
Section 1.10
Earnest Money Deposit
8
 
 
 
ARTICLE II CLOSING; CLOSING DELIVERIES; POST-CLOSING ACTS
9
 
 
Section 2.1
Closing
9
 
 
 
Section 2.2
Deliveries and Actions Taken at Closing
9
 
 
 
Section 2.3
Post-Closing Acts
11
 
 
 
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
11
 
 
Section 3.1
Organization and Qualification
11
 
 
 
Section 3.2
Authority; Enforceability
12
 
 
 
Section 3.3
Capitalization
12
 
 
 
Section 3.4
Assets
13
 
 
 
Section 3.5
Company Real Estate
13
 
 
 
Section 3.6
Material Contracts
15

i



Section 3.7
Permits and Licenses
18
 
 
 
Section 3.8
No Conflict or Violation
18
 
 
 
Section 3.9
Financial Statements
18
 
 
 
Section 3.10
Absence of Certain Changes
19
 
 
 
Section 3.11
Books and Records
20
 
 
 
Section 3.12
Litigation
20
 
 
 
Section 3.13
Compliance with Law
21
 
 
 
Section 3.14
Intellectual Property
21
 
 
 
Section 3.15
Employees
22
 
 
 
Section 3.16
Employee Benefit Plans
22
 
 
 
Section 3.17
Labor Relations
24
 
 
 
Section 3.18
Environmental, Health, and Safety
25
 
 
 
Section 3.19
Tax Matters
25
 
 
 
Section 3.20
Insurance
27
 
 
 
Section 3.21
Inventory
27
 
 
 
Section 3.22
Brokers
28
 
 
 
Section 3.23
Suppliers and Customers
28
 
 
 
Section 3.24
Products
28
 
 
 
Section 3.25
Accounts Receivable
31
 
 
 
Section 3.26
Bank Accounts and Powers of Attorney
31
 
 
 
Section 3.27
Unlawful Benefits
31
 
 
 
Section 3.28
Transactions with Affiliates
31
 
 
 
Section 3.29
No Other Representations and Warranties
31
 
 
 
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING STOCKHOLDER
32
 
 
Section 4.1
Organization and Qualification
32

ii



Section 4.2
Authority; Enforceability
32
 
 
 
Section 4.3
No Conflict
33
 
 
 
Section 4.4
Title of Shares
33
 
 
 
Section 4.5
Litigation
33
 
 
 
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER
33
 
 
Section 5.1
Organization
33
 
 
 
Section 5.2
Authority; Enforceability
34
 
 
 
Section 5.3
No Conflict or Violation
34
 
 
 
Section 5.4
Governmental Consents
34
 
 
 
Section 5.5
Purchase for Investment
35
 
 
 
Section 5.6
Brokers
35
 
 
 
Section 5.7
Ability to Perform Agreement
35
 
 
 
ARTICLE VI COVENANTS OF THE PARTIES
35
 
 
Section 6.1
Conduct of Business and Notification
35
 
 
 
Section 6.2
Access
37
 
 
 
Section 6.3
Confidential Information
37
 
 
 
Section 6.4
Consents of Third Parties; Governmental Approvals
38
 
 
 
Section 6.5
Further Assurances
39
 
 
 
Section 6.6
Tax Covenants
40
 
 
 
Section 6.7
Insurance; Property
42
 
 
 
Section 6.8
Administration of Accounts
42
 
 
 
Section 6.9
No Solicitation; Exclusivity
42
 
 
 
Section 6.10
Director and Officer Liability; Indemnification
42
 
 
 
Section 6.11
Contact with Employees, Customers and Suppliers
43
 
 
 
Section 6.12
Control of the Company’s or the Buyer’s Operations
43

iii



Section 6.13
Confidentiality
43
 
 
 
Section 6.14
Interim Financial Statements
44
 
 
 
Section 6.15
Title Commitments, Title Policies, Surveys and Zoning Letters
44
 
 
 
Section 6.16
Lease Estoppels; Landlord Lien Waivers; and Non-Disturbance Agreements
45
 
 
 
Section 6.17
Amendments to LLC Agreement
45
 
 
 
Section 6.18
Required Amendments
45
 
 
 
ARTICLE VII CLOSING CONDITIONS
46
 
 
Section 7.1
Conditions Precedent to the Buyer’s and the Parent’s Obligations
46
 
 
 
Section 7.2
Conditions Precedent to the Seller’s and the Company’s Obligations
47
 
 
 
ARTICLE VIII OTHER AGREEMENTS OF THE PARTIES
47
 
 
Section 8.1
Survival of Representations, Warranties and Covenants
47
 
 
 
Section 8.2
Indemnification
48
 
 
 
Section 8.3
Release
52
 
 
 
Section 8.4
Disclosure Generally
53
 
 
 
Section 8.5
Independent Significance
54
 
 
 
Section 8.6
No Contribution
54
 
 
 
ARTICLE IX TERMINATION; REMEDIES
54
 
 
Section 9.1
Termination
54
 
 
 
Section 9.2
Effect of Termination
55
 
 
 
ARTICLE X MISCELLANEOUS
56
 
 
Section 10.1
Assignment; No Third Party Rights
56
 
 
 
Section 10.2
Notices
56
 
 
 
Section 10.3
Choice of Law; Venue and Forum
58
 
 
 
Section 10.4
Entire Agreement; Amendments and Waivers
58

iv



Section 10.5
Counterparts; Facsimile
58
 
 
 
Section 10.6
Expenses
59
 
 
 
Section 10.7
Invalidity
59
 
 
 
Section 10.8
Publicity
59
 
 
 
Section 10.9
Knowledge; Construction
59
 
 
 
Section 10.10
Joint Drafting
59
 
 
 
Section 10.11
Transfer Taxes
59
 
 
 
Section 10.12
Specific Performance
60
 
 
 
Section 10.13
Parent Guaranty
60
 
 
 
Section 10.14
Privilege; Waiver of Conflict
60
 
 
 
ARTICLE XI DEFINITIONS
60
 
 
Section 11.1
Certain Defined Terms
60



v



LIST OF EXHIBITS
Exhibit A:    Form of Escrow Agreement


vi


STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”) is entered into effective as of August 7, 2014, by and among NUTS DISTRIBUTOR OF AMERICA INC., a Washington corporation (“ Buyer ”), POST HOLDINGS, INC., a Missouri corporation (“ Parent ”), AMERICAN BLANCHING COMPANY, a Georgia corporation (the “ Company ”), and ABC PEANUT BUTTER, LLC, a Delaware limited liability company, being the sole shareholder of the Company (the “ Seller ”). Certain capitalized terms used in this Agreement are defined in Section 11.1 .
RECITALS
A. The Company is in the business of providing peanut blanching, granulation and roasting services and producing peanut granules, peanut paste, peanut butter and related products and performing related activities (the “ Business ”).
B. The Seller is the sole owner of all the issued and outstanding shares of capital stock of the Company (collectively the “ Purchased Shares ”).
C. The Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer, all of the Purchased Shares on the terms and subject to the conditions contained in this Agreement.
D. The Parent has agreed to guaranty the obligations of the Buyer as provided in Section 10.14 .
NOW THEREFORE , in consideration of the mutual covenants and agreements hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF PURCHASED SHARES
Section 1.1      Sale and Transfer of Purchased Shares . On the terms and subject to the conditions contained in this Agreement, at the Closing, the Seller shall sell, convey, transfer, assign, and deliver to the Buyer, and the Buyer shall acquire from the Seller, the Purchased Shares, free and clear of any and all Encumbrances.
Section 1.2      Purchase Price . The aggregate amount to be paid by the Buyer for the Purchased Shares shall be an amount (the “ Purchase Price ”) equal to $128,000,000, plus or minus, as applicable, the following items:
(i)     plus the amount of Cash and Cash Equivalents;
(ii)     plus the Working Capital Adjustment (which amount may be a positive or negative number);
(iii)     minus the amount of Closing Date Indebtedness (as reflected on the Pay-Off Letters);

1


(iv)     minus the Transaction Expenses;
(v)     minus the Pre-Closing Tax Obligations; and
(vi)     minus the Capital Expenditures Deficit.
Section 1.3      Payment Direction Certificate . Not more than ten (10) or less than three (3) Business Days prior to the Closing, the Company shall deliver to the Buyer a certificate, signed by its Chief Financial Officer (the “ Payment Direction Certificate ”), setting forth in reasonable detail as of the Closing Date the Company’s good faith estimates of the following:
(a)     the amount of the estimated Closing Date Net Working Capital (as contemplated by Section 1.6 ) and the resulting estimate of the Working Capital Adjustment (which amount may be a positive or negative number) (the “ Estimated WCA ”);
(b)     the amount of the estimated Cash and Cash Equivalents (the “ Estimated Cash and Cash Equivalents ”);
(c)     the amount of the estimated Transaction Expenses, itemized by the Person to whom such amount is owed (the “ Estimated Transaction Expenses ”);
(d)     the amount of the estimated Closing Date Indebtedness, itemized by the holders thereof (the “ Estimated Closing Date Indebtedness ”);
(e)     the amount of the estimated Pre-Closing Tax Obligations (the “ Estimated Pre-Closing Tax Obligations ”);
(f)     the amount of the estimated Capital Expenditures Deficit (the “ Estimated Capital Expenditures Deficit ”) and
(g)     the amount of the Closing Date Cash Payment.
The Payment Direction Certificate shall also specify the wire transfer instructions with respect to the various disbursements of the Purchase Price as contemplated in Section 1.5 . Within two days of receipt of the Payment Direction Certificate, the Buyer shall be entitled to review and comment on and request reasonable changes to the various components of the Payment Direction Certificate, and the Company shall cooperate with the Buyer in connection therewith and consider (but shall not be obligated to make) the Buyer’s proposed changes in good faith.
Section 1.4      Payment of Purchase Price .
(a)     At the Closing, or if the Closing does not occur on a Business Day, on the first Business Day immediately following the Closing, the Buyer shall pay the Purchase Price as follows:

2


(i)     An amount equal to $1,500,000 (the “ Closing Adjustment Escrow Amount ”) shall be deposited into the Closing Adjustment Escrow Account as provided in Section 1.9 and Section 1.10 ;
(ii)     An Amount equal to $10,000,000 (the “ Indemnification Escrow Amount ”) shall be deposited into the Indemnification Escrow Account as provided in Section 1.9 and Section 1.10 .
(iii)     An amount equal to the Estimated Closing Date Indebtedness by wire transfer of immediately available funds to the holders of the Estimated Closing Date Indebtedness, in such amounts and to such accounts as specified in Payoff Letters;
(iv)     An amount equal to the Estimated Transaction Expenses to the Persons, in the amounts, and in accordance with the payment instructions set forth in the Payment Direction Certificate; and
(v)     An amount (the “ Closing Date Cash Payment ”) equal to (A) the sum of (1) $128,000,000, plus (2) the Estimated WCA (which amount may be a positive or negative number), plus (3) the Estimated Cash and Cash Equivalents, less (B) the sum of (1) the Closing Adjustment Escrow Amount, plus (2) the Indemnification Escrow Amount, plus (3) the Estimated Closing Date Indebtedness, plus (4) the Estimated Transaction Expenses, plus (5) the Estimated Pre-Closing Tax Obligations, plus (6) the Estimated Capital Expenditures Deficit, by (x) releasing to the Seller the Earnest Money Deposit (less the Closing Adjustment Escrow Amount and the Indemnification Escrow Amount) as provided in Section 1.9 and Section 1.10 , and (y) paying the remaining balance by wire transfer of immediately available funds to an account or accounts designated by the Seller.
Section 1.5      Payoff of Certain Liabilities . The Parties acknowledge and agree that the Purchase Price assumes that, at the Closing, the Company’s only indebtedness shall be current liabilities incurred in the Ordinary Course, including trade payables and accruals. The amount of all Funded Indebtedness that remains unpaid and owing as of the close of business on the day immediately preceding the Closing Date (collectively, the “ Closing Date Indebtedness ”) shall be extinguished and paid in full from the Purchase Price as provided in Section 1.4(a)(iii) . Prior to the Closing Date, the Company shall deliver to the Buyer letters, setting forth the payoff amounts and the payees of all Closing Date Indebtedness and Transaction Expenses, from the holders of such amounts (which letters shall include the agreement of the holder that upon payment in full of the applicable indebtedness secured by any Encumbrance, such holder shall release and terminate all such Encumbrances) (“ Pay-Off Letters ”).
Section 1.6      Purchase Price Calculation . The calculation of the Purchase Price shall be based upon the calculation of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Closing Date Indebtedness, the Transaction Expenses, the Pre-Closing Tax Obligations and the Capital Expenditures Deficit, each of which shall be based on the Closing Date Balance Sheet and calculated and applied in the following manner.

3


(a)      Closing Date Balance Sheet . Within seventy-five (75) days following the Closing Date, the Buyer will prepare and deliver to the Seller a balance sheet for the Company as of the close of business on the day immediately preceding the Closing Date (the “ Closing Date Balance Sheet ”) and, based thereon and on other information necessary to make the calculation, a calculation of the amount of (i) both the Closing Date Net Working Capital and any resulting Working Capital Adjustment (which will be calculated in the manner described herein), (ii) the Cash and Cash Equivalents and any resulting Cash and Cash Equivalents adjustment (which will be calculated in the manner described herein), (iii) the Closing Date Indebtedness and any resulting Indebtedness adjustment (which will be calculated in the manner described herein), (iv) the Transaction Expenses and any resulting Transaction Expenses adjustment (which will be calculated in the manner described herein), (v) the Pre-Closing Tax Obligations and any resulting Pre-Closing Tax Obligations adjustment (which will be calculated in the manner described herein), (vi) the Capital Expenditures Deficit and any resulting Capital Expenditures Deficit adjustment, and (vii) any resulting Closing Date Cash Payment Adjustment. The Closing Date Balance Sheet will be prepared in accordance with GAAP, consistently applied, and prepared applying the same accounting principles and methodologies used to prepare the Balance Sheet and applying the past practices of the Company (and where GAAP provides for a range of alternatives such past practices shall govern provided they are in accordance with GAAP). Whether or not the date as of which the Closing Date Balance Sheet is required to be prepared coincides with a fiscal quarter-end or fiscal year-end of the Company, the Parties shall use customary closing procedures for the preparation thereof, including procedures with respect to accounts and adjustments. The Parties acknowledge and agree that Schedule 1.6(a) sets forth an illustration of the calculation of the Purchase Price assuming (including the various components and line items of Net Working Capital) that the Closing Date had occurred on July 1, 2014.
(b)      Physical Inventory . For purposes of calculating the value of the Inventory reflected on the Closing Date Balance Sheet, within two days prior to the Closing Date, the Company shall take a physical count of the Inventory of the Company, and the Buyer and its representatives shall be permitted to observe such physical count. The count shall be adjusted for activity between the date of the physical inventory and the Closing Date. For purposes of counting and calculating the value of the Inventory of the Company for purposes of determining the Closing Date Net Working Capital, the Parties acknowledge and agree that (in furtherance of the rules of GAAP and historical accounting practices) (i) any finished inventory with a remaining shelf life of 6 months or less without a valid purchase order shall be excluded, (ii) any packaging inventory that is either greater than one year old or that is related to products that the Company no longer manufactures shall be excluded; and (iii) any supplies or ingredients inventory that exceeds the amounts that the Company will reasonably use or ship (based upon historical practice) before such inventory ages past the limits set forth in clause (i)–(ii) above shall be excluded.
(c)      Closing Date Net Working Capital Adjustment . For purposes of this Agreement, “ Target Net Working Capital ” shall be $15,938,000. For purposes of this Agreement, “ Closing Date Net Working Capital ” shall be defined as the Net Working Capital of the Company as of the close of business on the day immediately preceding the Closing Date. For purposes of this Agreement, “ Net Working Capital ” shall be defined as the Company’s current assets (excluding the amount of Cash and Cash Equivalents and current and deferred income Tax assets) less the Company’s current Liabilities (excluding the amount of Transaction Expenses, Funded Indebtedness and current and deferred income Tax Liabilities), calculated in accordance with GAAP, as consistently applied, and as set forth on Schedule 1.6(a) . For purposes of this Agreement, “ Working Capital Adjustment ” shall be an amount equal to the Closing Date Net Working Capital less the amount of the Target Net Working Capital (which amount may be a positive or negative number).

4


Section 1.7      Post Closing Adjustment of Closing Date Payment .
(a)      Calculation of Closing Date Cash Payment Adjustment . Upon finalization of the Closing Date Balance Sheet, the Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the various estimates set forth on the Payment Direction Certificate are, on a cumulative basis, greater or less, as applicable, than the corresponding final amounts based upon the Closing Date Balance Sheet or the calculation of the Pre-Closing Tax Obligations, as applicable (the “ Closing Date Cash Payment Adjustment ”), as follows:
(i)      Working Capital Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the Working Capital Adjustment is greater than or less than, respectively, the Estimated WCA.
(ii)      Cash and Cash Equivalents Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the Cash and Cash Equivalents are greater than or less than, respectively, the Estimated Cash and Cash Equivalents.
(iii)      Transaction Expenses Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the Transaction Expenses are less than or greater than, respectively, the Estimated Transaction Expenses.
(iv)      Indebtedness Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the Closing Date Indebtedness is less than or greater than, respectively, the Estimated Closing Date Indebtedness.
(v)      Pre-Closing Tax Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent the Pre-Closing Tax Obligations are less than or greater than, respectively, the Estimated Pre-Closing Tax Obligations; provided , however , that the Pre-Closing Tax Obligations shall not be deemed final until the expiration of the statute of limitations period applicable to the matters covered thereby and, for avoidance of doubt, any amount of the Pre-Closing Tax Obligations that shall not have been deducted for purposes of determining the Purchase Price pursuant to this Article I shall be subject to indemnification to the extent provided in Article VIII . The fact that the Pre-Closing Tax Obligations are not considered final shall not defer the date on which payments with respect to such Pre-Closing Tax Obligations are due under this Section 1.7 , Section 1.8 or Article VIII .
(vi)      Capital Expenditures Deficit Adjustment . The Closing Date Cash Payment shall be increased or decreased, on a dollar-for-dollar basis, to the extent that the Capital Expenditures Deficit is less than or greater than, respectively, the Estimated Capital Expenditures Deficit.

5


(b)      Payment of Closing Date Cash Payment Adjustment . In the event that, in the aggregate, the Closing Date Cash Payment Adjustment results in an increase in the Closing Date Cash Payment, (i) all of the Closing Adjustment Escrow Amount shall be released to the Seller in accordance with the Escrow Agreement, and (ii) the Buyer shall pay the Closing Date Cash Payment Adjustment to the Seller. In the event that the Closing Date Cash Payment Adjustment results in a decrease in the Purchase Price, (x) the Closing Date Cash Payment Adjustment, up to the Closing Adjustment Escrow Amount, shall be released to the Buyer in accordance with the Escrow Agreement, and (y) if the Closing Date Cash Payment Adjustment exceeds the Closing Adjustment Escrow Amount, the Seller shall pay to the Buyer the remaining balance of such Closing Date Cash Payment Adjustment. If the Closing Date Cash Payment Adjustment is less than the Closing Adjustment Escrow Amount, the balance of the Closing Adjustment Escrow Amount not so applied as provided in the preceding sentence shall be released to the Seller in accordance with the Escrow Agreement. Payments due pursuant hereto by the Seller or the Buyer shall be paid in cash not later than five (5) days following the date on which the Closing Date Balance Sheet is completed and the calculations hereunder become final and binding on the Parties; provided , however , that if the final determination of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Capital Expenditures Deficit and the resulting Closing Date Cash Payment Adjustment have been made, but the final determination of the Pre-Closing Tax Obligations has not been made because the Company’s Tax Return for its short taxable year ending on the Closing Date (determined in accordance with Treasury Regulation Section 1.1502-76(b) or any comparable provision of state or local requirements of Law) has not been filed by the Seller, then the actions set forth in this Section 1.7(b) shall be taken with respect to the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Capital Expenditures Deficit, and the resulting Closing Date Cash Payment Adjustment and any further estimate of the Pre-Closing Tax Obligations determined as of such date, and the actions set forth in this Section 1.7(b) with respect to Pre-Closing Tax Obligations shall be taken not more than two (2) Business Days after the filing of such Tax Return; provided , further , however , that the Pre-Closing Tax Obligations shall not be deemed final until the expiration of the statute of limitations period applicable to the matters covered thereby and, for avoidance of doubt, any amount of the Pre-Closing Tax Obligations that shall not have been deducted for purposes of determining the Purchase Price pursuant to this Article I shall be subject to indemnification to the extent provided in Article VIII .
Section 1.8      Disputes Regarding Closing Date Balance Sheet, Calculation of the Closing Date Cash Payment Adjustment .
(a)     If the Seller disagrees with the amounts of any of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness or the Capital Expenditures Deficit, or the amount of the Closing Date Cash Payment Adjustment, as calculated using the Closing Date Balance Sheet (including, without limitation, any claim that any of the foregoing were calculated in a manner inconsistent with the terms of this Agreement), the Seller shall notify the Buyer of such disagreement in writing specifying in detail the particulars of such disagreement within sixty (60) days after the Seller’s receipt of the Closing Date Balance Sheet and the amounts of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Pre-Closing Tax Obligations, the Capital Expenditures Deficit and the resulting Closing Date Cash Payment Adjustment prepared by the Buyer; provided , however , that in the event the Pre-Closing Tax Obligations are determined at the time specified in Section 1.8(b) , with respect to any disagreement relating to the determination of Pre-Closing Tax Obligations only, the time periods specified above in this Section 1.8(a) shall be measured from the date of such determination. The Seller and the Buyer shall use reasonable efforts for a period of thirty (30) days after the Buyer’s receipt of such notice (or such longer period as the Seller and the Buyer may mutually agree upon) to resolve any disagreements raised by the Seller with respect to the amounts of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Pre-Closing Tax Obligations, the Capital Expenditures Deficit and any resulting Closing Date Cash Payment Adjustment. During any such period of dispute, the Seller shall have reasonable access to the working papers of the Company, the Buyer, and their respective accountants relating to the Closing Date Balance Sheet and the amounts of the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Pre-Closing Tax Obligations, the Capital Expenditures Deficit and the amount of any adjustment pursuant to Section 1.7(a)(i)-(vi) prepared by the Buyer and calculated using the Closing Date Balance Sheet.

6


(b)     If, at the end of such period described in Section 1.8(a) , the Seller and the Buyer do not resolve such disagreements, the Seller and the Buyer shall promptly select a mutually acceptable independent accounting firm of recognized national standing to review the Closing Date Balance Sheet, the amounts of and methodology of calculating the Closing Date Net Working Capital, the Cash and Cash Equivalents, the Transaction Expenses, the Closing Date Indebtedness, the Capital Expenditures Deficit and any resulting Closing Date Cash Payment Adjustment prepared by the Buyer in accordance with the procedures described herein and calculated using the Closing Date Balance Sheet, and resolve any remaining disagreements regarding the foregoing items; provided , however , that the accounting firm shall not review the Pre-Closing Tax Obligations. If the Seller and the Buyer cannot agree upon an accounting firm, they shall choose an accounting firm by lot from those “Big 4” accounting firms having no material relationship to any of the Seller, the Buyer or the Company. The determination by such independent accounting firm applying the procedures described herein shall be final, binding, and conclusive on the Parties and judgment may be entered thereon in a court of competent jurisdiction; provided , however , that the Pre-Closing Tax Obligations shall not be deemed final until the expiration of the statute of limitations period applicable to the matters covered thereby and, for avoidance of doubt, any amount of the Pre-Closing Tax Obligations that shall not have been deducted for purposes of determining the Purchase Price pursuant to this Article I shall be subject to indemnification to the extent provided in Article VIII . The Seller and the Buyer shall make their respective submissions to the independent accounting firm within thirty (30) days after selecting such firm pursuant to this Section 1.8(b) . The Seller and the Buyer shall use reasonable efforts to cause such independent accounting firm to make its determination within thirty (30) days after accepting its selection. The fees and expenses of such independent accounting firm shall be shared by the Seller and the Buyer as follows: of the aggregate amount in dispute, if the independent accounting firm adopts the Seller’s position absolutely, the Buyer shall pay all such fees and expenses, and if the independent accounting firm adopts the Buyer’s position absolutely, the Seller shall pay all such fees and expenses. If the independent accounting firm adopts a compromise between the two positions, then the Seller and the Buyer shall share the fees and expenses in inverse proportion to the relative success of each Party, with the more successful Party bearing a proportionately smaller share of the fees and expenses.

7


(c)     For the avoidance of doubt, unless otherwise jointly agreed to by the Buyer and the Seller, (i) the accounting firm shall not review the Pre-Closing Tax Obligations; and (ii) the Buyer and the Seller shall negotiate in good faith to resolve any dispute as to the Pre-Closing Tax Obligations in accordance with Section 6.6(a) (relating to the preparation and review of Tax Returns). In the event that after good faith negotiations the parties cannot agree, then the Purchase Price shall be adjusted by the amounts or items that are not disputed, and any remaining adjustments attributable to any disputed item shall be made based on, and determined at the time, the Tax Returns that include the Pre-Closing Tax Obligations relating to the disputed items are filed.
Section 1.9      Escrow Agreement . On the date hereof, the Buyer, the Seller and Wells Fargo Bank, National Association (the “ Escrow Agent ”) have entered into an Escrow Agreement substantially in the form of Exhibit A hereto (the “ Escrow Agreement ”) providing for the deposit of the Earnest Money Deposit pursuant to Section 1.10 and the establishment of (a) an escrow account (the “ Indemnification Escrow Account ”) with the Escrow Agent to secure any payments to be made by the Seller pursuant to Article VIII hereof, and (b) an escrow account (the “ Closing Adjustment Escrow Account ”) with the Escrow Agent to secure any payments to be made by the Seller pursuant to Section 1.7(b) . At the Closing, (x) a portion of the Earnest Money Deposit equal to the Indemnification Escrow Amount shall be deposited into the Indemnification Escrow Account, (y) a portion of the Earnest Money Deposit equal to the Closing Adjustment Escrow Amount shall be deposited in the Closing Adjustment Escrow Account, and (z) the remainder of the Earnest Money Deposit shall be released to the Seller. The Indemnification Escrow Amount shall be distributed from the Indemnification Escrow Account to the Buyer or the Seller, as the case may be, pursuant to the terms of the Escrow Agreement.
Section 1.10      Earnest Money Deposit . Not later than the end of the first Business Day after the date hereof, the Buyer shall deposit $14,000,000 cash with the Escrow Agent (the “ Earnest Money Deposit ”) pursuant to the Escrow Agreement. If the Transactions contemplated hereby are consummated, (a) a portion of the Earnest Money Deposit equal to the Indemnification Escrow Amount shall be deposited into the Indemnification Escrow Account pursuant to Section 1.9 to secure any payments to be made by the Seller pursuant to Article VIII hereof, (b) a portion of the Earnest Money Deposit equal to the Closing Adjustment Escrow Amount shall be deposit in the Closing Adjustment Escrow Account pursuant to Section 1.9 to secure any payments to be made by the Seller pursuant to Section 1.7(b) , and (c) the remainder of the Earnest Money Deposit shall be released to the Seller. If the Transactions contemplated by this Agreement shall not be consummated, then the Earnest Money Deposit shall be delivered to either the Buyer or the Seller as provided in Section 9.2 . The Parties agree that for U.S. federal income Tax purposes, the Buyer shall be treated as the owner of the Earnest Money Deposit until either Closing occurs or this Agreement is terminated, and the Buyer shall pay all Taxes with respect to any earnings thereon (but shall receive a distribution of all such earnings on the earlier of (i) five (5) days after the end of each calendar quarter, or (ii) the Closing Date). Until either the Closing occurs or this Agreement is terminated, any earnings on the Earnest Money Deposit shall be the property of the Buyer. If this Agreement is not terminated prior to the Closing, ownership of the Earnest Money shall be determined as provided in the Escrow Agreement

8


ARTICLE II
CLOSING; CLOSING DELIVERIES; POST-CLOSING ACTS
Section 2.1      Closing . Subject to the satisfaction of the conditions precedent to closing described in Article VII , the closing (the “ Closing ”) of the transactions contemplated by this Agreement and the Ancillary Agreements (the “ Transactions ”) will take place at 10:00 a.m. Central Time on the later to occur of (a) the first Business Day of the month immediately following the month during which each of the conditions set forth in Article VII are satisfied or waived (other than those conditions that by their terms cannot be satisfied until the Closing), or (b) November 1, 2014 at 12:01 a.m. Central Time, or at such other date and time as mutually agreed to by the Parties (the “ Closing Date ”), and shall be consummated by exchanging documents via facsimile, e-mail and/or overnight courier.
Section 2.2      Deliveries and Actions Taken at Closing .
(a)      Deliveries by the Company and the Seller . To effect the Transactions, the Company and the Seller (as applicable) will, at the Closing, and as a condition to Closing, deliver to the Buyer the following documents, in each case duly executed or otherwise in proper form:
(i)     original certificates representing all of the Purchased Shares (or affidavits of lost certificates and corresponding indemnity agreements if necessary), duly endorsed in blank for transfer or accompanied by duly executed stock powers, together with any required transfer or documentary stamps attached, free and clear of all Encumbrances;
(ii)     the Seller’s Certificate of Formation certified by the Secretary of State of the State of Delaware and dated within three (3) Business Days prior to the Closing Date;
(iii)     a certificate of good standing of the Seller issued by the Secretary of State of the State of Delaware and dated within three (3) Business Days prior to the Closing Date;
(iv)     the Company’s Articles of Incorporation certified by the Secretary of State of the State of Georgia and dated within three (3) Business Days prior to the Closing Date;
(v)     a certificate of good standing of the Company issued by the Secretary of State of the State of Georgia and dated within three (3) Business Days prior to the Closing Date;
(vi)     a Secretary’s Certificate for the Company certifying (A) the Bylaws of the Company (B) the incumbency of the officers executing documents executed and delivered in connection herewith, and (C) copies of resolutions of the Seller and the Board of Directors of the Company authorizing the execution, delivery, and performance of this Agreement and the Ancillary Agreements;

9


(vii)     a Manager’s Certificate for the Seller certifying (A) the incumbency of the officers or managers executing documents executed and delivered in connection herewith, and (B) copies of resolutions of the Board of Managers of the Seller authorizing the execution, delivery, and performance of this Agreement and the Ancillary Agreements;
(viii)     the Company’s Compliance Certificate;
(ix)     an affidavit from the Seller dated as of the Closing Date, in form and substance required under the Treasury Regulations issued pursuant to Section 1445 of the Code stating that Seller is not a foreign person within the meaning of Section 1445 of the Code;
(x)     the Material Contract Consents, the Closing Condition Amendments and those authorizations, registrations, consents, approvals, notices and filings referred to in Schedule 3.8(a) ;
(xi)     evidence of payment in full of any Funded Indebtedness occurring after the date hereof and prior to the Closing Date, including releases of any guarantees and terminations of any Encumbrances with respect to Funded Indebtedness;
(xii)     the Pay-Off Letters;
(xiii)     the resignations from all members of the Board of Directors of the Company;
(xiv)     evidence that the Management Agreements have been terminated;
(xv)     the Release Agreement; and
(xvi)     such other documents, instruments, and certificates as the Buyer or its counsel or counsel to the Buyer’s or its Affiliate’s lenders reasonably deems necessary to consummate the Transactions and to vest, perfect or confirm of record or otherwise in the Buyer any and all right, title and interest in, to and under all of the Assets of the Company acquired or to be acquired by the Buyer as a result of, or in connection with, the Transactions, and such other certificates of authority and documents as the Buyer reasonably requests.
(b)      Deliveries by the Buyer . To effect the Transactions, and in addition to the payment of the Purchase Price contemplated by Section 1.4 , the Buyer will, at the Closing, and as a condition to Closing, deliver to the Seller the following documents, in each case duly executed or otherwise in proper form:
(i)     a copy of (A) the Buyer’s Articles of Incorporation certified by the State of Washington and (B) the Parent’s Articles of Incorporation certified by the State of Missouri, each dated within three (3) Business Days prior to the Closing Date;
(ii)     a Secretary’s Certificate of the Buyer certifying (A) the Bylaws of the Buyer, and (B) resolutions of the Board of Directors of the Buyer authorizing the execution, delivery, and performance of this Agreement and the Ancillary Agreements;

10


(iii)     a Secretary’s Certificate of the Parent certifying (A) the Bylaws of the Parent, and (B) resolutions of the Board of Directors of the Parent authorizing the execution, delivery, and performance of this Agreement and the Ancillary Agreements to which it is a party;
(iv)     the Buyer’s Compliance Certificate;
(v)     a certificate of good standing for (A) the Buyer issued by the Secretary of State of the State of Washington and (B) the Parent issued by the Secretary of State of the State of Missouri, each dated within three (3) Business Days prior to the Closing Date; and
(vi)     such other documents, instruments and certificates as the Seller or their counsel reasonably deem necessary to consummate the Transactions.
(c)      Form of Instruments . To the extent that a form of any document to be delivered under this Agreement is not attached as an Exhibit, such documents will be in form and substance, and will be executed and delivered in a manner, reasonably satisfactory to the Buyer and the Seller.
(d)     If the Closing does not occur on a Business Day, the deliveries required by Section 2.2(a) and (b) shall be delivered to the Parties’ respective counsel on the Closing Date, to be held in trust and released by them on the first Business Day immediately following the Closing upon payment of the Purchase Price.
Section 2.3      Post-Closing Acts . At any time, and from time to time after the Closing Date, without the payment of any further consideration, the Parties shall duly execute, acknowledge, and deliver all documents, agreements, and/or instruments and will use their respective reasonable best efforts to take such other action consistent with the terms of this Agreement and the Ancillary Agreements, as may be necessary or desirable for the purpose of giving effect to this Agreement, the Ancillary Agreements and the Transactions, at each Party’s own expense.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company, on behalf of itself and the Seller, represents and warrants to the Buyer and the Parent as of the date of this Agreement and as of the Closing as follows:
Section 3.1      Organization and Qualification . The Company is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Georgia. The Company has full corporate power and authority to conduct and carry on the Business as and where it is presently being conducted by the Company and to own, operate and lease the Assets. The Company is a corporation duly qualified to do business and is in good standing in each jurisdiction in which the character or location of the property owned, leased, or operated by it, or the nature of the Business, makes such qualification necessary, including each of the jurisdictions as set forth on Schedule 3.1 , except where the failure to be so qualified would not be reasonably likely to have a Material Adverse Effect. Complete and correct copies of the Articles of Incorporation and Bylaws of the Company, including all amendments, have previously been provided to counsel for the Buyer. The Company engages in no material business or activities other than in furtherance of the Business.

11


Section 3.2      Authority; Enforceability .
(a)     The Company has all requisite power, right and authority, without the consent of any other Person (other than as required by the HSR Act and as set forth on Schedule 3.6(b) , Schedule 3.7 and Schedule 3.8(a) ), to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations under such agreements and to consummate the Transactions, and there is no provision in the Company’s Articles of Incorporation or in its bylaws which prohibits or limits the Company’s ability to consummate the Transactions. The execution and delivery of this Agreement, the Ancillary Agreements, and all other instruments and certificates to be delivered at the Closing by the Company and the consummation by the Company of the Transactions have been duly approved by the board of directors and shareholders of the Company. No other proceeding on the part of the Company or the Seller is necessary to authorize this Agreement, the Ancillary Agreements, and the other instruments and certificates to be delivered by the Company under this Agreement, or the consummation of the Transactions.
(b)     This Agreement, the Ancillary Agreements, and the other instruments and certificates to be delivered by the Company has been (or, if to be executed or delivered after the date of this Agreement, will be) duly executed and delivered by the Company and are (or, when executed, will be) legal, valid, and binding obligations of the Company enforceable against the Company in accordance with their terms.
Section 3.3      Capitalization .
(a)     The authorized capital stock of the Company consists solely of Ten Thousand shares of Common Stock, of which One Hundred shares of Common Stock are issued and outstanding. There are no authorized shares of preferred stock. Except as described in Schedule 3.3(a) , no shares of the Company’s capital stock are reserved for issuance. The Purchased Shares: (i) constitute, and at Closing will constitute, 100% of all of the issued and outstanding shares of capital stock of the Company; (ii) are validly authorized and duly issued, fully paid, and nonassessable; and (iii) are, and immediately prior to the Closing will be, owned beneficially and of record entirely by the Seller. No Purchased Shares were issued in violation of any preemptive rights (whether statutory or contractual), first refusal rights, or other subscription rights of any shareholder of the Company or any other Person, and all Purchased Shares were offered and sold in compliance with all applicable securities Laws. There are no outstanding options, warrants, calls, puts, subscriptions, agreements, or other commitments by the Company or the Seller (w) to issue, transfer, or sell any additional shares of the Company’s capital stock, (x) to pay any dividends on such shares, or (y) to purchase, redeem, or retire any outstanding shares of its capital stock. There are not outstanding any securities or obligations that are convertible into or exchangeable for any shares of capital stock of the Company. There are no stock appreciation rights, phantom stock, or similar rights in existence with respect to the Company. The Company is not a party to any voting trust or other Contract with respect to the voting, redemption, purchase, registration, sale, transfer or other disposition of the Company’s capital stock.

12


(b)     Except as set forth on Schedule 3.3(b) , the Company does not own, and in the last five (5) years has not owned of record or beneficially, directly or indirectly, any shares of capital stock, any participating interest, any membership interest, or other equity interest in any corporation, partnership, limited liability company, joint venture, trust, or other Person, or securities convertible into any capital stock or other equity interest of any Person.
Section 3.4      Assets . Except as set forth in Schedule 3.4 , the Company has, and immediately prior to Closing will have, good, marketable and indefeasible title (or in the case of leased personal property, a good, valid and insurable leasehold interest) to all of the Assets, subject to no Encumbrances or restrictions on transfer except for Permitted Encumbrances, all of which Encumbrances or restrictions on transfer (other than Permitted Encumbrances) shall be terminated prior to Closing. Except as set forth in Schedule 3.4 , the tangible Assets are in good working order, repair, and condition (ordinary wear and tear excepted), have been maintained in accordance with normal industry practice, and are suitable for the purposes for which they are presently used. Except as set forth on Schedule 3.4 , the Company owns or validly leases all assets, properties and rights used in, or held for use in, the Business as presently conducted. Except as set forth in Schedule 3.4 , no Asset used in, or held for use in, the Business is leased from or owned by the Seller or any Affiliate of the Company or the Seller. The Assets include all the assets, properties, and rights used to operate, and necessary to the operation and conduct of, the Business as currently conducted. Other than this Agreement, there are no outstanding options to purchase any of the Assets or any portion thereof or any interest therein.
Section 3.5      Company Real Estate .
(a)      Schedule 3.5(a) sets forth a true, correct and complete list of each and every parcel of real property owned in fee simple by the Company (together with all buildings, structures, and improvements thereon and appurtenances thereto, the “ Owned Real Property ”), together with the physical street address thereof. The Company is the sole and exclusive legal and equitable owner of all right, title and interest in and has good, marketable and insurable title in fee simple absolute to all Owned Real Property, including the buildings, structures, fixtures, sidetracks and improvements situated thereon and appurtenances thereto, which, in each case at Closing, will be free and clear of all tenancies and other possessory interests, conditional sale or other title retention agreements, easements, rights of way, covenants, restrictions, reservations, options or rights of first refusal or offer to purchase or lease, defects in title, encroachments and other Encumbrances.
(b)     The Company has delivered to the Buyer accurate, correct and complete copies of all deeds, existing title insurance policies, title commitments or reports, surveys, environmental audits and similar reports, certificates of occupancy, and appraisals, if any, with respect to each parcel of the Owned Real Property.
(c)      Schedule 3.5(c) contains (i) a true, correct and complete list (including the street address, landlord/lessor, and tenant/lessee) of each leasehold interest of the Company in real property (the “ Leased Real Property ”) and (ii) a true, correct and complete list of all leases, subleases, licenses and other agreements for the use and occupancy by the Company of the Leased Real Property, together with all modifications, amendments and supplements thereto (each individually, as amended or modified, a “ Lease ” and collectively, the “ Leases ”) and all existing estoppels and non-disturbance agreements related thereto. The Owned Real Property and the Leased Real Property shall be referred to in this Agreement collectively as the “ Company Real Estate ”.

13


(d)     The Company has delivered to the Buyer true, correct and complete copies of all Leases and all existing estoppels and non-disturbance agreements related thereto. No Lease has been amended or modified except as listed in Schedule 3.5(c) . Except as set forth in Schedule 3.5(c) , to the Knowledge of the Company, no landlord/lessor under any Lease has assigned its interest in the Lease. Each Lease is in full force and effect and is a legal, valid and binding agreement enforceable against the parties thereto in accordance with its terms. Except as disclosed in Schedule 3.5(d) , the Company has performed in all material respects all obligations required to be performed by it under each Lease. To the Knowledge of the Company, except as disclosed in Schedule 3.5(d) , no party to any Lease (other than the Company) is (with or without the lapse of time or the giving of notice or both) in breach or default in the payment of any amount or in the performance of any other obligation thereunder. To the Knowledge of the Company, there are no material disputes with any lessor, sublessor, lessee or sublessee under any Lease; and no party to any Lease has delivered a written demand for early termination thereof. The Company has not received any notice of any uncured breach or violation of any provision of any Lease, nor has the Company given any notice of any uncured breach or violation of any provision of any Lease to any other party under any Lease. Each Lease that contains a change in control, assignment, or other transfer by operation of law provision that requires the consent or approval of any Person in connection with the Transactions is appropriately identified as such on Schedule 3.5(c) and Schedule 3.8(a) .
(e)     Except as disclosed on Schedule 3.5(e) ,the Company has not been a party to any lease, license or occupancy agreement related to any real property that expired, terminated, or was assigned by the Company to a third party (without a release of the Company from the obligations thereunder) within the past sixty (60) months.
(f)     Except as disclosed on Schedule 3.5(f) , no option or right of first refusal or offer to purchase or lease or any similar right to purchase or lease has been granted by or to the Company with respect to any Company Real Estate, or portion thereof.
(g)     Except as listed in Schedule 3.5(g) , there are no appurtenant easements benefitting any parcel of Owned Real Property necessary for or useful to the continued use and operation or conduct of the Business as presently conducted.
(h)     All tangible personal property, including all Fixtures and Equipment, of the Company are located at the Company Real Estate. The Company Real Estate, including all buildings, fixtures and other improvements are fit and sufficient for the continued use and operation or conduct of the Business as presently conducted.
(i)     All buildings, fixtures, and other improvements located on or comprising the Owned Real Property (i) have been constructed, operated, maintained and repaired in accordance with all Laws, Encumbrances, and Permits and Licenses and are in good working order and repair (ordinary wear and tear excepted), including the roof, the foundation and all mechanical systems thereof, (ii) have legal access to public rights of way, and (iii) are supplied with utilities and other services reasonably necessary for the continued use and operation or conduct of the Business as presently conducted and such utility facilities are located in easements dedicated for the purpose of their use.

14


(j)     Each parcel of the Company Real Estate is presently zoned for the current use and such zoning is adequate for the use and operation or conduct of the Business as presently conducted.
(k)     The Company has not received any written notice (i) of any uncured violation of any building code, zoning ordinance, or other Law or Permits and Licenses affecting any Company Real Estate, or portion thereof, (ii) of any existing, pending or threatened zoning, building code or other moratorium proceedings which could reasonably be expected to adversely affect the ability to operate or further develop any Company Real Estate, or portion thereof; or (iii) that it lacks any Permits and Licenses required for the use and operation of any Company Real Estate, or portion thereof.
(l)     There are no pending, or to the Knowledge of the Company, proposed or threatened condemnation or eminent domain actions or proceedings or zoning changes affecting the Company Real Estate, or any material portion thereof.
(m)     Neither the whole nor any material portion of any Company Real Estate has been materially damaged or destroyed by fire or other casualty that has not been repaired.
(n)     Except as set forth on Schedule 3.5(n) , no portion of any building or other material improvement on any Owned Real Property is located within any “Special Flood Hazard Area” designated by the United States Department of Housing and Urban Development or Federal Emergency Management Agency, or in any area similarly designated by any Governmental Authority; and the location of any portion of any Owned Real Property within a flood plain or Special Flood Hazard Area does not negatively impact the marketability or value of such Owned Real Property for purposes of its current use. No portion of any Owned Real Property is located within a watershed area imposing restrictions upon the use of such Owned Real Property or any part thereof.
Section 3.6      Material Contracts .
(a)      Schedule 3.6(a) sets forth a list as of the date of this Agreement of each of the following types of Contracts to which the Company is a party or otherwise bound (collectively, the “ Material Contracts ”):
(i)     any individual, written employment, retention, change in control bonus or severance agreements to which the Company is a party with respect to any employee of the Company;
(ii)     any Contract containing covenants of the Company not to compete in any line of business or with any Person in any geographical area or not to hire or solicit any Person or granting exclusivity of the sale of any of the Company’s products to any Person or granting any Person most favored nation or similar status;

15


(iii)     any Contract under which (A) the Company is lessee of, or holds or uses, any machinery, equipment, vehicle or intangible personal property owned by a third party or (B) the Company is a lessor or sublessor of, or makes available for use by any third party, any tangible personal property owned or leased by the Company, in any case which has future required scheduled payments in excess of $100,000 per annum and is not terminable by the Company upon notice of 60 calendar days or less without penalty or other payment;
(iv)     any Contract which creates a partnership, joint venture, profit sharing or similar arrangement;
(v)     any Contract relating to the incurrence, assumption or guarantee of indebtedness, including any Funded Indebtedness, or the making of any loans or advances, in each case other than trade payables;
(vi)     any Contract under which the Company has advanced or loaned any other Person amounts, except oral contracts for employment at-will and contracts that will be repaid or otherwise satisfied at or prior to Closing;
(vii)     any Contract involving the resolution or settlement of any actual or threatened litigation, arbitration, claim or other dispute against the Company pursuant to which the Company has material continuing obligations as of the date hereof;
(viii)     any Contract for the sale of any of the Assets, other than in the Ordinary Course of Business, for consideration in excess of $50,000;
(ix)     any Contract for the sale or other disposition of any Company Real Estate or portion thereof;
(x)     any other Contract which involves the expenditure or receipt of more than $50,000 annually that are not terminable by the Company without penalty on notice of ninety (90) days or less, other than purchase orders for Inventory and sale of product in the Ordinary Course of Business;
(xi)     any Contract relating to the acquisition of any operating business or the capital stock or equity interest of any other Person;
(xii)     any Contract in effect with any officer, director or shareholder or member (as applicable) of the Company or the Seller;
(xiii)     any Contract that requires the Company to purchase a material amount of its requirements of any product from a third party;
(xiv)     any Contract that requires the Company to sell a material amount of production of any product to a third party;
(xv)     any Contract for any labor or material or improvement which relates to any Company Real Estate, in each case which has an aggregate future liability to any Person in excess of $50,000;

16


(xvi)     any sales agency or distribution Contract involving annual consideration in excess of $100,000 and which is not terminable by the Company by notice of not more than sixty (60) days;
(xvii)     any Contract providing for rebates, discounts, bonuses or commissions with customers or suppliers in excess of $50,000 (or in excess of $200,000 for all such Contracts);
(xviii)     any Contract with a Governmental Authority (other than purchase orders for products in the Ordinary Course of Business) in excess of $100,000;
(xix)     any co-packing or co-manufacturing Contract with respect to the packaging or distribution of any product;
(xx)     (A) any Contract, commitment or arrangement for the future purchase of materials, supplies, equipment, raw materials, inventory, packaging or commodities, (B) any management, service or other similar Contract, or (C) any advertising Contract, in any such case which has an aggregate future liability or obligation to any Person in excess of $50,000 and is not terminable without penalty by the Company by notice of not more than sixty (60) days;
(xxi)     any Contract, commitment or arrangement or other licensing agreement (including for software) with respect to any Intellectual Property (other than in the case of computer software that is generally available to the public in the retail marketplace, for which the licenses are non-exclusive); or
(xxii)     any other Contract not included in clauses (i) through (xxi) above or set forth on any of the other sections of the Disclosure Schedules to which the Company is a party and which has future required scheduled payments to or by the Company in excess of $200,000 per annum and is not terminable by the Company upon notice of 60 calendar days or less without penalty or other payment (other than purchase orders entered into in the Ordinary Course of Business).
(e)     The Company has delivered to, or made available for inspection by, the Buyer a copy of each Material Contract. Each Material Contract is in full force and effect, and valid, binding, and enforceable against the Company and, to the Knowledge of the Company, the other party(ies) thereto, in accordance with its respective terms. Except as disclosed on Schedule 3.6(b) , the Company and, to the Knowledge of the Company, each other party that is a signatory to a Material Contract, has performed all material obligations required to be performed by it to date under the Material Contracts, including, for the avoidance of doubt, any obligation of the Company thereunder to maintain any “safety stock” or other minimum amount of supplies, products or inventory, and is not (with or without lapse of time or the giving of notice, or both) in breach or default thereunder where any such failure to perform or any such breach or default would, individually or in the aggregate, have a Material Adverse Effect. Each Material Contract that requires the consent or approval of any Person in connection with the Transactions (“ Material Contract Consents ”) is appropriately identified as such on Schedule 3.6(b) .

17


Section 3.7      Permits and Licenses . All Permits and Licenses held by the Company are listed on Schedule 3.7 and the Company has delivered to, or made available for inspection by, the Buyer complete copies of all such Permits and Licenses of the Company. The Company has all Permits and Licenses necessary for the conduct of, or relating to the operation of, the Business, including each parcel of the Company Real Estate, as now being conducted, except as set forth on Schedule 3.7 and except where the failure to hold or obtain any such Permit(s) or Licenses(s) would not be reasonably likely to have a Material Adverse Effect. Except as set forth on Schedule 3.7 , all Permits and Licenses of the Company are valid and in full force and effect. There is not now pending nor, to the Knowledge of the Company, threatened or any basis for, any Action by or before any Governmental Authority to revoke, cancel, rescind, modify, or refuse to renew in the Ordinary Course of Business any of such Permits and Licenses. Except as set forth on Schedule 3.7 , no notice to, declaration, filing, or registration with, or Permit from, any Governmental Authority or any other Person is required to be made or obtained by the Company or the Seller in connection with the execution, delivery, or performance of this Agreement by the Company and the Seller and the consummation of the Transactions.
Section 3.8      No Conflict or Violation .
(a)     Except for obtaining the Material Contract Consents or as otherwise set forth on Schedule 3.8(a) , none of the execution, delivery, or performance of this Agreement and the Ancillary Agreements, the consummation of the Transactions, or compliance by the Company with any of the provisions of this Agreement will: (i) violate or conflict with any provision of the Articles of Incorporation or Bylaws of the Company; (ii) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination, modification, cancellation or acceleration under, any of the terms, conditions or provisions of any Contract, indebtedness, note, bond, indenture, security or pledge agreement, commitment, license, lease, franchise, permit, agreement, or other instrument or obligation (A) to which the Company is a party or (B) by which any Asset is or the Purchased Shares are bound; (iii) violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree, or award; or (iv) impose any Encumbrance on the Assets or Purchased Shares, other than any Permitted Encumbrance.
(b)     Except as set forth on Schedule 3.8(a) or as required by the HSR Act, no authorization, registration, consent or approval of, notice to, or filing with any third Person or Governmental Authority is necessary for the execution, delivery or performance of this Agreement or the Ancillary Agreements or the consummation of the Transactions.
Section 3.9      Financial Statements .
(a)     The Company has previously delivered to the Buyer the Financial Statements, which are attached as Schedule 3.9(a) . The Financial Statements present fairly, in all material respects, the financial position of the Company as of the dates referred to for such Financial Statements, and the results of its operations, cash flows and shareholders’ equity for the periods referred to therein, in conformity with GAAP applied on a consistent basis throughout such periods (except as may be indicated in the notes thereto and subject, in the case of the unaudited financial statements, to the lack of footnote disclosure and changes resulting from year-end adjustments, none of which are expected to be material).

18


(b)     Except as set forth on Schedule 3.9(b) , the Company has no Liabilities whatsoever (whether matured or unmatured, known or unknown, fixed or contingent or otherwise), except (i) Liabilities that are reflected on or reserved against in the Interim Balance Sheet or disclosed in the notes thereto, (ii) Liabilities that have arisen since June 28, 2014 in the Ordinary Course of Business (none of which result from, arise out of, relate to, or are in the nature of or caused by any breach of contract, tort, infringement, or violation of Law), and (iii) such Liabilities specifically disclosed in another section of the Disclosure Schedules.
(c)     The Company has not been notified in writing by its independent public accounting firm or licensed public accountants that such firm is of the opinion that any of the Financial Statements should be restated or that the Company should materially modify its accounting or auditing practices, procedures or methodologies in future periods.
(d)     A schedule of the Funded Indebtedness of the Company as of June 28, 2014 is attached hereto as Schedule 3.9(d) .
Section 3.10      Absence of Certain Changes . Except as disclosed in Schedule 3.10 , since December 28, 2013, the Company has conducted the Business only in the Ordinary Course and there has not occurred:
(a)     any Material Adverse Change;
(b)     any damage to, or destruction or loss of, any Asset (whether or not covered by insurance) that would require expenditures in excess of $250,000 in the aggregate to repair or replace;
(c)     any change by the Company in its accounting methods, principles, or practices except as required by any change in GAAP;
(d)     any transfer, assignment, sale or other disposition of or Encumbrance (other than a Permitted Encumbrance) upon any Assets (including any material damage, destruction or loss (whether or not covered by insurance)), except (i) sales of inventory in the Ordinary Course of Business and (ii) dispositions of obsolete or worthless assets;
(e)     any cancellation of any indebtedness owed to or held by the Company;
(f)     any execution, implementation, amendment or termination of any employment, bonus, deferred compensation, severance, or Employee Benefit Plan or other compensation agreement or collective bargaining agreement pertaining to any employee of the Company;
(g)     any binding commitment for capital expenditures or individual commitment in excess of $250,000 that is not otherwise included in the expenditure information set forth on Schedule 3.10(g) ;

19


(h)     any amendment of the Company’s Articles of Incorporation or Bylaws;
(i)     any issuance, adjustment, split, combination, or reclassification of any capital stock of the Company or units, securities or equity interest convertibles into shares of capital stock of the Company;
(j)     any grant to any Person of any right to acquire any shares of its capital stock, other than to the Buyer pursuant to this Agreement;
(k)     the filing of any Tax elections;
(l)     any incurrence, assumption or guarantee of any indebtedness for borrowed money in excess of $100,000 except unsecured current obligations and Liabilities incurred in the Ordinary Course of Business;
(m)     adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
(n)     any acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof; or
(o)     any Contract, commitment, agreement or understanding to undertake any of the foregoing.
Section 3.11      Books and Records . All Books and Records delivered to the Buyer by the Company are complete and accurate in all material respects and reflect the Business as conducted by the Company. The Company has given the Buyer and the Parent reasonable access to, and permitted the Buyer and the Parent to make reasonable examinations of, the Books and Records.
Section 3.12      Litigation . Except as set forth in Schedule 3.12 , since January 1, 2010, there has not been and there is not currently pending or, to the Knowledge of the Company, threatened or anticipated, any action, order, writ, injunction, judgment, or decree outstanding or any claim, complaint, inquiry, suit, litigation, proceeding, hearing, dispute, arbitration, or action (collectively, “ Actions ”) (a) against or involving the Company, the Business, any Company Real Estate or other Assets, the Products or any officers or directors of the Company (in their capacities as such), (b) against or involving the Company that, individually or in the aggregate, would be reasonably expected to have the effect of preventing, delaying, limiting, enjoining or otherwise interfering with any of the Transactions or payments contemplated hereunder; (c) involving the risk of criminal liability; or (d) involving the Company as plaintiff, including any derivative suits brought by or on behalf of the Company. Except as set forth in Schedule 3.12 , no judgment, order, writ, injunction, plan or decree of any court or other Governmental Authority or arbitrator affecting the Company, the Business, the Assets or the Products has been entered which is presently in effect and, to the Knowledge of the Company, the Company is not in breach or default with respect to any such judgment, order, writ, injunction, plan or decree. There are no unsatisfied judgments or orders against the Company, the Business, the Assets or the Products.

20


Section 3.13      Compliance with Law . Except as shown in Schedule 3.13 , since January 1, 2010, the Company in the conduct of the Business has not materially violated any, and is in compliance in all material respects with, all applicable Laws relating to the Company, the Assets, or the Business. The Company has not received any notice alleging (or any notice of any investigation related to) any violation by the Company of any Law, which notice has not been finally resolved as of the date of this Agreement.
Section 3.14      Intellectual Property .
(a)      Company Intellectual Property . Schedule 3.14(a) sets forth a complete and accurate list of each of the following owned, used, or held for use by the Company in the conduct of its business: (i) issued patents and pending patent applications; (ii) registered trademarks and service marks and applications for registration of trademarks and service marks and material common law trademarks ; (iii) copyright registrations and applications for registration of copyrights; and (iv) internet domain name registrations, and specifying as to each, as applicable, the (w) owner of the item, (x) the jurisdiction in which the item registered or issued, or in which any application has been filed, (y) the respective issuance, registration, or application number, and (z) the date of application and issuance or registration of any item. Schedule 3.14(a) sets forth material licenses pertaining to Intellectual Property that any third Person owns and that the Company uses in the conduct of its business, excluding off-the-shelf, shrink-wrap, click-wrap licenses or other licenses for commercially available software that were acquired for less than $50,000. From and after the Closing, the Company will have the right to continue to use or utilize all of the Company Software was used or utilized by the Company immediately prior to the Closing, without consent or approval of any Person in connection with the Transactions or the payment of any amounts to any Person. Schedule 3.14(a) sets forth material licenses pertaining to Intellectual Property that the Company owns and licenses to a third Person.
(b)     Except as set forth on Schedule 3.14(b) , the Company owns or, to the Knowledge of the Company, has a valid right to use, all Intellectual Property used in the Business as currently conducted. Each item of Intellectual Property owned or used by the Company immediately prior to the Closing Date will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing Date. The Company is not in material breach or default, and, to the Knowledge of the Company, no event has occurred which with notice or lapse of time would constitute a breach or default, under any license it has to use Intellectual Property. No claims are pending in writing or, to the Knowledge of the Company, threatened in writing against the Company, that the Company’s business has or will result in the infringement of Intellectual Property owned or licensed by a third Person. Except as set forth on Schedule 3.14(b) , the Company has not been sued as a defendant in any claim, suit, action, or proceeding which involves a claim of infringement of any Intellectual Property of any third Person and which has not been finally terminated prior to the date hereof. Except as set forth on Schedule 3.14(b) , to the Knowledge of the Company, no Person has infringed or misappropriated, or is infringing or misappropriating, any material Company Intellectual Property.

21


Section 3.15      Employees . Schedule 3.15 attached to this Agreement lists all Persons employed by the Company on a full-time or part-time basis as of the date of this Agreement, and all Persons providing services to the Company as independent contractors. Schedule 3.15 states, with respect to all such Persons compensated in excess of $100,000 annually, their total annualized 2013 compensation. There are no employment, severance, or termination agreements with the Company, accruing to the benefit of any shareholder, director, officer, partner, or employee of the Company, except for agreements disclosed on Schedule 3.15 to this Agreement or entered into pursuant to this Agreement. A list of all employees to whom the Company has made any loan or advance, which includes the amount of each such loan or advance and the date on which it was made, together with the terms of such loans (including maximum borrowings and minimum monthly payments), is set forth on Schedule 3.15 ,
Section 3.16      Employee Benefit Plans .
(a)     Except as set forth on Schedule 3.16(a) , the Company does not, directly or through any trade or business that together with the Company would be treated as a “single employer” within the meaning of Code Section 414(b), (c), (m), or (o) (“ Controlled Group Member ”), maintain, contribute (or have an obligation to contribute) to, or have any liability with respect to and no individual by virtue of his or her employment or former employment with the Company benefits under (i) any “employee benefit plan” (as defined in Section 3(3) of ERISA), whether a single employer, a multiple employer, or a multiemployer plan, for the benefit of employees or former employees, or (ii) any other plan, policy, program, practice, or arrangement providing compensation or benefits under which the Company or a Controlled Group Member has any obligation or liability to any employee or former employee, including retirees (or any dependent or other beneficiary thereof) including, but not limited to, pension, profit sharing, incentive, bonus, deferred compensation, vacation, holiday, personal leave, sick leave, maternity or paternity leave, family leave, medical, dental, vision, severance, disability, death, health care reimbursement, dependent care assistance, cafeteria plan, stock purchase, stock option, stock appreciation right, phantom stock, tuition reimbursement, executive perquisites (e.g., automobile allowance or club dues) or other similar benefit, whether written or unwritten (individually, an “ Employee Benefit Plan ” and collectively, the “ Employee Benefit Plans ”). With respect to each Employee Benefit Plan, to the extent applicable, the Company has made available or provided to the Buyer true and correct copies of the following documents: (u) the Employee Benefit Plan documents or, in the case of an Employee Benefit Plan not required to be memorialized in a document, a written summary of the material terms thereof, (v) any related trust or insurance contracts or policies, (w) the most recent summary plan description, (x) the most recent determination letter or opinion letter issued by the IRS with respect to any Employee Benefit Plan intended to be qualified under Code Section 401(a), (y) for the most recently completed three Employee Benefit Plan years, the Forms 5500, and (z) administrative service agreements and business associate agreements (as such term is defined by HIPAA).
(b)     Each Employee Benefit Plan and related trust agreement, annuity contract or other funding instrument is legal, valid and binding and in full force and effect, and there are no defaults thereunder. None of the rights of the Company thereunder will be impaired by the consummation of the Transactions contemplated by this Agreement, and all of the rights of the Company thereunder will be enforceable by the Buyer and the Company at or after the Closing without the consent or agreement of any other Person. The Company has no liability or obligation to provide life, medical or other welfare benefits to former or retired employees, other than under COBRA. Each Employee Benefit Plan (including any Employee Benefit Plan covering former or retired employees of the Company) may be amended or terminated by the Company or the Buyer on or at any time after the Closing Date without further liability thereunder.

22


(c)     Each Employee Benefit Plan (and each related trust, custodial account, annuity contract, insurance contract or other funding instrument) complies with and has been administered, operated, and maintained in compliance with its terms in all material respects, and the Company does not have any direct or indirect material liability under the requirements provided by any and all statutes, orders or requirements of Governmental Authorities, including but not limited to ERISA, the Code, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and regulations promulgated thereunder (“ COBRA ”) and the Health Insurance Portability and Accountability Act of 1996, as amended, and regulations promulgated thereunder (“ HIPAA ”). To the Knowledge of the Company, with respect to each Employee Benefit Plan, no prohibited transactions (as defined in ERISA Section 406 or Code Section 4975) and no violations of ERISA Section 407 for which an applicable statutory or administrative exemption does not exist have occurred. Any employee training and participant or other notices required by ERISA, HIPAA, COBRA, the Code or any other state or federal Law or any ruling or regulation of any state or federal administrative agency with respect to each Plan have been appropriately and timely given. There is no pending or threatened legal action, proceeding or investigation, suit, grievance, arbitration or other manner of litigation, or claim against or involving any Employee Benefit Plan and no facts exist that would give rise to any legal action, proceeding or investigation, suit, grievance, arbitration or other manner of litigation, or claim, other than a routine claim for benefits. Insurance premiums and contributions required to be made to any Employee Benefit Plan have been and will be timely made by the Company and its Controlled Group Members, as applicable, for all periods ending on the Closing Date.
(d)     Each Employee Benefit Plan and related trust, if any, intended to be qualified under Code Section 401(a) or 501(a) is qualified and has received a favorable determination or opinion letter from the Internal Revenue Service with respect to such plan’s or trust’s qualified or tax exempt status, as applicable, and nothing has since occurred to cause the loss of any such plan’s qualified or tax exempt status. The Company and its Controlled Group Members have not terminated or taken action to terminate any employee benefit plan (as defined by Section 3(3) of ERISA).
(e)     In the last ten (10) years, the Company and its Controlled Group Members (i) have not contributed to, or been under any obligation to contribute to, any multiemployer plan (as defined in Section 3(37) or 4001(a)(3) of ERISA) and (ii) are not liable, directly or indirectly, with respect to any such plan for a complete or partial withdrawal (within the meaning of Title IV of ERISA) or due to the termination or reorganization of such a plan. Neither the Company nor its Controlled Group Members has any liability under any multiemployer plan.
(f)     In the last ten (10) years, the Company and its Controlled Group Members have not maintained or contributed, or had an obligation to contribute, to a plan subject to Title IV of ERISA. Neither the Company nor its Controlled Group Members has any liability under any plan subject to Title IV of ERISA.

23


(g)     Except as set forth and specifically listed and described on Schedule 3.16(g) , neither the execution of this Agreement nor the consummation of the Transactions contemplated by this Agreement will (i) entitle any current or former employee of the Company to claim or receive severance pay or benefits, unemployment compensation or any other payment, or (ii) accelerate the time of payment or vesting, or increase the amount of any compensation due to any current or former employee of the Company
(h)     Except as set forth on Schedule 3.16(h) , neither the execution of this Agreement nor the consummation of the Transactions contemplated by this Agreement will give rise to the payment of any amount that would not be deductible pursuant to Code Section 280G (or any corresponding provision of state, local, or foreign Law).
(i)     Each Employee Benefit Plan that is subject to Code Section 409A has at all times complied with (including documentation and operation thereof) the requirements of Code Section 409A. The Company has no obligation to “gross up” or indemnify any current or former employee or service provider for any costs, taxes, or penalties incurred or that may be incurred in connection with Code Section 409A or Code Section 4999.
(j)     No provision of this Agreement, including without limitation this Section 3.16 , shall create any third-party beneficiary rights in any Person, including, without limitation, employees or former employees (including any beneficiary or dependent thereof) of the Company, unions or other representatives of such employees or former employees, or trustees, administrators, participants, or beneficiaries of any Employee Benefit Plan, and no provision of this Agreement, including this Section 3.16 , shall create such third-party beneficiary rights in any such Person in respect of any benefits that may be provided, directly or indirectly, under any Employee Benefit Plan, including the currently existing Employee Benefit Plans.
Section 3.17      Labor Relations . To the Knowledge of the Company, the Company has complied in all material respects with all applicable requirements of Governmental Authorities pertaining to the employment of labor, including those relating to wages, hours, collective bargaining, employment discrimination, sexual or other workplace harassment, worker’s compensation, and the payment of or withholding of taxes. Except as set forth on Schedule 3.17 , there are no actions, suits, charges, complaints, proceedings, investigations, or audits pending or, to the Knowledge of the Company, threatened against the Company in connection therewith. No present or former employee of the Company has given notice to the Company of, and to the Knowledge of the Company there is no valid basis for any claim against the Company (whether under applicable Law, any employment agreement or otherwise) on account of or for, (a) overtime pay, other than overtime pay for the current payroll period, (b) wages or salary (excluding current bonus, accruals and amounts accruing under “employee benefit plans,” as defined in Section 3(3) of ERISA) for any period other than the current payroll period, (c) vacation, time off or pay in lieu of vacation or time off, other than that earned in respect of the current fiscal year or (d) any violation of any applicable Law relating to minimum wages or maximum hours of work. The Company is not a party to any labor contract or collective bargaining agreement, and no union or similar organization has been certified as the exclusive bargaining agent of any employees of the Company or otherwise represents employees of the Company and, to the Knowledge of the Company, as of the date hereof, no such organization has been recognized or is attempting to organize such employees. Except as set forth on Schedule 3.17 , there has been no demand on behalf of any labor organization to represent any employees of the Company and, to the Knowledge of the Company, there are no present efforts of any labor organization for authorization to represent any employees of the Company. The Company currently has good relations with its employees and there are no strikes, work stoppages, or labor disputes pending or, to the Knowledge of the Company, threatened against the Company.

24


Section 3.18      Environmental, Health, and Safety .
(a)     Except as set forth in Schedule 3.18(a) , the Company is in compliance in all material respects, with all Environmental Requirements applicable to the Business. Except as set forth in Schedule 3.18(a) , the Company has not received any written notice or report regarding any required Remediation arising under Environmental Requirements relating to the Business.
(b)     Except as set forth on Schedule 3.18(b) , there are no underground storage tanks on the Company Real Estate.
(c)     Except as set forth on Schedule 3.18(c) , the Company has not made on the Company Real Estate nor have any other Environmental Releases occurred on or affected the Company Real Estate that (i) violates any applicable Environmental Requirement; or (ii) requires Remediation.
(d)     Except as set forth on Schedule 3.18(d) , the Company has not, at any location, disposed of or arranged for the disposal of any Hazardous Substances in violation of any Environmental Requirements or under circumstances requiring Remediation.
(e)     Except as set forth on Schedule 3.18(e) the Company is in compliance with all Health and Safety Requirements applicable to the Business, except, in each instance, where failure to so comply would not reasonably be expected to result in a Material Adverse Effect. Except as set forth in Schedule 3.18(e) , the Company has not received any written notice or report regarding any actual or alleged non-compliance with any Health and Safety Requirement.
(f)     The Company has made available to the Buyer complete copies of all final written environmental assessments, compliance assessments, reviews, audits and reports relating to compliance with Environmental Requirements concerning the Business in the possession, custody or control of the Company or the Seller.
(g)     Except as set forth in Schedule 3.18(g) , the Company has not received from any Person or Governmental Authority any written notice of alleged violation of any Environmental Requirement.
Section 3.19      Tax Matters .
(a)      Filing of Tax Returns . The Company (and any affiliated group of which the Company is now or has been a member, if any) has timely filed or caused to be filed with the appropriate Governmental Authorities all Tax Returns required to be filed through the date hereof and will timely file any such Tax Returns required to be filed on or prior to the Closing Date. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. The Tax Returns filed (or to be filed) are (or will be) true, correct and complete in all material respects.

25


(b)      Payment of Taxes . All Taxes payable by the Company (whether or not reflected on any Tax Return), including any estimated Taxes, in respect of periods ending on or before the Closing Date, have been timely paid by the Company, or will be timely paid, or an adequate reserve specifically identifying such Taxes has been established and set forth in the Financial Statements, and, the Company has no Liability for Taxes in excess of the amounts so paid or reserves so established. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party. There are no liens for Taxes (other than for Taxes not yet due and payable or being contested in good faith for which adequate reserves have been established).
(c)      Audits, Investigations or Claims . There are no pending or, to the Knowledge of the Company, threatened, Actions for or relating to any additional Liability of the Company in respect of Taxes, and there are no assessments, claims for collection, proposed deficiencies, or other matters under discussion between the Company and any Governmental Authority with respect to Taxes. Neither the Company nor the Seller has received (i) a notice indicating an intent to open an audit or other review, or (ii) a request for information related to Tax matters with respect to the Company. The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
(d)      Compensation Matters . The Company is not obligated to make any payments, and is not a party to any agreements or other arrangements, that would be subject to Section 280G or Section 409A of the Code (or the corresponding provisions of state, local or foreign Law), or that would not be deductible under Section 162(m) of the Code (or the corresponding provisions of state, local or foreign Law).
(e)      Other Tax Obligations . The Company (i) has not been a member of an affiliated group of corporations filing consolidated federal income tax returns; (ii) does not have any Liability for Taxes for any entity under Treas. Reg. 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by Contract or otherwise; and (iii) is not a party to any tax allocation or sharing agreement. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662 (or the corresponding provisions of state, local or foreign Law).
(f)      FIRPTA . The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code (or the corresponding provisions of state, local, or foreign Law) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code (or the corresponding provisions of state, local, or foreign Law).

26


(g)      Other Matters . The Company (i) will not be required to include any item of income, or exclude any item of deduction from taxable income for any period ending after the Closing Date (A) under Section 481 of the Code (or similar provision of state, local, or foreign Law) as a result of a change in method accounting for a taxable period ending on or prior to the Closing Date, (B) as the result of the use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (C) pursuant to the provisions of any agreement entered into with any Governmental Authority executed on or prior to the Closing Date; (D) as a result of an installment sale or open transaction disposition made on or prior to the Closing Date; or (E) as a result of a prepaid amount received on or prior to the Closing Date; (ii) has not received notice of any claim from a Governmental Authority in any jurisdiction in which the Company has never filed a Tax Return that the Company is, or may be, subject to taxation in that jurisdiction; and (iii) has not participated in any “reportable transaction” as defined in Section 6707A of the Code or Treas. Reg. 1.6011-4.
(h)      Disclosure of Information . Schedule 3.19(h) sets forth the following information with respect to the Company as of the most recent practicable date: (i) the basis of the Company in its assets; (ii) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax credit, or excess charitable contribution allocable to the Company; and (iii) the amount of any deferred gain or loss allocable to the Company arising out of any intercompany transaction.
Section 3.20      Insurance . Schedule 3.20 contains a complete and accurate list of all policies or binders of fire, liability, worker’s compensation, product liability, property, flood and other forms of insurance maintained by the Company on the Business or the Assets, true and complete copies of which have been provided to the Buyer. All insurable Assets are insured for the benefit of the Company in amounts and against risks appropriate with respect to the Company’s operations and consistent with industry practice, and, to the Knowledge of the Company, such insurance provides, and during such period provided, coverage to the extent and in the manner as may be required by Law, any Material Contracts, any Leases or by any lender of the Company. The Company is not in material breach or default under any of such policies or binders and will have paid all premiums due for coverage periods prior to the Closing. The Company has not received any notice from any insurance company of any defect or inadequacies in the insurable Assets or any part thereof adversely affecting the insurability thereof. To the Knowledge of the Company, all such policies and binders are in full force and effect and no insurance carrier has made a reservation of right with respect to any claim made by the Company under any such policy and binder.
Section 3.21      Inventory .
(a)      Schedule 3.21 attached to this Agreement contains a complete and accurate list of all of the addresses at which any Inventory is located. Except as set forth on Schedule 3.21 , the Inventory is of a quality and quantity commercially usable and salable at not less than cost in the Ordinary Course of Business, except for any items of obsolete material or material below standard quality, all of which have been written down through the date of the Financial Statements to realizable market value, or for which adequate reserves have been provided, and the present quantities of all Inventory are reasonable with respect to the Business as the date of this Agreement and will be as of the Closing Date. The Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any other Person, and the completion of manufacture or sale or other disposition of the Inventory after the Closing will not require the consent of any Person and will not constitute a breach or default under any Contract to which the Company is a party or to which the Inventory is subject.

27


(b)     All Inventory of the Company existing now and at Closing, complies or will comply, to the extent applicable, in all material respects with all Laws including (i) the Federal Food, Drug and Cosmetic Act (the “ FFDC Act ”), including any amendments thereto and applicable regulations promulgated thereunder, (ii) rules and regulations promulgated from time to time by the U.S. Department of Agriculture, (iii) the Fair Packaging and Labeling Act, and (iv) the Federal Trade Commission Act (the “ FTC Act ”).
(c)     All packaging is (i) in compliance in all material respects with the Nutrition Labeling and Education Act of 1990, and (ii) usable in the ordinary course of business for products being sold to retail or food service accounts.
Section 3.22      Brokers . Except as set forth on Schedule 3.22 , whose fees and expenses shall be paid by the Seller, no Person will be entitled to any brokerage commissions, finder’s fees, or similar compensation or any claim therefor (including the assertion of a lien) against the Company, the Business, the Assets or the Buyer arising out of or due to any act of the Company, the Seller, or their Representatives in connection with the Transactions.
Section 3.23      Suppliers and Customers . Attached as Schedule 3.23 is a correct and complete list of each of the top 10 suppliers to and customers of the Business, measured in terms of expenditures or sales for the 12 months ended December 28, 2013 and the 6 months ended June 28, 2014, showing the approximate aggregate total expenditures or sales by the Company for each such supplier and customer during such period. Except as set forth on Schedule 3.23 , the Company has not received any written or, to the Knowledge of the Company, oral communication from any representative of any such supplier or customer of any threat or intention to, no such supplier or customer has over the last twelve (12) months in fact ceased or materially reduced the supply or purchase of products, goods, or services to or from the Business, whether as a result of the Closing or otherwise, and, to the Knowledge of the Company, no basis exists for such cessation or material reduction. To the Knowledge of the Company there has not been any development with respect to any such supplier or customer which has had or would reasonably be likely to have a Material Adverse Effect.
Section 3.24      Products .
(a)     Except as set forth in Schedule 3.24(a) , since January 1, 2010:
(i)     the Company has not been required to file any notification or other report with or provide information to any Governmental Authority concerning actual or potential defects or hazards with respect to any product sold, manufactured, produced, distributed or marketed by the Company since January 1, 2010 (the “ Products ”);
(ii)     the Company has been in compliance, in all material respects, with each Food and Drug Legal Requirement that is applicable to it;

28


(iii)     with respect to products and ingredients supplied to the Company, to the Knowledge of the Company, the suppliers have been in compliance, in all material respects, with each Food and Drug Legal Requirement that is applicable to them;
(iv)     the Company has not received any written notice or other written communication from any Governmental Authority or any other Person regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any material Food and Drug Legal Requirement, or (B) any actual, alleged, possible or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any material remedial action of any nature;
(v)     the Company has not been subject to any obligation or requirement arising under any consent decree, consent agreement, inspection report or Warning Letter issued to the Company by or entered into with the U.S. Food and Drug Administration (“ FDA ”) or the Federal Trade Commission (“ FTC ”), or any other U.S. or foreign Governmental Authority or other order from, agreement with, or notice or requirement or commitment made to any other Governmental Authority with regard to the development, testing, manufacture, registration, approval, marketing, distribution, labeling, storage, or transport of any of the Products.
(vi)     there have been no investigations, audits, actions, inquiries or other proceedings pending or, to the Knowledge of the Company, threatened, with respect to a material violation by the Company of any applicable Law with regard to the development, testing, manufacture, registration, approval, marketing, distribution, labeling, storage, or transport of any of the Products that reasonably would be expected to result in an administrative, civil, or criminal Liability, and, to the Knowledge of the Company, there are no facts or circumstances existing that would reasonably be expected to serve as a basis for such an investigation, audit, action, inquiry or other proceeding.
(b)     Except as set forth in Schedule 3.24(b) , since January 1, 2010, the Products:
(i)     have not been adulterated or misbranded within the meaning of the FFDC Act, or within the meaning of any other applicable Law;
(ii)     have not been articles which may not, under the provisions of Section 404, 505 and 512 of the FFDC Act, be introduced into interstate commerce;
(iii)     have been sanitary and, based on current scientific evidence and industry practice, safe for human consumption when used in accordance with the labeling; and
(iv)     have not been the subject of any notices, actions, decrees, citations, investigations, audits, actions, inquiries or other proceedings pursuant to The Safe Drinking Water and Toxic Enforcement Act of 1986, as amended, promulgated by the State of California.
(c)     Set forth on Schedule 3.24(c) is a complete description of all recall programs of any and all Products of the Company which may be underway or pending.

29


(d)     Except as noted in Schedule 3.24(d) , claims on the labeling and in the advertising and promotional materials of the Company for Products sold or intended to be sold in the United States are limited to allowed nutrient content and structure function claims, as defined by the FDA.
(e)     The Company has delivered or made available to the Buyer true, correct and complete copies of:
(i)     all Warning Letters, untitled letters, regulatory letters, notices of inspectional observations or similar notices, or other correspondence, including meeting notes or minutes, if any, with or from any Governmental Authority relating to the Products, and the Company’s compliance with Food and Drug Legal Requirements and rules and regulations of other Governmental Authorities, and all of the responses thereto, within the last five (5) years; and
(ii)     all written reports of Good Manufacturing Practices audits of the Company and, to the extent in the possession of the Company, of the Company’s contract manufacturers, within the last five (5) years.
(f)     Except as disclosed in Schedule 3.24(f) , each dietary ingredient used in the manufacture of Products complies in all material respects with applicable Law. All fillers, shellacs, processing aids, colors and flavors that the Company uses in its manufacture of the Products intended to be sold in the United States are (i) ”Generally Recognized as Safe” as determined by FDA, or (ii) food additives approved by FDA. All imported raw materials that the Company uses in the manufacture of products are legally available in the United States, and no United States import alert restricts the importation of any raw materials used by the Company in the manufacture of the Products.
(g)     Since January 1, 2010, and except as disclosed in Schedule 3.24(g) , none of the Products have been subject to withdrawal, modification, cancellation or suspension by FDA or any other Governmental Authority, and no Products have been discontinued (other than for commercial or other business reasons), recalled by FDA or any other Governmental Authority or subject to a removal or safety alert (whether voluntarily or otherwise). Since January 1, 2010, and except as disclosed in Schedule 3.24(g) , no proceedings have occurred (whether completed or pending) seeking to recall, re-label, or seize any Product.
(h)     Since January 1, 2010, the Company has operated in all material respects with applicable Law and has only shipped Products intended to be distributed in each jurisdiction that are in compliance in all material respects with the applicable Law relating to the manufacture of food.
(i)     Since January 1, 2010, the Company has been in compliance in all material respects with all applicable FDA import and export requirements, including prior notices of imported food, certificates of free sale, and record keeping requirements and the applicable Law equivalent thereof.

30


(j)     The Company has not utilized any of the equipment described on Schedule 3.24(j)(i) in the manufacture, production, marketing or sale of any peanut butter products with inclusions, other than products produced specifically for the counter-party described on Schedule 3.24(j)(ii) . Except as set forth on Schedule 3.24(j)(iii) , none of the equipment described on Schedule 3.24(j)(i) is necessary to manufacture, produce, market or sell any Products currently manufactured, produced, marked or sold by the Company or which the Company currently has plans to manufacture, produce, market or sell, other than Products produced specifically for the counter-party described on Schedule 3.24(j)(ii) .
Section 3.25      Accounts Receivable . Schedule 3.25 is a list of all accounts receivable of the Company as of June 28, 2014. Except as set forth on Schedule 3.25 , the accounts receivable of the Company set forth on Schedule 3.25 (and the accounts receivable of the Company as of the Closing Date): (a) are, or will be, as applicable, bona fide; (b) have, or will have, as applicable, arisen in the Ordinary Course of Business; (c) are not, or will not be, as applicable, subject to valid defenses or a material claim of set-off or counterclaim, subject to the allowance for doubtful accounts and returns which are (or will be, as applicable) adequate.
Section 3.26      Bank Accounts and Powers of Attorney . Schedule 3.26 is a list of all accounts and deposit boxes maintained by the Company at any bank or other financial institution and the names of the individuals authorized to effect transactions in such accounts and with access to such boxes. Except as set forth on Schedule 3.26 , there are no outstanding powers of attorney executed on behalf of the Company.
Section 3.27      Unlawful Benefits . Except as set forth on Schedule 3.27 , none of the Company or the Seller, or any of their Affiliates, or any other Person on behalf of the Company, in connection with the conduct of the Business, directly or indirectly, has given, or has agreed to give, any significant gift or similar benefit to any supplier, customer or potential employee of the Company, or any other Person who was, is or may be, in a position to help or hinder the Company (or assist in connection with any actual or potential transaction) under circumstances that involve a violation of any applicable Law which was then in effect and which could reasonably be expected to subject the Company to any material damage or penalty.
Section 3.28      Transactions with Affiliates . Except as set forth on Schedule 3.28 , the Company has no Liability to any shareholder, member or Affiliate of the Company or the Seller, nor does any shareholder, member or Affiliate of the Company or the Seller owe any Liability to the Company. Except as set forth on Schedule 3.28 , no Affiliate of the Company or the Seller is a party to any Contract that affects any of the Assets or the Business or the operation thereof. All Contracts, Liabilities and other transactions between or among the Company and any shareholder, member or Affiliate of the Company or the Seller have been conducted at arm’s length in the Ordinary Course and are bona fide.
Section 3.29      No Other Representations and Warranties . The representations and warranties contained in this Article III and Article IV and in any certificate or closing document delivered pursuant to this Agreement are the only representations and warranties made by the Company or the Seller in connection with the Transactions contemplated herein and, for greater certainty and without limiting the generality of the foregoing, no other representation or warranty, whether express or implied, is made in connection with, arising out of or relating to the Transactions contemplated by this Agreement. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES REFERENCED IN THE PRECEDING SENTENCE, THE COMPANY AND THE STOCKHOLDER MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, RELATING TO THE COMPANY, ITS ASSETS OR ANY OTHER MATTER, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, HABITABILITY, WORKMANSHIP OR FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH ADDITIONAL REPRESENTATIONS AND WARRANTIES ARE HEREBY DISCLAIMED. None of the material or information provided by or communications made by the Company, the Seller or any of its or their Affiliates, or by any advisor thereof, whether by use of a “data room,” or in any information memorandum, or otherwise, or by any broker or investment banker, will independently cause or independently create any warranty, express or implied, as to the title, condition, value or quality of the Company or any of its assets.

31


ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING STOCKHOLDER
The Seller represents and warrants to the Buyer and the Parent as of the date hereof and as of the Closing as follows:
Section 4.1      Organization and Qualification . The Seller is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware. The Seller is duly qualified to do business and is in good standing in each jurisdiction in which the character or location of the property owned, leased, or operated by it, or the nature of its business, makes such qualification necessary, except where the failure to be so qualified does not or would not be reasonably likely to have a Material Adverse Effect.
Section 4.2      Authority; Enforceability .
(a)     The Seller has all requisite power, right and authority, without the consent of any other Person (other than as set forth on Schedule 3.6(b) , Schedule 3.7 and Schedule 3.8(a) ), to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations under such agreements, and there is no provision in the Seller’s Certificate of Formation and Limited Liability Company Agreement which prohibits or limits the Seller’s ability to consummate the Transactions. The execution and delivery of this Agreement, the Ancillary Agreements, and all other instruments and certificates to be delivered at the Closing by the Seller and the consummation by the Seller of the Transactions have been duly approved by the board of managers of the Seller. No other proceeding on the part of the Seller (including any consent or approval of its members) is required or necessary to authorize this Agreement, the Ancillary Agreements, and the other instruments and certificates to be delivered by the Seller under this Agreement, or the consummation of the Transactions.
(b)     This Agreement, the Ancillary Agreements, and the other instruments and certificates to be delivered by the Seller has been (or, if to be executed or delivered after the date of this Agreement, will be) duly executed and delivered by the Seller and are (or, when executed, will be) legal, valid, and binding obligations of the Seller enforceable against the Seller in accordance with their terms.

32


Section 4.3      No Conflict . Except as set forth on Schedule 4.3 , none of the execution, delivery, or performance of this Agreement and the Ancillary Agreements, the consummation of the Transactions, or compliance by the Seller with any of the provisions of this Agreement will violate or conflict with any applicable Law or any agreement, order, judgment, or decree to which the Seller is a party or by which the Seller or any of its assets are bound, including the Seller’s Certificate of Formation and Limited Liability Company Agreement.
Section 4.4      Title of Shares . The Seller is the sole record and beneficial owner of the Purchased Shares, which constitute 100% of the issued and outstanding shares of capital stock of the Company. The Purchased Shares are owned free and clear of all Encumbrances (other than state and federal securities Law restrictions). There are no outstanding options, calls, puts, subscriptions, preemptive rights, rights of first refusal, or other agreements or commitments, other than this Agreement, obligating the Seller to sell or transfer the Purchased Shares to any Person or granting an option or right to any Person to purchase or acquire from the Seller the Purchased Shares. At the Closing, and subject to the Buyer’s satisfaction of its obligations hereunder, the Buyer will acquire good and marketable title to and complete ownership of such Purchased Shares, free and clear of all Encumbrances (other than state and federal securities Law restrictions), upon the delivery of the certificate(s) evidencing the Purchased Shares to the Buyer duly endorsed for transfer.
Section 4.5      Litigation . There is no, there has not been any, and to the Knowledge of the Seller, there is no threatened or anticipated, Action: (a) involving, against, related, to or affecting the Seller or the Purchased Shares or (b) that, individually or in the aggregate, would be reasonably expected to have the effect of preventing, delaying, making illegal, limiting, enjoining or otherwise interfering with any of the Transactions or payments contemplated hereunder. No judgment, order, writ, injunction, plan or decree of any court or other Government Authority or arbitrator affecting the Seller has been entered which is presently in effect, and, the Seller is not in breach or default with respect to any judgment, order, writ, injunction, plan or decree. There are no unsatisfied judgments against the Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as of the date hereof and as of the Closing as follows:
Section 5.1      Organization . The Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Washington. The Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Missouri. The Buyer has full corporate power and authority to conduct and carry on its business where it is presently being conducted by the Buyer and to own, operate and lease its assets. The Buyer and the Parent are duly qualified as corporations to do business and are in good standing in each jurisdiction in which the character or location of the property owned, leased, or operated by them, or the nature of the business conducted by them makes such qualification necessary.

33


Section 5.2      Authority; Enforceability .
(a)     Each of the Buyer and the Parent have all requisite power, right and authority, without the consent of any other Person other than as required by the HSR Act, and has taken all action necessary, to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to consummate the Transactions, and to perform its obligations under this Agreement and the Ancillary Agreements to which it is a party. The execution and delivery by the Buyer and the Parent of this Agreement and the Ancillary Agreements to which it is a party, and all other instruments and certificates to be delivered at the Closing by the Buyer and the Parent, and the consummation by the Buyer and the Parent of the Transactions, have been duly approved by the board of directors of the Buyer and the Parent. No other proceedings on the part of the Buyer and the Parent are necessary to authorize this Agreement and the Ancillary Agreements to which it is a party or the other agreements, instruments, and certificates to be delivered by the Buyer and the Parent under this Agreement and the Ancillary Agreements to which it is a party or the consummation of the Transactions.
(b)     This Agreement, the Ancillary Agreements to which it is a party, and the other agreements, instruments, and certificates to be delivered by the Buyer and the Parent under this Agreement and the Ancillary Agreements to which it is a party have been (or, if to be executed or delivered after the date hereof, will be) duly executed and delivered by the Buyer and the Parent and are (or, when executed, will be) legal, valid, and binding obligations of the Buyer and the Parent, enforceable against the Buyer and the Parent in accordance with their terms.
Section 5.3      No Conflict or Violation . None of the execution, delivery, or performance of this Agreement or the Ancillary Agreements to which the Buyer is a party, the consummation of the Transactions, or compliance by the Buyer or the Parent with any of the provisions of this Agreement and the Ancillary Agreements to which the Buyer or the Parent is a party, will: (a) violate or conflict with any provision of the Articles of Incorporation or Bylaws of the Buyer or the Parent; (b) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, any of the terms, conditions or provisions of any material contract, indebtedness, note, bond, indenture, security or pledge agreement, commitment, license, lease, franchise, permit, agreement, or other instrument or obligation (i) to which the Buyer or the Parent is a party or (ii) by which the Buyer’s or the Parent’s assets are bound; (c) violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award; or (d) impose any Encumbrance on the assets or the business of the Buyer or the Parent; except in each case where such violation or conflict could not reasonably be expected to have a material adverse effect on the Parent and its subsidiaries, taken as a whole.
Section 5.4      Governmental Consents . Except as required by the HSR Act, no consent or approval of, notice to, or filing with any Governmental Authority is required to be made by either the Buyer or the Parent in order to consummate the Transaction contemplated by this Agreement.

34


Section 5.5      Purchase for Investment . The Buyer is acquiring the Purchased Shares for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. The Parent is an “accredited investor” within the meaning of Section 501(a) of Regulation D promulgated under the Securities Act, and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Purchased Shares and is capable of bearing the economic risks of such investment.
Section 5.6      Brokers . Except for Lazard Middle Market LLC, no Person will be entitled to any brokerage commissions, finder’s fees, or similar compensation arising out of or due to any act of the Buyer or its Representatives in connection with the Transactions.
Section 5.7      Ability to Perform Agreement . The Buyer has sufficient funds to pay the Purchase Price without the need to obtain additional financing, and there is no occurrence, event or condition with respect to it that would prevent it from completing the Transactions. At the Closing, the Buyer will have sufficient funds for the Buyer to pay all the amounts required to be paid by the Buyer pursuant to Article I .
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1      Conduct of Business and Notification .
(a)     Except as otherwise provided in this Agreement, or as the Buyer may otherwise consent to in writing, which consent shall not be unreasonably withheld, on and after the date hereof and prior to the Closing Date or the termination of this Agreement, the Company shall, and the Seller shall cause the Company to (i) conduct the business, operations, activities and practices of the Company in the Ordinary Course, (ii) use reasonable efforts to preserve the Company’s current business organization and existing business relationships, including with respect to the preservation of the goodwill of the Company’s suppliers, contractors, licensors, employees, customers and distributors and others having business relations with the Company, (iii) maintain the Company’s property in substantially the condition currently existing, normal wear and tear excepted, (iv) except as set forth on Schedule 6.1(iv) , not increase the benefits provided or compensation payable or to become provided or payable to, any employee or former employee, except increases in compensation as may be mandated by Law or consistent with past practices in the Ordinary Course with respect to non-managerial employees (which increases shall not exceed 5% of the compensation for any single employee or $327,250 for all employees), (v) except as set forth on Schedule 6.1(v) , not grant any severance or termination pay to, or enter into or materially amend any employment, severance or other agreement or arrangement with, any of its directors, managers, officers, independent contracts or employees, other than in the Ordinary Course of Business, (vi) except as set forth on Schedule 6.1(vi) , not establish, adopt or enter into or materially amend any bonus, incentive, deferred compensation, profit sharing, equity option or purchase, insurance, pension, retirement or other employee benefit plan, (vii) not enter into any collective bargaining agreement, labor contract, or other Contract with any labor organization or union; (viii) except as set forth on Schedule 6.1(viii) , not enter into, terminate or amend in any material respect any Material Contract, or any Contract that would be a Material Contract if in existence as of the date hereof, except consistent with past practices in the Ordinary Course, (ix) not sell, lease or otherwise transfer or grant any option to sell, lease or otherwise transfer, give a security interest in or otherwise create any Encumbrance (other than a Permitted Encumbrance) on any of the Assets or interest in the Assets, other than the sale of Inventory in the Ordinary Course, (x) not make any individual commitment or agreement for capital expenditures in excess of $250,000 that is not otherwise included in the expenditure information set forth on Schedule 3.10(g) , (xi) not make or change any material election, change an annual accounting period, adopt or change any material accounting method, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating to the Company, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to the Company, or take any other similar action relating to the filing of any Tax return or the payment of any Tax or enter into any binding agreement or arrangement with the IRS (or any similar Tax authority) or other Governmental Authority, with respect to the Company, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action would have the effect of materially increasing the Tax liability of the Company for any period or periods after the Closing Date or materially decreasing any Tax attribute of the Company existing on the Closing Date and not otherwise applicable or useable to reduce the Tax Liability of the Company for a Pre-Closing Period, (xii) not create, incur, assume or otherwise become

35


liable, with respect to any indebtedness, other than Funded Indebtedness created, incurred or assumed in the Ordinary Course or Permitted Encumbrances, (xiii) not make any loan to any third party other than employee loans in the Ordinary Course of Business and trade payables in the Ordinary Course, (xiv) not make any change or incur any obligation to make a change in its Articles of Incorporation, Bylaws or other organizational documents, (xv) not effect any dissolution, winding-up, liquidation or termination of the Company, (xvi) except as set forth on Schedule 6.1(xvi) , not sell, transfer, license, sublicense or otherwise dispose of any Intellectual Property, (xvii) not acquire by merging or consolidating with, or by purchasing the capital stock or assets of, directly or indirectly, any business or any corporation, partnership, association or other business organization or division thereof, (xviii) not issue, deliver or sell any securities of the Company or enter into, issue or grant any agreements, arrangements, options, warrants, puts, calls, subscriptions, rights, claims or commitments of any character relating to the issuance, sale, purchase, redemption, conversion, exchange, registration, voting or transfer of any capital stock or other equity interests or securities of the Company, (xix) except as set forth on Schedule 6.1(xix) , not enter into any lease, use or license agreement relating to any Company Real Estate or terminate or amend any Lease or waive any material right under any Lease, (xx) not permit or suffer any termination, revocation, expiration or lapse of any Permits and Licenses or violation of any Law applicable to the Business or any of the Assets, (xxi) declare, set aside, pay or make any dividend or other distribution, payable in cash, stock or property; and (xxii) not enter into any agreement (conditional or otherwise) to do any of the foregoing.
(b)     Prior to the Closing, neither the Seller nor the Company shall take any action that is intended to or may reasonably be expected to result in: (i) any of the representations and warranties set forth in Article III or Article IV being or becoming untrue in any material respect; (ii) any of the conditions to the Closing set forth in Section 7.1 not being satisfied; or (iii) any violation of any provision of this Agreement, except, in each case, as may be required by applicable Law.

36


(c)     Prior to the Closing, the Seller and the Company shall promptly notify the Buyer (in writing) and keep the Buyer advised as to any Action threatened, pending, or known to the Seller or the Company that challenges or seeks to delay the Transactions. The Seller and the Company agree to cooperate and use commercially reasonable efforts to defend against such claim, action, suit, investigation or other proceeding and, if an injunction or other order is issued in any such action, suit or other proceeding, to use commercially reasonable efforts to have such injunction or other order lifted, and to cooperate reasonably regarding any other impediment to the consummation of the Transactions.
(d)     Prior to the Closing, the Seller and the Company will promptly supplement or amend the Disclosure Schedules with respect to any fact, matter or event arising after the date hereof which is required to make each representation and warranty set forth in Article III accurate as of the date such supplement or amendment is made (a “ Subsequent Event ”) . If the Closing occurs on or prior to November 1, 2014, then no supplement or amendment of the Disclosure Schedule made pursuant to this Section 6.1(d) shall, or shall be deemed, to have qualified the representations and warranties set forth in this Agreement to which it relates or cure or be deemed to have cured any misrepresentations or breach of representation, warranty, covenant or obligations that otherwise might have existed hereunder by reason of the Subsequent Event, and the Buyer shall have the right to exercise its right of termination pursuant to Section 9.1(d) if the Subsequent Event caused a breach for which the Buyer is entitled to terminate this Agreement in accordance with Section 9.1(d) . If the Closing has not occurred on or prior to November 1, 2014 and such failure of the Closing to occur on or prior to such date is due to the failure of the Buyer to fulfill any obligation under this Agreement required to have been fulfilled prior to such date, which failure has been the cause of, or resulted in, the failure of the Closing to occur on or prior to such date, then any supplement or amendment of the Disclosure Schedule made pursuant to this Section 6.1(d) with respect to Subsequent Events occurring after November 1, 2014 shall, and shall be deemed, to have qualified the representations and warranties set forth in this Agreement to which it relates and to cure any misrepresentations or breach of representation, warranty, covenant or obligation that otherwise might have existed hereunder by reason of such Subsequent Event that occurred after November 1, 2014.
Section 6.2      Access . The Company will afford to the Buyer and to its Representatives, accountants and attorneys reasonable access, during normal business hours, to all Assets (to the extent under the control of the Company), Books and Records, and Company Real Estate for purposes of completing its legal, financial, tax, and business due diligence (including environmental investigations, title examinations and surveys) and transition planning.
Section 6.3      Confidential Information . Each of the Parent and the Company agrees and acknowledges that it remains bound by the Non-Disclosure Letter Agreement, dated November 12, 2013, between the Company and the Parent, the Company agrees and acknowledges that it remains bound by the Non-Disclosure Letter Agreement, dated May 7, 2014, between Golden Boy Foods Ltd. and the Company, and each of the Parent and the Seller agrees and acknowledges that it remains bound by the Non-Disclosure Letter Agreement, dated July 14, 2014, between the Seller and the Parent (collectively, the “ Confidentiality Agreements ” ) and that each of the Parent, the Company and the Seller shall be responsible for any breaches of the applicable Confidentiality Agreement(s) by any of its respective Affiliates or Representatives.

37


Section 6.4      Consents of Third Parties; Governmental Approvals .
(a)     The Company, the Seller and the Buyer will act diligently and reasonably in attempting to secure, before the Closing Date, the consent, approval or waiver, in form and substance reasonably satisfactory to the other Party, required to be obtained from any Person (other than a Governmental Authority) to consummate this Agreement and the Transactions; provided , however , that such action shall not include any requirement of the Buyer, the Parent, the Company or the Seller or any of their respective Affiliates to expend money, commence or participate in any litigation or offer or grant any accommodation (financial or otherwise) to any third Person.
(b)     During the period prior to the Closing Date, the Buyer shall act diligently and reasonably, and the Seller and the Company, upon the request of the Buyer, shall use their respective reasonable efforts to cooperate with the Buyer, in attempting to secure any consents and approvals of any Governmental Authority required to be obtained by the Buyer or the Parent in order to permit the consummation of this Agreement and the Transactions. The HSR Act filing fees shall be borne by the Buyer. Each Party hereto shall make an appropriate filing, if necessary, pursuant to the HSR Act with respect to this Agreement and the Transactions promptly (and, in any event, within ten (10) Business Days) after the date of this Agreement and shall supply as promptly as practicable to the appropriate Governmental Authority any additional information and documentary material that may be requested pursuant to the HSR Act. Without limiting the foregoing, (i) the Company, the Seller, the Buyer and the Parent and their respective Affiliates shall not extend any waiting period or comparable period under the HSR Act or enter into any agreement with any Governmental Authority not to consummate this Agreement or the Transactions, except with the prior written consent of the other Parties, and (ii) the Company, the Seller, the Buyer and the Parent agree to take all actions that are reasonably necessary or reasonably advisable to consummate this Agreement and the Transactions.
(c)     Notwithstanding anything to the contrary set forth in this Agreement, including Section 6.4(b) , none of the Parent, the Buyer or any of their Subsidiaries shall be required to, and the Company shall not, without the prior written consent of the Buyer, become subject to, consent to, or offer or agree to, or otherwise take any action with respect to, any requirement, condition, limitation, understanding, agreement or order to (i) sell, license, assign, transfer, divest, hold separate or otherwise dispose of any assets, business or portion of business of the Company, the Buyer, the Parent or any of their respective Subsidiaries, (ii) conduct, restrict, operate, invest or otherwise change the assets, business or portion of business of the Company, the Buyer, the Parent or any of their respective Subsidiaries in any manner, or (iii) impose any restriction, requirement or limitation on the operation of the business or portion of the business of the Company, the Buyer, the Parent or any of their respective Subsidiaries; provided that , if requested by the Buyer, the Company shall become subject to, consent to, or offer or agree to, or otherwise take any action with respect to, any such requirement, condition, limitation, understanding, agreement or order so long as such requirement, condition, limitation, understanding, agreement or order is only binding on the Company in the event the Closing occurs. Notwithstanding anything in the contrary in this Agreement, including Section 6.4(b) , none of the Parent, the Buyer or any of their Affiliates shall be required to defend, contest or resist any action or proceeding, whether judicial or administrative, or to take any action to have vacated, lifted, reversed or overturned any order, writ, assessment, decision, injunction, decree, ruling or judgment of a Governmental Authority, whether temporary, preliminary or permanent, in connection with the Transactions contemplated by this Agreement.

38


(d)     Amounts payable to the Person(s) set forth on Schedule 3.16(h) (each is a “ Disqualified Individual ”), which, in the absence of shareholder approval, in connection with the transactions contemplated by this Agreement would constitute “excess parachute payments” within the meaning of Section 280G of the Code shall be referred to as “ 280G Payments ”. Prior to the Closing, the Company shall seek a vote of its shareholders (to the extent and in the manner required under Sections 280G(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code), that such person has the right to receive such payment as disclosed on Schedule 3.16(h). Prior to such vote, the Company shall use commercially reasonable efforts to obtain a waiver from such Disqualified Individual, such that unless such payments are approved by the Company’s shareholders to the extent and in the manner required under Sections 280G(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code, no such payments shall be made.
Section 6.5      Further Assurances . Each of the Parties agrees: (a) to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the Transactions (except as provided in Section 6.4(c) , and except that no Party shall be required to waive any conditions precedent to Closing); (b) to execute any further documents, instruments or conveyances of any kind that may be reasonably necessary or advisable to consummate the Transactions, including, but not limited to, obtaining any licenses and/or agreements from the owners of the rights to any software (including, without limitation, commercial off the shelf software, other licensed software and software-as-a-service) that is used or utilized by the Company immediately prior to the Closing (the “ Company Software ”) that are necessary to grant the Company the right to use or utilize the Company Software, in each case in a quantity and manner equal to the quantity and manner of a given license type actually deployed/used by the Seller as of the Closing Date; and (c) to cooperate with each other in connection with the foregoing. Without limiting the generality of the foregoing, the Seller from time to time after the Closing, at the Buyer’s request, will execute, acknowledge, and deliver to the Buyer such other instruments of assignment, conveyance and transfer and will take such other actions and execute and deliver such other documents, certifications, and further assurances as the Buyer may reasonably require in order to vest more effectively in the Buyer, or to put the Buyer more fully in possession of, any of the Purchased Shares and will take such further action as may be necessary or desirable to effect such transfer and to otherwise carry out the purposes of this Agreement, in each case to the extent not inconsistent with applicable Laws. The Seller agrees to pay directly to the applicable third party, or reimburse the Buyer or the Company, as applicable, for, any and all third party costs, fees or expenses, including, without limitation, transfer fees, licensing fees or penalties, that (i) might arise prior to, as of or after Closing with regard to the Company Software as a result of the Transactions, or (ii) must be paid prior to, as of or after Closing in order for the Company to continue to use or utilize the Company Software from and after the Closing Date in the same quantity or manner as used or utilized as of the Closing Date.

39


Section 6.6      Tax Covenants .
(a)      Tax Returns . The Buyer or the Parent shall prepare and file, or cause to be prepared and filed, all Tax Returns for the Company for all periods ending after the Closing Date. In the case of Tax Returns for periods starting on or before and ending after the Closing Date (a “ Straddle Period ”), the Buyer or the Parent shall provide the Seller with an opportunity to review and comment on such Tax Returns no less than fifteen (15) days prior to the due date thereof and the Seller shall be responsible for and reimburse the Buyer within five (5) days after such due date for all Taxes imposed on the Company shown as due and owing on such Tax Returns that are allocable to the portion of the Straddle Period that extends through the Closing Date (the “ Pre-Closing Straddle Period ”), except to the extent (i) a reserve for such Taxes has been established and is reflected in the Financial Statements and such Taxes are taken into account in calculating the Closing Date Net Working Capital, or (ii) such Taxes are included in the calculation of Pre-Closing Tax Obligations to the extent such amounts were deducted in determining the Closing Date Cash Payment pursuant to Article I . The Seller, at its expense, shall prepare and, following the Buyer’s approval of the same (which approval will not be unreasonably withheld), file all Tax Returns required to be filed by the Company for all periods ending on or before the Closing Date (“ Pre-Closing Periods ”), and shall pay (x) any Taxes owed with respect to such Tax Returns, and (y) any installments of estimated Tax with respect to income or gain of the Company received on or prior to the Closing Date; provided , however , that the Seller shall not be liable for or pay any Taxes (I) to the extent a reserve for such Taxes has been established and is reflected in the Financial Statements and such Taxes are taken into account in calculating the Closing Date Net Working Capital, or (II) to the extent such Taxes are included in the calculation of Pre-Closing Tax Obligations to the extent such amounts were deducted in determining the Closing Date Cash Payment pursuant to Article I (whether at the time specified in Section 1.8(a) or at the time specified in Section 1.8(b) , as applicable). Neither the Buyer nor any of its Affiliates shall amend, refile, revoke or otherwise modify any Tax Return or Tax election of the Company with respect to any Tax period ending on or before the Closing Date without the prior written consent of the Seller, which consent shall not be unreasonably withheld or delayed.
(b)      Straddle Period Allocation . For purposes of this Section 6.6 , the Taxes of the Company for a Straddle Period shall (i) in the case of Taxes based upon or related to income, gross income, gross receipts, sales, net profits, windfall profits or similar items, be allocated to the Pre-Closing Straddle Period based on a closing of the books as of the end of the Closing Date and (ii) in the case of Taxes other than Taxes described in clause (i), the amount of Taxes allocated to the Pre-Closing Straddle Period shall be the product of (A) the amount of Taxes for the entire Straddle Period and (B) a fraction, the numerator of which is the number of calendar days in the Pre-Closing Straddle Period and the denominator of which is the number of calendar days in the entire Straddle Period.
(c)      Cooperation on Tax Matters . The Parties shall cooperate fully, to the extent reasonably requested by another Party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information reasonably relevant to any such audit, litigation, or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and the Seller shall (i) retain all books and records with respect to Tax matters pertinent to the Company relating to any Taxable period beginning before the Closing Date until expiration of the statute of limitations (and, to the extent notified by the Buyer or the Seller, any extensions thereof) of the respective Taxable periods, and to abide by all record retention agreements entered into with any Taxing authority, and (ii) give the other Party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other Party so requests, the Company or the Seller, as the case may be, shall allow the other Party to take possession of such books and records.

40


(d)      Tax Sharing Agreements . Any Tax sharing agreements or similar agreements between the Company on the one hand and a Person other than the Company on the other hand shall be terminated as of the Closing Date and, after the Closing Date, the Company shall not be bound thereby or have any liability thereunder.
(e)      Refunds . If the Company or an Affiliate thereof actually receives a credit with respect to, or refund of, any Tax paid by the Company prior to the Closing with respect to any Pre-Closing Period (or portion thereof), the Buyer shall pay over to the Seller the amount of such refund or credit within fifteen (15) days of receipt or entitlement thereto.  In the event that any refund or credit of Taxes for which a payment has been made to the Seller pursuant to the preceding sentence is subsequently reduced or disallowed, the Seller shall indemnify and hold harmless the Buyer and the Company for any Tax assessed against the Company, the Buyer or any Affiliate thereof by reason of such reduction or disallowance and Seller shall make a payment to the Buyer in such amount within fifteen (15) days of the Buyer’s notice to the Seller.  For purposes of this Section 6.6(e) , Tax refunds shall include any interest that is paid as part of the payment of such refunds, reduced by increase in the original payee’s federal, state, local, foreign or other Taxes payable attributable to such interest after taking into account any offsetting deductions or credits.
(f)      Proceedings .
(i)     The Buyer shall promptly notify the Seller in writing upon receipt by the Buyer or any Affiliate thereof of written notice of any inquiries, claims, assessments, audits or similar events with respect to Taxes relating to a Pre-Closing Period for which the Seller may be liable under this Agreement or by Law (any such inquiry, claim, assessment, audit or similar event, a “ Tax Matter ”). So long as sufficient amounts remain in the Indemnity Escrow Account to satisfy in full any amounts that may become due with respect to such Tax Matter, the Seller, at its sole expense, shall control the defense, compromise or other resolution of any such Tax Matter, including responding to inquiries and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, such Tax Matter; provided , however , that the Seller may not enter into any settlement of or otherwise compromise any Tax Matter that affects or may affect the Tax liability of the Company or the Buyer or any Affiliate of the foregoing for any period ending after the Closing Date, without the prior written consent of the Buyer, which consent may not be unreasonably withheld or delayed. The Seller shall keep the Buyer fully and timely informed with respect to the commencement, status and nature of any Tax Matter.

41


(ii)     The Buyer or the Parent shall represent the interests of the Company before the relevant Taxing authority with respect to any inquiry, claim, assessment, audit, or similar event relating to a Straddle Period (a “ Straddle Period Tax Matter ”) and shall control the defense, compromise or other resolution of any such Straddle Period Tax Matter, including responding to inquiries, filing Tax Returns and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, such Straddle Period Tax Matter. If the Seller would be required to indemnify the Buyer, the Company or any of their Affiliates pursuant to Section 8.2 with respect to such Straddle Period Tax Matter then: (A) the Seller may participate in the defense of such Straddle Period Tax Matter and to employ counsel, at its own expense, separate from counsel employed by the Buyer, and (B) the Buyer and the Parent shall not enter into any settlement of or otherwise compromise any such Straddle Period Tax Matter to the extent that it adversely affects the Tax liability of the Seller without the prior written consent of the Seller, which consent shall not be unreasonably withheld or delayed. The Buyer shall keep the Seller fully and timely informed with respect to the commencement, status and nature of any Straddle Period Tax Matter.
Section 6.7      Insurance; Property . From the date of this Agreement to the Closing Date, the Company and the Seller will maintain the Company’s existing insurance or obtain substantially similar coverage on presently insured property (real, personal, and mixed) owned or leased by the Company; and all such property will be used, operated, maintained, and repaired in the Ordinary Course of Business.
Section 6.8      Administration of Accounts . All payments and reimbursements received by the Seller, or any Affiliate of the Seller after the Closing Date from any third party in the name of the Company, for the benefit of the Company, or in connection with the Company or the Business, shall be held by the Seller or such Affiliate in trust for the benefit of the Company. Immediately upon receipt of such payment or reimbursement, the Seller shall pay to the Buyer the amount of such payment or reimbursement.
Section 6.9      No Solicitation; Exclusivity . Between the date of this Agreement and the earlier to occur of the Closing Date or the termination of this Agreement pursuant to Section 9.1 , neither the Company nor the Seller shall, and the Company and the Seller shall not permit any of their Affiliates, directors, officers, employees or Representatives to, directly or indirectly, (a) solicit or consider any inquiries, proposals or offers, or enter into agreements, relating to the disposition of the Purchased Shares, Assets or the Business of the Company, the merger or consolidation of the Company with any Person, the sale or exchange of any securities of the Company, or any other business combination, or (b) divulge or otherwise disclose any confidential information concerning the Business or the Assets to any third Person (other than in the Ordinary Course) or any details regarding the terms of this Agreement.
Section 6.10      Director and Officer Liability; Indemnification . For a period of six (6) years after the Closing Date, the Company’s Articles of Incorporation and Bylaws shall contain provisions no less favorable than those set forth in the Company’s Articles of Incorporation and Bylaws as of the date hereof with respect to exculpation or indemnification of any current or former officer, manager, director or similar functionary (unless required by Law) in respect of acts, omissions or events occurring on or prior to Closing, it being the intent of the Parties that such officers, managers, directors and similar functionaries of the Company shall continue to be entitled to such exculpation and indemnification in respect of acts, omissions or events occurring on or prior to Closing to the fullest extent of the Law. The provisions of this Section 6.10 are intended for the benefit of, and will be enforceable by, each current and former officer, director, manager or similar functionary of the Company and his or her heirs and representatives, and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have had by contract or otherwise. Prior to the Closing Date, the Company and the Seller shall obtain, at the expense of the Company, “tail” policies in respect of existing policies of directors’ and officers’ liability insurance maintained by the Company, for a period of six (6) years after the Closing Date, to provide insurance coverage for events, acts or omissions occurring on or prior to the Closing Date for all Persons who were directors or officers of the Company on or prior to the Closing Date.

42


Section 6.11      Contact with Employees, Customers and Suppliers . Prior to the Closing, neither the Buyer nor any of the Buyer’s Representatives shall contact or otherwise communicate with any employees, customers or suppliers of the Company in connection with or regarding the Transactions contemplated hereby, except to the extent approved in advance in writing by Jack Warden, the Chief Executive Officer of the Company, such approval not to be unreasonably withheld.
Section 6.12      Control of the Company’s or the Buyer’s Operations . Nothing contained in this Agreement shall give the Parent or the Buyer, on the one hand, or the Company, on the other hand, directly or indirectly, rights to control or direct the operations of the other prior to the Closing. Prior to the Closing, each of the Parent and the Buyer, on the one hand, and the Company, on the other hand, shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its respective operations.
Section 6.13      Confidentiality . The Seller acknowledges the confidential and proprietary nature of the Company Confidential Information and agrees, that from and for eighteen (18) month period after the Closing, the Seller shall: (a) keep the Company Confidential Information confidential, (b) not use the Company Confidential Information for any reason or purpose; and (c) without limiting the foregoing, not disclose the Confidential Information to any Person, except with the Buyer’s prior written consent; provided , however , that the Seller’s obligations under this Section 6.13 with respect to any Company Confidential Information that is a Trade Secret shall survive indefinitely. Notwithstanding the foregoing or any provision contained herein, the Seller shall have the right to disclose any part of the Company Confidential Information to the extent, and only to the extent, necessary to (w) pursue any right or Claim for Losses arising under this Agreement, (x) defend against any Claim for Losses asserted against it under this Agreement, (y) defend against any third party claim relating to its ownership of the Company prior to the Closing, and (z) file any Tax Returns or respond to any audit, litigation or other proceeding with respect to Taxes. This Section 6.13 shall not apply to that part of the Company Confidential Information that becomes generally available to the public other than as a result of a breach of this Section 6.13 by the Seller. Company Confidential Information shall not be deemed “generally available to the public” merely because it is included or incorporated in more general information that is publicly available or because it combines features which individually may be publicly available. If the Seller becomes compelled in any action or proceeding to make any disclosure that is prohibited by this Section 6.13 , the Seller shall, to the extent legally permissible, provide the Buyer with prompt notice of such compulsion so that the Buyer may seek an appropriate protective order or other appropriate remedy or waive compliance with the provisions of this Section 6.13 . In the absence of a protective order or other remedy, the Seller may disclose that portion (and only that portion) of the Company Confidential Information that, based upon advice of the Seller’s counsel, the Seller is reasonably likely to be legally compelled to disclose; provided , however , that the Seller shall use its reasonable efforts to obtain written assurance that any Person to whom any Company Confidential Information is so disclosed shall accord confidential treatment to such Company Confidential Information. Nothing in this Section 6.13 shall diminish the protections and benefits under applicable Law to which any Trade Secret of the Company is entitled. If any information that the Buyer, the Parent or the Company or any of their Subsidiaries asserts to be a Trade Secret under applicable Law is found by a court of competent jurisdiction not to be such a Trade Secret, such information shall nonetheless be considered Company Confidential Information for purposes of this Section 6.13 .

43


Section 6.14      Interim Financial Statements . During the period prior to the Closing Date, (a) within fifteen (15) days after the end of each fiscal month, the Company shall deliver to the Buyer an unaudited balance sheet of the Company as of the last day of the most recently completed fiscal month and unaudited statements of income of the Company for the most recently completed fiscal month and for the period from December 28, 2013 to the end of the most recently completed fiscal month, and (b) within thirty (30) days after the last day of each fiscal quarter of the Company ended at least thirty (30) days prior to the Closing Date, the Company shall deliver to the Buyer an unaudited balance sheet of the Company as of the last day of such fiscal quarter and statements of income, cash flows and changes in shareholders’ equity of the Company for the interim period between the date of the latest audited balance sheet (e.g., December 28, 2013) and the last day of such fiscal quarter (and for the corresponding period of the preceding fiscal year of the Company), with each of the financial statements in clause (b) of this Section 6.14 reviewed in accordance with AU Section 722 Interim Financial Information, meeting the requirements of Regulation S-X for a Form S-1 registration statement (other than Rules 3-10 and 3-16 of Regulation S-X) and being in a form that will enable the independent auditors of the Company to render a customary “comfort letter” (including customary “negative assurances”). From and after the Closing, the Seller shall cooperate fully to provide relevant information relating to Pre-Closing Periods, to the extent reasonably requested by the Buyer or the Buyer, in connection with the Buyer’s preparation of monthly, quarterly or other interim balance sheets, statements of income, changes in shareholders’ equity and cash flows for periods ending after the Closing Date (and for the corresponding period of the preceding fiscal year).
Section 6.15      Title Commitments, Title Policies, Surveys and Zoning Letters . In the event requested by the Buyer, the Company shall use commercially reasonable efforts to cooperate with the Buyer or the Parent in obtaining, with respect to each parcel of Company Real Estate (a) ALTA or other form of title commitment for owner’s, lessee’s and/or lender’s policies (if applicable) of title insurance (each, a “ Title Commitment ”) prepared by a national title insurance company acceptable to the Buyer (“ Title Company ”), (b) certified ALTA/ACSM or other on-the-ground, staked, boundary survey maps of the Owned Real Property, or any portion thereof, prepared by surveyors reasonably acceptable to the Buyer and reflecting the matters disclosed on the Title Commitment related thereto; and (c) letters from the appropriate Governmental Authority in the locations where each parcel of Company Real Estate is located certifying zoning compliance of such Company Real Estate, as applicable. If requested by the Buyer, the Company shall deliver at the Closing an owner’s affidavit of title with respect to each parcel of Company Real Estate, in form and substance required by Title Company, and such other transfer declarations, GAP undertakings, title clearance, and corporate authority documents required by Title Company to issue at Closing 2006 ALTA owner’s, lessee’s and lender’s policies of title insurance (extended coverage policies, including mechanic’s lien coverage) on the Company Real Estate as requested by the Buyer, including such endorsements required by the Buyer (each a “ Title Policy ” and collectively the “ Title Policies ”). The Company shall also cooperate fully with the Buyer to satisfy or accomplish all requirements of policy issuance required by the Title Company and to eliminate such exceptions from the Title Policies as the Buyer may desire eliminated.

44


Section 6.16      Lease Estoppels; Landlord Lien Waivers; and Non-Disturbance Agreements . The Company shall use commercially reasonable efforts to obtain and deliver to the Buyer at Closing (a) certificates of estoppel in a form and substance reasonably acceptable to the Buyer from each party (lessors, lessees, and sublessees, as applicable) to each Lease (other than the Company); (b) if requested by the Buyer, non-disturbance agreements from each lender of a landlord/lessor under each Lease in form and substance acceptable to the Buyer; and (c) if required by the Buyer’s lender, access and waiver of lien agreements, in form acceptable to such lender, from the landlords/lessors under the Leases agreeing that any trade fixtures, machinery, equipment, furniture, inventory, goods or other personal property kept at or installed in the Leased Real Property is personal property, is not to become a part of the realty no matter how affixed to it, may be removed from the Leased Real Property by such lender at any time free and clear of any claim or lien of such landlord/lessor and such additional matters as may reasonably be requested by such lender to protect its interest in such personal property (each an “ Access Agreement ”). In the absence of any such estoppels, the Company shall provide at Closing the estoppel for any Leased Real Property for which the third party estoppel is not received and each such estoppel shall be deemed an Ancillary Agreement under this Agreement and a deliverable under Section 2.2(a) . Notwithstanding anything herein to the contrary, delivery of each Access Agreement to the Buyer on or before Closing shall be deemed a deliverable under Section 2.2(a) .
Section 6.17      Amendments to LLC Agreement . Prior to the Closing Date, the Seller shall amend the Amended and Restated Limited Liability Company Agreement of the Seller dated as of February, 2010 (as it may have been further amended or restated from time to time) (the “ Seller LLC Agreement ”) to provide that the sale of all or substantially all of the assets of the Seller shall not cause the Seller to be dissolved, its assets disposed of and its affairs wound up and the Seller shall provide evidence reasonably satisfactory to the Buyer that such amendment was accomplished in accordance with the terms of the Seller LLC Agreement and applicable Law. The Seller shall not dissolve or wind up its affairs or take any action which would require that it be dissolved or wind up its affairs for a period of eighteen (18) months after the Closing Date.
Section 6.18      Required Amendments . Prior to the Closing Date, the Company and the Seller shall use their reasonable best efforts to obtain the Required Amendments and shall keep the Buyer advised as to the status thereof.

45


ARTICLE VII
CLOSING CONDITIONS
Section 7.1      Conditions Precedent to the Buyer’s and the Parent’s Obligations . The obligations of the Buyer and the Parent to consummate the Transactions is expressly subject to the satisfaction, on or prior to the Closing Date, of all of the following conditions (compliance with any of which or the occurrence of any of which may be waived in whole or in part by the Buyer and the Parent in writing):
(a)     Each representation and warranty of the Company and the Seller contained in this Agreement and the Ancillary Agreements shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date, and except that the representations and warranties set forth in Section 3.3(a) shall be true and correct in all respects at and as of the Closing Date); provided , however , to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect,” such representations and warranties (as so written) shall be true and correct in all respects at and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date).
(b)     The Company and the Seller shall have performed and complied with in all material respects all covenants and agreements required by this Agreement and the Ancillary Agreements to be performed on or prior to the Closing Date. The Company shall deliver to the Buyer a certificate dated as of the Closing Date and signed by an officer of the Company certifying compliance with Section 7.1(a) and this Section 7.1(b) (the “ Company’s Compliance Certificate ”).
(c)     No action or proceeding shall have been instituted before any court or Governmental Authority to restrain or prohibit, or to obtain damages in respect of, this Agreement or the consummation of the Transactions.
(d)     All documents and instruments executed and delivered and all actions taken in connection with this Agreement and the Transactions shall be reasonably satisfactory to the Buyer and its counsel, including those deliverables set forth in Section 2.2(a) .
(e)     All required HSR filings shall have been made and either (i) the HSR waiting period shall have expired or (ii) early termination granted.
(f)     No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of any of the Transactions contemplated by this Agreement.
(g)     The amendments to the Employment Agreements entered into as of the date hereof with each of the individuals listed on Schedule 7.1(g) shall be in full force and effect as of the Closing Date.

46


Section 7.2      Conditions Precedent to the Seller’s and the Company’s Obligations . The obligation of the Company and the Seller to consummate the Transactions is expressly subject to the satisfaction, on or prior to the Closing Date, of all of the following conditions (compliance with which or the occurrence of which may be waived in whole or in part by the Company and the Seller in writing):
(a)     Each representation and warranty of the Buyer contained in this Agreement and the Ancillary Agreements shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date); provided , however , to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect,” such representations and warranties (as so written) shall be true and correct in all respects at and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date).
(b)     The Buyer and the Parent shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed on or prior to the Closing Date. the Buyer shall deliver to the Seller a certificate dated as of the Closing Date and signed by an officer of the Buyer certifying compliance with Section 7.2(a) and this Section 7.2(b) (the “ Buyer’s Compliance Certificate ”).
(c)     No action or proceeding shall have been instituted before any court or Governmental Authority to restrain or prohibit or to obtain damages in respect of this Agreement or the consummation of the Transactions.
(d)     All documents and instruments executed and delivered and all actions taken in connection with this Agreement and the Transactions, shall be reasonably satisfactory to the Seller and its counsel, including those deliverables set forth in Section 2.2(b).
(e)     All required HSR filings shall have been made and either (i) the HSR waiting period shall have expired or (ii) early termination granted.
(f)     No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of any of the Transactions contemplated by this Agreement.
ARTICLE VIII
OTHER AGREEMENTS OF THE PARTIES
Section 8.1      Survival of Representations, Warranties and Covenants . The representations and warranties of the Parties contained in this Agreement will survive the Closing and shall be deemed to have been relied upon for a period of eighteen (18) months following the Closing Date (“ Survival Period ”); provided , however , the representations and warranties set forth in Section 3.16 (Employee Benefit Plans), Section 3.18 (Environmental, Health and Safety) and Section 3.19 (Tax Matters) will survive until thirty (30) days after the expiration of the applicable statute of limitations (including, in the case of Section 3.19 (Tax Matters) extensions of the applicable statute of limitations); and the representations and warranties contained in Section 3.1 (Organization and Qualification), Section 3.2 (Authority; Enforceability), Section 3.3 (Capitalization), Section 3.22 (Brokers), Section 4.4 (Title of Shares), Section 4.2 (Authority; Enforceability), Section 5.2 (Authority; Enforceability), Section 5.6 (Brokers) and Section 5.7 (Ability to Perform) (collectively, the “ Fundamental Representations ”) will survive indefinitely. Any claim (whether or not fixed as to liability or liquidated as to amount) pending on the expiration date of the applicable survival period set forth above for which a claim notice has been given in accordance with Section 8.2 on or before such expiration date may continue to be asserted and shall be indemnified against until finally resolved. All covenants and agreements contained in this Agreement will survive the Closing in accordance with their terms, or if no term is expressly stated, upon the expiration of the statute of limitations period applicable to the matters covered thereby.

47


Section 8.2      Indemnification .
(a)      By the Seller . The Company shall, until the Closing, and the Seller shall, after the Closing, indemnify, save, and hold harmless the Buyer, the Parent and their Affiliates (including, after the Closing, the Company) and their respective Representatives, successors, and assigns from and against any and all costs, losses, Taxes, Liabilities, obligations, damages, Actions, and expenses (whether or not arising out of third-party claims), including reasonable attorneys’ fees (collectively, “ Losses ”) asserted, incurred in connection with, arising out of, resulting from or incident to:
(i)     any breach of any representation or warranty made by the Company or the Seller in or pursuant to this Agreement, any Ancillary Agreement, or in any certificate or other closing document delivered pursuant to this Agreement;
(ii)     any failure by the Company or the Seller to perform or observe any covenant or agreement to be performed or observed by any of them under this Agreement, any Ancillary Agreement or in any certificate or other closing document delivered pursuant to this Agreement;
(iii)     any Taxes or costs (A) relating to Pre-Closing Periods or Pre-Closing Straddle Periods, (B) any Pre-Closing Tax Obligations, or (C) arising as a result of any failure by the Seller to pay any Taxes payable pursuant to Section 6.6 ;
(iv)     any payment to any of the Company’s current or former officers, managers, directors and similar functionaries under the provisions of (A) the Company’s Articles of Incorporation and Bylaws, or (B) the Buyer’s Certificate of Formation and Limited Liability Company agreement, in either case with respect to exculpation or indemnification of such officers, managers, directors or similar functionaries in respect of acts, omissions or events occurring on or prior to Closing;
(v)     any unpaid Closing Date Indebtedness and Transaction Expenses;
(vi)     obtaining the Non-Closing Condition Amendments (less an amount equal to 20% of any such costs);

48


(vii)     any matters, actions, disputes, claims, relationships or business dealings which were the subject of the Settlement Agreement and Mutual Release of Claims described in Schedule 3.12 ;
(viii)     those matters specifically set forth on Schedule 8.2(a)(viii) ; and
(ix)     any failure of the Seller to vote in favor of the matters described in Section 6.4(d) .
(b)      By the Buyer . The Buyer shall indemnify and save and hold harmless the Seller and its Representatives, successors, and assigns from and against any and all Losses asserted, incurred in connection with, arising out of, resulting from, or incident to: (i) any breach of any representation or warranty made by the Buyer in or pursuant to this Agreement or in any certificate or other closing document delivered pursuant to this Agreement, (ii) any failure by the Buyer or the Parent to perform or observe any covenant or agreement to be performed or observed by the Buyer or the Parent under this Agreement or in any certificate or other closing document delivered pursuant to this Agreement, and (iii) except as otherwise provided in this Agreement, any Taxes of the Company relating to periods following the Closing Date. Notwithstanding anything to the contrary in this Section 8.2(b) , the Buyer’s and the Parent’s maximum aggregate liability for claims of Losses under this Section 8.2(b) will not exceed the General Cap; provided , however , that the General Cap shall not apply with respect to any Losses relating to breaches of Section 5.2 (Authority; Enforceability) and/or Section 5.6 (Brokers).
(c)      Claims for Indemnification .
(i)     If a claim for Losses (a “ Claim ”) is made by a Party entitled to indemnification hereunder (the “ Indemnified Party ”) against the Party obligated to provide indemnification for such Claim hereunder (the “ Indemnifying Party ”), the Indemnified Party will give written notice (a “ Claim Notice ”) to the Indemnifying Party and the Escrow Agent as soon as practicable after the Indemnified Party becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under this Section 8.2 . The Claim Notice shall contain (A) a description and the amount of any Losses incurred or reasonably expected to be incurred by the Indemnified Party, (B) a statement that the Indemnified Party is entitled to indemnification under Section 8.2(a) or Section 8.2(b) , as applicable, for such Losses and a reasonable explanation of the basis therefor, and (C) a demand for payment in the amount of such Losses. The failure of any Indemnified Party to give a timely Claim Notice to the Indemnifying Party under this Agreement will not affect its rights to indemnification under this Agreement, except to the extent that the Indemnifying Party demonstrates actual damage caused by such failure. If the Seller or the Buyer, as applicable, fails to notify the Indemnified Party within sixty (60) days following receipt of a Claim Notice from such Indemnified Party that it disputes the Claim therein, the Claim set forth in the Claim Notice shall be conclusively deemed a liability to be indemnified under this Section 8.2 , and the Indemnified Party shall be indemnified for the amount of the Losses stated in such Claim Notice on demand.

49


(ii)     If any third-party files any lawsuit or enforcement action or otherwise asserts a claim against any Indemnified Party, the Indemnified Party shall give a Claim Notice of such action to the Indemnifying Party as promptly as practicable (and in any event within fifteen (15) days after the service of the citation or summons). The failure of any Indemnified Party to give timely notice of a third party action to the Indemnifying Party under this Agreement will not affect its rights to indemnification under this Agreement, except to the extent that the Indemnifying Party demonstrates actual damage caused by such failure. After such notice, the Indemnifying Party will be entitled, if it so elects, (A) to take control of the defense and investigation of such lawsuit or action, and (B) to employ and engage attorneys of its choice that are reasonably acceptable to the Indemnified Party to handle and defend the same; provided , however , that the Indemnifying Party may not assume the defense of a third-party Claim if (x) the Indemnifying Party is the Company (prior to Closing) or the Seller, and (I) a reasonable assessment of the likely amount of such Claim is in excess of the sum of the amount of the funds then on deposit in the Indemnification Escrow Account, or (II) such Claim is asserted directly by or on behalf of a Person that is a supplier or customer of the Company, or (y) such Claim seeks an injunction or other equitable relief against the Indemnified Party. Any Indemnified Party shall have the right to employ separate counsel in any such Claim and to participate in the defense thereof, but the fees and expenses of such counsel shall not be entitled to indemnity hereunder unless (1) the Indemnifying Party shall have failed, within thirty (30) days after having been notified in writing by the Indemnified Party of the existence of such Claim as provided in this Section 8.2(c)(i) , to assume and continue to diligently conduct the defense of such Claim, (2) the employment of such counsel has been specifically authorized by the Indemnifying Party or (3) the representation of the Indemnified Party by counsel provided by the Indemnifying Party would be inappropriate due to actual or potential conflicting interests between them, including situations in which there are one or more material legal defenses available to the Indemnified Party that are not available to Indemnifying Party. No Indemnifying Party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (a) includes only monetary damages that are paid in full by the Indemnifying Party, (b) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and (c) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of the Indemnified Party. In no event will an Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to any Claim for which the Indemnified Party is liable hereunder without the prior written consent of the Indemnifying Party which consent shall not be unreasonably withheld.
(iii)     Subject to the limitations in this Article VIII , in the event that the Buyer or its Affiliates is the Indemnified Party, and once the amount of Losses has been agreed to by the Seller or finally adjudicated to be payable by the Seller pursuant to this Article VIII , (A) such Losses shall first be satisfied from the Indemnification Escrow Amount pursuant to the terms of the Escrow Agreement by the transfer from the Escrow Agent to the Indemnified Party of an amount equal to the amount of such Losses, and (B) subject to the limitations in this Article VIII , if such Losses exceed the value of the remaining balance in the Indemnification Escrow Account (if any), and the Seller is liable therefor, the Seller shall pay the unsatisfied portion of such Losses, in either case, by wire transfer of immediately available funds to the account designated in writing by the Indemnified Party within five (5) Business Days after the amount of Losses has been determined hereunder.

50


(iv)     Subject to the limitations in this Article VIII , in the event that Seller or its Affiliates is the Indemnified Party, and once the amount of Losses has been agreed to by the Buyer or finally adjudicated to be payable by the Buyer pursuant to this Article VIII , the Buyer shall pay the amount of such Losses by wire transfer of immediately available funds to the account designated in writing by the Indemnified Party within five (5) Business Days after the amount of Losses has been determined hereunder.
(d)      Exclusive Remedy . The indemnification given by the Parties under this Agreement shall be the Parties’ sole and exclusive post-Closing remedy, each against the other, with respect to all Losses incurred by a Party hereunder, except for any claims arising out of or relating to the fraud, intentional misrepresentation, or wrongful act of any Party.
(e)      Limitations .
(i)      Limited Claims . Subject to Section 8.2(e)(ii) , (1) the Seller will have no liability under Section 8.2(a)(i) unless and until the aggregate amount of all claims for Losses under Section 8.2(a)(i) exceeds $1,000,000 (the “ Basket Amount ”), at which time the Seller will be liable only for Losses under Section 8.2(a)(i) that exceed the Basket Amount ( provided , however , the first ten (10) individual items, or series of related items arising from the same or similar circumstances, where the Loss under Section 8.2(a)(i) is less than $25,000 (the “ Mini Basket Amount ”) shall not be indemnified for or against and shall not count towards the Basket Amount, but any individual items or series of related items not captured by the Mini Basket Amount shall count toward the Basket Amount), and (2) the maximum aggregate liability of the Seller for claims of Losses under Section 8.2(a)(i) will not exceed $14,000,000 (the “ General Cap ”).
(ii)      Other Claims . Notwithstanding the foregoing, (A) the Basket Amount, Mini Basket Amount and General Cap shall not apply to Losses (and claims thereof) under Section 8.2(a)(ii) , Section 8.2(a)(iii) , Section 8.2(a)(iv) , Section 8.2(a)(v) , and (B) the Basket Amount, Mini Basket Amount and General Cap shall not apply to Losses (and claims thereof) relating to breaches of the Fundamental Representations. The Basket Amount and the Mini Basket Amount shall not apply to Losses (and claims thereof) under Section 8.2(a)(vi) , Section 8.2(a)(vii) , Section 8.2(a)(viii) and Section 8.2(a)(ix) , but shall in each case be subject to the General Cap. The maximum aggregate liability of the Seller for such Losses under this Section 8.2(e)(ii) shall be $128,000,000.
(iii)      Exclusions from Losses . In no event shall any Indemnified Party under this Section 8.2 be entitled to recover or make a claim for any amounts in respect of, and in no event shall “Losses” be deemed to include, (A) any special, indirect, punitive, aggravated damages, except to the extent that such damages are based upon a willful breach or fraudulent misrepresentation by the Company or the Seller or included in any third party action ( provided , however , for avoidance of doubt, Losses shall be deemed to include consequential damages), or (B) any loss, liability, damage or expense to the extent included in the calculation of the Closing Date Net Working Capital, Transaction Expenses or Closing Date Indebtedness.

51


(iv)      Materiality . For the purposes of determining whether there has occurred any breach or inaccuracy of a representation or warranty and he amount of Losses due to a breach or inaccuracy of a representation or warranty, all “Material Adverse Effect” or “Material Adverse Change” qualifications and other materiality qualifications contained in such representations and warranties shall be disregarded.
(f)      Insurance and Tax Effect . The amount of any Loss subject to indemnification hereunder or of any Claim therefore shall be calculated net of (i) any amounts actually theretofore recovered by an Indemnified Party pursuant to any indemnification by or indemnification agreement with any non-affiliated third party (net of all direct collection expenses), (ii) any insurance proceeds or other non-affiliated third party cash receipts or sources of reimbursement actually theretofore received by an Indemnified Party against such Loss (net of all direct collection expenses) on account of such Loss (each such source named in clauses (i) and (ii), a “ Collateral Source ”), (iii) any Tax Benefit (as defined below) actually realized by such Indemnified Party or its Affiliates on account of such Loss, and (iv) shall be increased by the amount of an Tax Detriment actually suffered by such Indemnified Party or its Affiliates on account of such Loss. If such Indemnified Party or its Affiliates actually realizes a Tax Benefit after an indemnification payment is made to such Indemnified Party, such Indemnified Party shall promptly pay to the Indemnifying Party the amount of such Tax Benefit at such time or times as and to the extent that such Tax Benefit is realized. For purposes hereof, “ Tax Benefit ” shall mean any refund of Taxes paid or reduction in the amount of Taxes which otherwise would have been paid to the Indemnified Party, and “ Tax Detriment ” shall mean any additional Taxes or costs paid or increase in the amount of Taxes which otherwise would have been paid by the Indemnified Party. The Indemnified Party shall use commercially reasonable efforts to seek full recovery of any Loss from all Collateral Sources covering such Loss to the same extent as they would if such Loss were not subject to indemnification hereunder. In the event that a recovery from a Collateral Source is made by such Indemnified Party or its Affiliates with respect to any Loss for which any such Person has been indemnified hereunder, then a refund equal to the aggregate amount of the recovery (net of all direct collection expenses) shall be made promptly to the Indemnifying Party.
(g)      Duty to Mitigate . Nothing in this Agreement in any way restricts or limits the general obligation at Law of an Indemnified Party to mitigate any Loss which it may suffer or incur by reason of the breach by an Indemnifying Party of any representation, warranty, covenant or obligation of the Indemnifying Party under this Agreement; provided that, neither the Buyer nor the Company shall have any duty to pay any Taxes or file any Tax Return for which the Seller is liable or responsible under this Agreement to mitigate the accrual of penalties and interest on such Taxes or with respect to such Tax Return.
Section 8.3      Release .
(a)     The Seller, on behalf of itself and its members, trustees, agents, attorneys, representatives, successors, assigns, heirs, beneficiaries, creditors and Affiliates (collectively, the “ Releasing Parties ”), hereby, irrevocably and unconditionally, fully and forever acquit, release, covenant not to sue, discharge and agree to hold harmless the Company, the Buyer, the Parent, and their respective Affiliates, officers, directors, shareholders, members, managers, employees, agents, attorneys, representatives, predecessors, successors and assigns (collectively, the “ Releasees ”), from any and all commitments, actions, debts, claims, counterclaims, charges, demands, damages, losses, compensation, obligations, Liabilities, costs, expenses (including, without limitation, attorneys’ fees and court costs), causes of action, debts, contracts, torts, covenants, fiduciary duties, responsibilities, suits and judgments, at law or in equity, of every nature and kind that any of the Releasing Parties have, may have had or may have in the future against the Releasees, whether known or unknown, for all matters relating to, arising out of or in connection with the status of the Seller or any of the Releasing Parties as a shareholder, creditor, officer and/or director of the Company from the beginning of time through the Closing Date (collectively, for the purposes of this Section 8.3 , the “ Causes of Action ”), except as specifically set forth in this Agreement. The release set forth in this Section 8.3 shall be binding upon the Releasing Parties and their respective successors and assigns and shall inure to the benefit of the Releasees and their respective successors and assigns.

52


(b)     The Seller, on behalf of itself and the other Releasing Parties, hereby represents to the Releasees that the Releasing Parties (i) have not assigned any Causes of Action or possible Causes of Action against any Releasee, (ii) fully intend to release all Causes of Action against the Releasees including, without limitation, unknown and contingent Causes of Action (other than those specifically reserved above), and (iii) have consulted with counsel with respect to the execution and delivery of this general release and has been fully apprised of the consequences hereof.
(c)     The Seller hereby irrevocably covenants to refrain from, and to cause the other Releasing Parties to refrain from, directly or indirectly, (i) asserting any Causes of Action, or commencing, instituting or causing to be commenced, or continuing with any claim, action or proceeding for a Cause of Action, and this Agreement may be raised by any Releasee as an estoppel to any such claims, actions or proceedings; and (ii) making any claim or commencing any action or proceeding against any Person (or assisting or encouraging any other Person in connection therewith) in which any claim, action or proceeding would arise against any Releasee for contribution or indemnity or other relief from, over and against any Releasee or which otherwise results in a Releasee suffering or incurring any Losses, whether under common law, equity, statute, Contract or otherwise, with respect a Cause of Action. It is the intention of the Seller, on behalf of itself and the other Releasing Parties, that the release described in this Section 8.3 be effective as a bar to each Cause of Action hereinabove specified. In furtherance of this intention the Seller hereby expressly waives, and shall cause each of the other Releasing Parties to waive, any and all rights and benefits conferred upon it by the provisions of Applicable Law with respect to any Cause of Action and the Seller, on behalf of itself and the other Releasing Parties, expressly consents that the release described in this Section 8.3 shall be given full force and effect according to each and all of its express terms and provisions.
(d)     The Seller shall deliver to the Buyer at the Closing a release agreement in form reasonably satisfactory to the Buyer re-affirming its obligations under this Section 8.3 and extending the coverage of the release for the Releasing Parties set forth in this Section 8.3 to include the period from the date hereof through and including the Closing (the “ Release Agreement ”).
Section 8.4      Disclosure Generally . The Disclosure Schedules have been arranged, for purposes of convenience only, as separately titled Schedules corresponding to the Sections of Article III and Article IV . Any information set forth in any Disclosure Schedule or incorporated in any Section of this Agreement shall be considered to have been set forth in each other Schedule and shall be deemed to modify the representations and warranties in Article III or Article IV , as applicable, whether or not such representations and warranties refer to such Schedule, but only to the extent that it is reasonably apparent on the face of the Schedule that it applies to a particular representation and warranty. The specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the Disclosure Schedules is not intended to imply that such amounts, or higher or lower amounts, or the items so included or other items, are or are not required to be disclosed or are within or outside of the ordinary course of business, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Disclosure Schedules in any dispute or controversy with any Party as to whether any obligation, item or matter not described herein or included in a Disclosure Schedule is or is not required to be disclosed (including, without limitation, whether such amounts are required to be disclosed as material) or in the ordinary course of business for the purposes of this Agreement. The information contained in the Disclosure Schedules is disclosed solely for the purposes of this Agreement, and no information contained therein shall be deemed to be an admission by any Party hereto to any third party of any matter whatsoever, including of any violation of Law or breach of any agreement.

53


Section 8.5      Independent Significance . The Parties intend that each representation, warranty, covenant and agreement contained in this Agreement has independent significance. If any Party has breached any representation, warranty, covenant or agreement contained in this Agreement in any respect, the fact that there exists another representation, warranty, covenant or agreement relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, covenant or agreement.
Section 8.6      No Contribution . Notwithstanding anything herein to the contrary, after the Closing the Seller shall not have, and it hereby irrevocably waives, any claims, causes of action and rights to sue or seek contribution, reimbursement or indemnification against or from the Buyer, the Parent or the Company for any Losses incurred, suffered, paid, sustained or indemnified by the Seller in connection with, arising out of, based upon, relating to or otherwise involving this Agreement, including any breach by the Company of any representation, warranty, covenant or agreement set forth in this Agreement.
ARTICLE IX
TERMINATION; REMEDIES
Section 9.1      Termination . This Agreement may be terminated and the Transactions contemplated by this Agreement abandoned at any time prior to the Closing:
(a)     by mutual written consent of the Seller and the Buyer;
(b)     by either the Seller or the Buyer, by delivery of written notice of such termination to the other, if the Closing shall not have been consummated on or before January 1, 2015 (the “ Termination Date ”), unless the Termination Date is extended by written agreement of the Seller and the Buyer; provided , however , that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or prior to such date (for the purposes of the proviso, the failure to fulfill any obligation under this Agreement by the Company or the Seller shall be deemed the failure of the Seller and the Company);

54


(c)     by the Seller, by delivery of written notice of such termination to the Buyer, if there has been a breach of any representation, warranty or covenant made by the Buyer or the Parent in this Agreement, such that any condition in Section 7.2 would not be satisfied and which has not been cured by the Buyer or the Parent, as applicable, within fifteen (15) Business Days after receipt of written notice from the Seller requesting such breach to be cured (if reasonably curable in such time frame, and if not, reasonable steps to cure have not been take in such time frame); provided , however , that the right to terminate this Agreement pursuant to this Section 9.1(c) shall not be available to the Seller if the failure of the Company or the Seller to fulfill any of their obligations under this Agreement has been the primary cause of, or resulted in, such breach;
(d)     by the Buyer, by delivery of written notice of such termination to the Seller, if there has been a breach of any representation, warranty or covenant made by the Company or the Seller in this Agreement, such that any condition in Section 7.1 would not be satisfied and which has not been cured by the Company or the Seller, as applicable, within fifteen (15) Business Days after receipt of written notice from the Buyer requesting such breach to be cured (if reasonably curable in such time frame, and if not, reasonable steps to cure have not been take in such time frame); provided , however , that the right to terminate this Agreement pursuant to this Section 9.1(d) shall not be available to the Buyer if the failure of the Buyer or the Parent to fulfill any of its obligations under this Agreement has been the primary cause of, or resulted in, such breach; or
(e)     by either the Seller or the Buyer, if any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the consummation of the Transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable.
Section 9.2      Effect of Termination .
(a)     Except as provided in Section 9.2(b) , if this Agreement is terminated pursuant to Section 9.1 , all rights and obligations of the Parties hereunder shall terminate and no Party shall have any liability to the other Party, except for obligations of the Parties in Section 1.12 (Earnest Money), Section 6.3 (Confidential Information), this Section 9.2 (Effect of Termination), Section 10.2 (Notices), Section 10.3 (Choice of Law; Venue and Forum) and Section 10.6 (Expenses), which shall survive the termination of this Agreement; provided , however , except as provided in Section 9.2(b) , nothing herein shall relieve any Party from liability do to the extent that such termination results from fraud or the intentional breach or misrepresentation by such Party.

55


(b)     Except as set forth in the next sentence, if this Agreement is terminated for any reason, the Earnest Money Deposit shall be delivered to the Buyer (and the Buyer and the Seller shall deliver joint written instructions to the Escrow Agent to do so within two (2) Business Days following any such termination of this Agreement). Notwithstanding the foregoing, the Earnest Money Deposit shall be delivered to the Seller in the event the Seller terminates this Agreement pursuant to (i) Section 9.1(b) , but only if the Buyer’s or the Parent’s failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or prior to the Termination Date, or (ii) Section 9.1(c) and, in either case, the Buyer and the Seller shall deliver joint written instructions to the Escrow Agent to do so within two (2) Business Days following any such termination of this Agreement). Notwithstanding anything in this Agreement to the contrary, the Parties expressly acknowledge and agree that, with respect to any termination of this Agreement under circumstances in which the Earnest Money Deposit is payable to the Seller as provided in the preceding sentence, payment of the Earnest Money Deposit to the Seller shall constitute liquidated damages with respect to any claim for damages or any other claim which the Company or the Seller would otherwise be entitled to assert against the Buyer, the Parent or any of their Affiliates or Representatives or any of their respective assets, with respect to any such termination of this Agreement, and shall constitute the sole and exclusive remedy of the Seller, the Company or any other Person with respect to any such termination of this Agreement for any loss suffered as a result of any breach of any representation, warranty, covenant or agreement or the failure of the Transactions to be consummated, and upon payment of such amount, none of the Buyer, the Parent or any of their Affiliates or Representatives shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement. The Parties expressly acknowledge and agree that, in light of the difficulty of accurately determining actual damages with respect to the foregoing upon any such termination of this Agreement under circumstances in which the Earnest Money Deposit is payable to the Seller pursuant to this Section 9.2(b) , the right to such payment: (A) constitutes a reasonable estimate of the damages that will be suffered by reason of any such termination of this Agreement, and (B) shall be in full and complete satisfaction of any and all damages arising as a result of any such termination of this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1      Assignment; No Third Party Rights . Neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by any Party without the prior written consent of the other Parties; provided , however , that the Buyer may assign or delegate all or part of its rights and obligations under this Agreement to one or more direct or indirect subsidiaries or Affiliates and institutional lenders without the prior written consent of the Company or the Seller; provided , further , that any such assignment or delegation shall not relieve the Parent of its obligations under this Agreement. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, and no other Person will have any right, benefit or obligation under this Agreement as a third-party beneficiary or otherwise.
Section 10.2      Notices . All notices, requests, demands and other communications which are required or may be given under this Agreement will be in writing and will be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by confirmed facsimile, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested.

56


In each case notice will be sent to:
(a)     if to the Company (before Closing) or the Seller:
American Blanching Company
155 Rip Wiley Rd.,
Fitzgerald, Georgia 31750
Attn: Jack Warden, Chief Executive Officer
Tel: (229) 423-4098
Email: jwarden@americanblanching.com
and if to the Seller: ABC Peanut Butter, LLC
275 Madison Avenue
Suite 1618
New York, New York, 10016
Attn: Richard Baum
Tel: (212) 661-6886
Email: richard@baum.com

with a copy (which shall not constitute notice)
Polsinelli P.C.
161 N. Clark Street, Suite 4600
Chicago, Illinois 60601
Attn: Donald Figliulo
Tel: (312) 463-6311
Email: dfigliulo@polsinelli.com
(b)     if to the Buyer or the Parent:
Post Holdings, Inc.
2503 S. Hanley Road
St. Louis, Missouri 63144
Attn: Diedre J. Gray, SVP, General Counsel and Secretary
Tel: (314) 644-7622
Email: diedre.gray@postfoods.com


57


with a copy to (which shall not constitute notice)
Lewis, Rice & Fingersh, LC
600 Washington Avenue
Suite 2500
St. Louis, Missouri 63101
Attn: Tom W. Zook
Tel: (314) 444-7600
Email: tzook@lewisrice.com

(c)     or to such other place and with such other copies as any Party may designate as to itself by written notice to the others.
Section 10.3      Choice of Law; Venue and Forum . All matters relating to or arising out of this Agreement or any Transaction and the rights of the Parties (whether sounding in contract, tort, or otherwise) will be governed by and construed and interpreted under the Laws of the State of Delaware without regard to conflicts of laws principles that would require the application of any other Law. Except as otherwise provided in this Agreement, any Action arising out of or relating to this Agreement or any Transaction shall be brought in the courts of the State of Delaware, or, if it has or can acquire jurisdiction, in the United States District Court for the District of Delaware, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of such Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or any Transaction in any other court. Each Party acknowledges and agrees that this Section 10.3 constitutes a voluntary and bargained-for agreement between the Parties.
Section 10.4      Entire Agreement; Amendments and Waivers . This Agreement and the other agreements and certificates to be entered into or executed by the Parties in accordance with this Agreement, together with all Exhibits and Schedules hereto and thereto (including the Disclosure Schedules), constitute the entire agreement among the Parties pertaining to the subject matter of such agreements and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties; provided , however , that the Non-Disclosure Letter Agreement, dated July 14, 2014, between the Seller and the Parent shall survive and not be superseded by the execution of this Agreement and the other agreements and certificates to be entered into or executed by the Parties in accordance herewith. This Agreement may not be amended except by an instrument in writing signed by each of the Parties. No amendment, supplement, modification or waiver of this Agreement will be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Agreement will be deemed or will constitute a waiver of any other provision hereof (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.
Section 10.5      Counterparts; Facsimile . This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Agreement may be executed and delivered by facsimile transmission or by electronic mail, and a facsimile or electronic copy of this Agreement or of a signature of a Party will be effective as an original.

58


Section 10.6      Expenses . Except as otherwise expressly specified in this Agreement, each Party to this Agreement will pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement and to any action taken by such Party in preparation for carrying this Agreement into effect.
Section 10.7      Invalidity . In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to in this Agreement, will, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by Law, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement or any other such instrument. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
Section 10.8      Publicity . Prior to the Closing Date, no Party will issue any press release or make any other public statement relating to the Transactions contemplated hereby unless (i) mutually agreed to by the Parties, which agreement not to be unreasonably withheld, or (ii) required by Law, regulation or court order and any such release or statement will be subject to prior review by the Buyer and the Company. Notwithstanding the foregoing, where public disclosure is required by Law or a Governmental Authority, the Parties required to make the public disclosure will use its commercially reasonable efforts to obtain the approval of the other Party as to the form, nature and extent of the disclosure.
Section 10.9      Knowledge; Construction . The phrase “ to the Knowledge of the Company ,” or “ to the Knowledge of the Seller ” or words of comparable import, means facts or circumstances within the actual personal knowledge of any of the following: Jack Warden, Jim Freeman and Mike Davis. All references to sections, schedules, or exhibits in this Agreement refer to this Agreement’s sections, schedules or exhibits, unless otherwise indicated. The headings contained in this Agreement are for reference purposes. The words “include,” “includes,” or “including” will be deemed to be followed by the words “without limitation.” The word “or” is not exclusive.
Section 10.10      Joint Drafting . The Parties have participated jointly in the negotiation and drafting of this Agreement and the other agreements and documents to be executed by the Parties in connection herewith. In the event an ambiguity or question of intent or interpretation arises, this Agreement and the other agreements and documents to be executed by the Parties in connection herewith will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement and the other agreements and documents to be executed by the Parties in connection with this Agreement.
Section 10.11      Transfer Taxes . Any and all transfer, sales, use, bulk sales, recording, registration, documentary, stamp, or other similar Taxes and all conveyance fees, recording charges and similar fees and charges (including any penalties and interest) incurred in connection with the Transactions contemplated hereby, including the transfer of the Purchased Shares, shall be paid by the Seller when due and shall constitute a Transaction Expense. The Parties will file all necessary Tax returns and other documentation with respect to all such Taxes, fees and charges, and if required by applicable Law, the Parties will join in the execution of any such Tax returns or other documentation.

59


Section 10.12      Specific Performance . Each of the Parties acknowledge that the rights of each Party to consummate the Transactions contemplated hereby are unique and recognize and affirm that, except as provided in Section 9.2(b) , in the event of a breach of this Agreement by any Party, money damages may be inadequate and the non-breaching Party may have no adequate remedy at law. Accordingly, the Parties agree that, except as provided in Section 9.2(b) , such non-breaching Party shall have the right, in addition to any other rights and remedies existing in their favor at law or in equity, to enforce it rights and the other Party’s obligations hereunder not only by an action or actions for damages but also by an action or actions for specific performance, injunctive and/or other equitable relief (without posting of bond or other security).
Section 10.13      Parent Guaranty . Parent hereby guarantees unconditionally the payment and performance of all of the Buyer’s obligations and agreements under this Agreement, including, without limitation, any obligation of the Buyer with respect to any claim brought by the Seller arising out of or related to this Agreement. The Parent’s obligations are unconditional irrespective of any circumstances which might otherwise constitute, by operation of law, a discharge of a guarantor and it shall not be necessary for the Seller to institute or exhaust any remedies or causes of action against the Buyer as a condition to the obligations of the Parent hereunder.
Section 10.14      Privilege; Waiver of Conflict . Each of the Parties acknowledges that Polsinelli PC (“ Counsel ”) has represented the Seller, and, ancillary thereto, the Company, in the preparation and sale process leading up to this Agreement and the Transactions, and in connection with the preparation of this Agreement and the consummation of the Transactions contemplated by this Agreement (collectively, the “ Seller Engagement ”). Accordingly, to the extent required by reason of applicable law, decisional law or otherwise, each of the Buyer, Parent, and the Company expressly, (a) irrevocably waives any right it may have to access, or to discover or obtain, information or documentation relating to the Seller Engagement, and (b) agrees that the attorney-client privilege as it relates to any information, communication or legal advice occurring or arising with respect to the Seller Engagement will lie solely with the Seller, and not with the Parent, the Buyer, or the Company, and the Parent, the Buyer, and the Company will not have the right to assert or waive such attorney-client privilege.
ARTICLE XI
DEFINITIONS
Section 11.1      Certain Defined Terms . As used in this Agreement, the terms below will have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.

60


“ 280G Payments ” shall have the meaning ascribed in Section 6.4(d) .
“ Access Agreement ” shall have the meaning ascribed in Section 6.16 .
“ Actions ” shall have the meaning ascribed in Section 3.12 .
“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person, whether such control is through voting securities, contract or otherwise.
“ Agreement ” shall have the meaning ascribed in the first paragraph of this Agreement.
“Ancillary Agreements” means all ancillary agreements referred to herein to be executed in connection with the Closing and the consummation of the Transactions, including without limitation the Escrow Agreement.
“ Assets ” means, with respect to the Company and the Business, all properties, assets and rights of any nature or kind, whether tangible or intangible, real, personal or mixed, and constituting, or used in, or held for use in, in connection with, or related to, the Business, wherever located, including: (a) all properties and assets reflected in the Company’s Financial Statements as of the Closing Date; (b) all Contracts and Leases; (c) Fixtures and Equipment; (d) Inventory; (e) Books and Records; (f) Company Intellectual Property; (g) accounts receivable; (h) leasehold improvements; (i) all cash and cash equivalents (including any bank deposits, marketable securities, certificates of deposit and checks and drafts received by the Company for which the Company has not received funds prior to the Closing); (j) all rights under or pursuant to all warranties, representations, and guarantees made by suppliers or other Persons (including all contractual or other rights of the Company to return inventory) in favor of the Company; (k) all claims, causes of action, choses in action, rights of recovery and rights of set-off of any nature or kind, against any Person in favor of the Company, including any rights to payment or to enforce payment in connection with products or services delivered by the Company; and (l) all securities.
“ Balance Sheet ” means the balance sheet of the Company as of December 28, 2013, together with any related notes, as included in Schedule 3.9 .
“ Basket Amount ” shall have the meaning ascribed in Section 8.2(e)(i) .
“ Books and Records ” means any and all books related to the Business, as well as records, files, documentation, data or information of the Company that have been or now are used in connection with the Business.
“ Business ” shall have the meaning ascribed in the Recitals.
“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks are authorized or required to close under the Laws of the United States of America or the State of New York.
“ Buyer ” shall have the meaning ascribed in the first paragraph of this Agreement.

61


“ Buyer’s Compliance Certificate ” shall have the meaning ascribed in Section 7.2(b) .
“ Capital Expenditures Deficit ” means the amount by which “A” exceeds “B”, where “A” equals $3,000,000 and where “B” equals the aggregate amounts paid by the Company prior to the Closing Date for the purchase of the Owned Real Property located at 176 Rip Wiley Road, Fitzgerald, Georgia 31750 and any machinery, equipment and improvements relating to such Owned Real Property.
“ Cash and Cash Equivalents ” means the sum of the fair market value (expressed in United States dollars) of all cash, cash equivalents and marketable securities of the Company, as of the close of business on the day immediately preceding the Closing Date, determined in accordance with GAAP. For further avoidance of doubt, Cash and Cash Equivalents shall be calculated net of issued but uncleared checks and drafts and shall include checks actually received by the Company or its banks whether or not cleared.
“ Causes of Action ” shall have the meaning ascribed in Section 8.3(a) .
“ CERCLA ” shall have the meaning ascribed in the definition of “Environmental Requirements.”
“ Claim ” shall have the meaning ascribed in Section 8.2(c)(i) .
“ Claim Notice ” shall have the meaning ascribed in Section 8.2(c)(i) .
“ Closing ” shall have the meaning ascribed in Section 2.1 .
“ Closing Adjustment Escrow Account ” shall have the meaning ascribed in Section 1.9 .
“ Closing Adjustment Escrow Amount ” shall have the meaning ascribed in Section 1.4(a)(i) .
“ Closing Condition Amendments ” means those amendments described on Schedule 11.1 .
“ Closing Date ” shall have the meaning ascribed in Section 2.1 .
“ Closing Date Balance Sheet ” shall have the meaning ascribed in Section 1.6(a) .
“ Closing Date Cash Payment Adjustment ” shall have the meaning ascribed in Section 1.7(a) .
“ Closing Date Cash Payment ” shall have the meaning ascribed in Section 1.4(a)(v) .
“ Closing Date Indebtedness ” shall have the meaning ascribed in Section 1.5 .
“ Closing Date Net Working Capital ” shall have the meaning ascribed in Section 1.6(c) .
“COBRA” shall have the meaning ascribed in Section 3.16(c) .

62


“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations under the Code.
“ Collateral Source ” shall have the meaning ascribed in Section 8.2(f) .
“ Company Software ” shall have the meaning ascribed in Section 6.5 .
“ Company ” shall have the meaning ascribed in the first paragraph of this Agreement.
“Company Confidential Information” includes any of the following information held or used by or relating to the Company: (i) all information that is a Trade Secret; (ii) all information concerning product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned manufacturing or distribution methods and processes, computer hardware, software (including firmware and other software embedded in hardware devices), publicly undisclosed software code (including publicly undisclosed source, executable or object code), subroutines, interfaces and algorithms, and computer software, database technologies, systems, structures and architectures; and (iii) all information concerning the business and affairs of the Company, including historical and current financial statements, financial projections and budgets, Tax returns and accountants’ materials, historical, current, and projected sales, capital spending budgets and plans, business plans, strategic plans, marketing and advertising plans, publications, client and customer and prospect lists and files, current and anticipated customer requirements, price lists, market studies, contracts, the names and backgrounds of key personnel and personnel training techniques and materials, however documented.
“ Company Intellectual Property ” means any Intellectual Property (a) owned or used by the Company in the Business, and/or (b) licensed to the Company from third parties for use in the Business.
“ Company Real Estate ” shall have the meaning ascribed in Section 3.5(c) .
“ Company’s Compliance Certificate ” shall have the meaning ascribed in Section 7.1(b) .
“ Confidentiality Agreements ” shall have the meaning ascribed in Section 6.3 .
“Contract” means any legally binding contract, agreement, indenture, note, bond, loan, instrument, lease, license, conditional sales contract, mortgage or other arrangement, whether written or oral.
“ Controlled Group Member ” shall have the meaning ascribed in Section 3.16(a) .
“ Counsel ” shall have the meaning ascribed in Section 10.14 .
“ Disclosure Schedules ” means the schedules delivered by the Company and the Seller to the Buyer as of the date of this Agreement that set forth the exceptions to the representations and warranties contained in Article III or Article IV of this Agreement and certain other information called for by this Agreement.

63


“ Disqualified Individual ” shall have the meaning ascribed in Section 6.4(d) .
“ Earnest Money Deposit ” shall have the meaning ascribed in Section 1.10 .
“ Employee Benefit Plans ” shall have the meaning ascribed in Section 3.16(a) .
“ Encumbrance ” means, with respect to the Assets and the Purchased Shares, any claim, lien, pledge, encumbrance, option, right of first refusal, buy-sell agreements, defect in title, charge, covenant, condition, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, title retention agreement, restriction on transfer, voting agreements, voting trusts, proxies, preemptive rights (whether statutory or contractual), shareholder or similar agreements, adverse claims (as defined in Section 8-102(a)(1) of the Uniform Commercial Code) or other restrictions or encumbrances of any nature or kind, whether voluntarily incurred or arising by operation of law, including any agreement to give any of the foregoing in the future that is not eliminated, cured or waived as of the Closing Date.
“Environmental Claim” means any written notice, Action, suit, order, consent decree, penalty, fine, lien or claim (whether administrative, judicial or private in nature) arising from or related to: (a) an actual or alleged violation of or liability under any Environmental Requirements arising out of acts or omissions by the Company prior to the Closing Date; (b) the presence of any Hazardous Substance caused by the Company at, in, under, about or emanating from the Company Real Estate at or prior to the Closing Date; or (c) any abatement, removal, remedial, corrective or other response action in connection with an Environmental Requirement or order of a Governmental Authority arising out of acts or omissions by the Company prior to the Closing Date.
“Environmental Releases” means any spill, leak, emission, emptying, escaping, injection, deposit, discharge, disposal, escape, dumping, leaching, migrating, movement, placing, presence, pumping, pouring, seeping or release of a Hazardous Substance.
“ Environmental Requirements ” means all Laws and Permits and Licenses relating to (a) the protection of health, safety or the environment, (b) the discharge or discard of pollutants, wastes, contaminants, Hazardous Substances, odors or products, (c) monitoring for or mitigating risks of vapor intrusion or indoor air contamination; or (d) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances. The term “Environmental Requirements” includes, but is not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”), the Federal Water Pollution Control Act, as amended, the Federal Resource Conservation and Recovery Act, as amended, the Federal Clean Water Act, as amended, the Toxic Substances Control Act, as amended, the Federal Clean Air Act, as amended, and any and all other comparable state or local Laws, and all amendments thereto or regulations promulgated thereunder, relating to the environment, health or safety, including voluntary programs intended to facilitate voluntary Remediation of Environmental Releases or Hazardous Substances; provided, however, “Environmental Requirements” does not include those relating solely to the health or safety of employees or to health or safety of consumers of products sold or distributed by the Company.

64


“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder
“ Escrow Agent ” shall have the meaning ascribed in Section 1.9 .
“ Escrow Agreement ” shall have the meaning ascribed in Section 1.9 .
“ Estimated Cash and Cash Equivalents ” shall have the meaning ascribed in Section 1.3(b) .
“ Estimated Capital Expenditures Deficit ” shall have the meaning ascribed in Section 1.3(f) .
“ Estimated Closing Date Indebtedness ” shall have the meaning ascribed in Section 1.3(d) .
“ Estimated Pre-Closing Tax Obligations ” shall have the meaning ascribed in Section 1.3(e) .
“ Estimated Transaction Expenses ” shall have the meaning ascribed in Section 1.3(c)
“ Estimated WCA ” shall have the meaning ascribed in Section 1.3(a) .
“ FDA ” shall have the meaning ascribed in Section 3.24(a)(v) .
“ FFDC Act ” shall have the meaning ascribed in Section 3.21(b) .
“ Financial Statements ” means (a) the audited balance sheets of the Company as of each of December 31, 2011, December 29, 2012 and December 28, 2013 and the related audited consolidated statements of operations, shareholders’ equity and cash flows for each of the fiscal years then ended, and (b) the unaudited balance sheet of the Company as of June 28, 2014 and the related unaudited statements of operations and cash flows for the previous two fiscal quarters then ended and for the corresponding periods of the preceding fiscal year.
“ Fixtures and Equipment ” means all of the furniture, fixtures, furnishings, machinery, trucks, spare parts, supplies, equipment, computer hardware (including servers and network infrastructure), and other tangible personal property owned by the Company and used or usable in connection with the Business.
“ Food and Drug Legal Requirement ” means any Law, policy, regulation or procedure of the FDA or the FTC or other Governmental Authority of the U.S. or other applicable jurisdiction, relating to the manufacture, labeling, promotion, sale, safety or efficacy of the products of the Company or their regulation.
“ FTC ” shall have the meaning ascribed in Section 3.24(a)(v) .
“ FTC Act ” shall have the meaning ascribed in Section 3.21(b) .
“ Fundamental Representations ” shall have the meaning ascribed in Section 8.1 .

65


“ Funded Indebtedness ” means, as of any date, without duplication, the outstanding principal amount of, accrued and unpaid interest on and other payment obligations (including any unpaid premiums, penalties, redemption costs and other charges payable as a result of the consummation of the Transactions contemplated by this Agreement) arising under any and all of the following obligations of the Company: (i) indebtedness for borrowed money or indebtedness issued in substitution or exchange for borrowed money or indebtedness for the deferred purchase price of property or services (other than trade payables and Ordinary Course operating expenses such as payroll and non-income Tax accruals), (ii) indebtedness evidenced by any note, bond, debenture or other debt security, in each case, as of such date, (iii) obligations under any interest rate, currency, swap or other hedging agreements, in each case, as of such date, excluding any undrawn letters of credit, (iv) obligations of the Company for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction that has been drawn upon as of such date, (v) obligations of the Company under any capital lease, or (vi) any indebtedness or obligations of the type referred to in any of the clauses (i) through (v) of another Person secured by any Assets of the Company or guaranteed by the Company. Notwithstanding the foregoing, “Funded Indebtedness” (a) shall not include any obligations under operating leases as determined under GAAP, and (b) shall include all prepayment or termination fees, expenses or breakage costs, redemption prices or premiums (including without limitation any “make-whole” premiums) and penalties in each case payable in connection with any redemption, prepayment, defeasance or other satisfaction of amounts for any outstanding Funded Indebtedness of the Company.
“ GAAP ” means United States generally accepted accounting principles, consistently applied.
“ General Cap ” shall have the meaning ascribed in Section 8.2(e)(i) .
“ Governmental Authority ” means any nation or government, province, state, county, municipality and any other political subdivision, regulatory body, agency or instrumentality or authority of any of the foregoing, and any Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Health and Safety Requirements” means all federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of Law, all judicial and administrative orders and determinations, all contractual obligations and all common law requirements, in each case concerning worker health and safety, each as amended and as now or hereafter in effect.
“ Hazardous Substances ” means (i) any pollutant, contaminant, chemical, material, substance, waste or constituent, included within any definition in any Law of “hazardous substances,” “medical waste,” “special waste,” “hazardous waste,” “extremely hazardous substance,” “hazardous materials,” or “toxic substances”; and (ii) any material, waste or substance which is or contains: (A) petroleum, oil or a fraction thereof; (B) explosives, (C) radioactive materials; (D) asbestos or asbestos-containing material as defined by Environmental Requirements; and/or (E) mold; and (iii) any other biological or chemical substance, material or waste that is regulated or classified under any Environmental Requirement.

66


“ HIPAA ” shall have the meaning ascribed in Section 3.16(c) .
“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and rules and regulations promulgated thereunder.
“ Indemnified Party ” shall have the meaning ascribed in Section 8.2(c)(i) .
“ Indemnification Escrow Account ” shall have the meaning ascribed in Section 1.9 .
“ Indemnification Escrow Amount ” shall have the meaning ascribed in Section 1.4(a)(ii) .
“ Indemnifying Party ” shall have the meaning ascribed in Section 8.2(c)(i) .
“ Intellectual Property ” means all intellectual, industrial, and proprietary rights, whether domestic or foreign (including the right to sue and recover damages, costs and attorney’s fees for past, present and future infringement, misappropriation and/or dilution of same), including without limitation: (i) all patents, trademarks, trade names, service marks and copyrights; (ii) all trade secrets, confidential information, and know-how, including all technical, manufacturing, and engineering information, data, new developments, designs, inventions, or ideas, and all related documentation, whether in hard copy or electronic format; (iii) all words, symbols, icons, logos, trade dress or other indicia of origin, whether registered or unregistered, and all rights necessary to prevent unfair trading; (iv) all information technology systems and computer software, including without limitation, source code, operating systems and specifications, data, databases, files, programs, documentation and materials related thereto; (v) all Internet addresses and domain names; (vi) all applications and registrations related to, and all licenses and sub-licenses granted to or by third parties to use, any of the foregoing; and (vii) all goodwill relating to any of the foregoing.
“ Interim Balance Sheet ” means the interim balance sheet of the Company as of June 28, 2014, together with any related notes, as included in Schedule 3.9 .
“ Inventory ” means all inventory of the Company held for resale or in transit with respect to the Business and all of the Company’s raw materials, work-in-process, finished products, wrapping, supply and packaging items and similar items with respect to the Business, in each case wherever the same may be located.
“Laws” means all foreign, federal, state or local laws, statutes, codes, ordinances, regulations, rules, orders, judgments, decisions, administrative requirement or restriction, and decrees of Governmental Authorities.
“ Lease ” and “ Leases ” shall have the meaning ascribed in Section 3.5(c) .
“ Leased Real Property ” shall have the meaning ascribed in Section 3.5(c) .
“Liability” means any and all debts, liabilities and obligations of any kind or nature, whether accrued or fixed, absolute or contingent, matured or unmatured, known or unknown, determined or determinable, unasserted or asserted, liquidated or unliquidated or due or to become due, including any liability for Taxes.

67


“ Losses ” shall have the meaning ascribed in Section 8.2(a) .
“ Management Agreements ” means (i) the Management Services Agreement by and between the Company and Taglich Private Equity (f/k/a Weatherly Group, LLC) dated as of February 11, 2010, (ii) the agreement for consulting services by and between the Company and Jay Shuster, and (iii) the agreement for consulting services by and between the Company and Robert Allen.
“ Material Adverse Effect ” or “ Material Adverse Change ” means any effect, change, fact, circumstance or development that, individually or in the aggregate with all other effects, changes, facts, circumstances or developments, is, or is reasonably likely to be, materially adverse to (a) the condition (financial or otherwise), of the business, operations, Assets or liabilities of the Company or the Seller; provided , however , that any such effect, change, fact, circumstance or development arising out of or resulting from (i) any change in economic or capital market conditions generally, (ii) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (iii) any actions required to be taken pursuant to this Agreement or any agreement contemplated herein, shall not be considered when determining whether a Material Adverse Effect has occurred unless any of the matters described in clauses (i) or (ii) hereof have a disproportionate effect on the Company or the Seller as compared to other Persons who operate in the same industry; or (b) the ability of the Company or the Seller to timely consummate the Transactions contemplated hereunder.
“ Material Contract Consents ” shall have the meaning ascribed in Section 3.6(b) .
“ Material Contracts ” shall have the meaning ascribed in Section 3.6(a) .
“ Mini Basket Amount ” shall have the meaning ascribed in Section 8.2(e)(i) .
“ Net Working Capital ” shall have the meaning ascribed in Section 1.6(c) .
“ Non-Closing Condition Amendments ” means those amendments described on Schedule 11.2 .
“ Ordinary Course ” and “ Ordinary Course of Business ” shall mean the ordinary course of business consistent with past custom and practice of the Company, including with respect to quantity and frequency.
“ Owned Real Property ” shall have the meaning ascribed in Section 3.5(a) .
“ Parent ” shall have the meaning ascribed in the Preamble.
“ Party ” and “ Parties ” shall mean and include all of the persons and/or entities executing this Agreement.
“ Pay-Off Letters ” shall have the meaning ascribed in Section 1.5 .

68


“ Payment Direction Certificate ” shall have the meaning ascribed in Section 1.3 .
“ Permits and Licenses ” means all necessary licenses, permits, franchises, certificates, variances, approvals, authorizations, consents, or orders of, or filings with, any Governmental Authority, or any other Person.
“ Permitted Encumbrances ” means: (i) any Encumbrance for current Taxes and assessments not yet due or payable; (ii) any Encumbrance for Tax assessments and other charges or claims with respect to Taxes or assessments that are due and payable and the validity of which are being contested in good faith by appropriate proceedings (promptly commenced and conducted) during which collection or enforcement is stayed and as to which appropriate reserves have been established in accordance with GAAP; (iii) mechanics’ and materialmen’s liens incurred in the ordinary course of business for amounts not yet due, (iv) statutory liens of landlords’ and workmen’s, repairmen’s, warehousemen’s and carriers’ liens and other similar Encumbrances arising in the ordinary course of business for amounts not yet due or payable, (v) recorded easements, rights-of-way, restrictions and other similar Encumbrances (excluding in all instances liens, pledges, security interests, deeds of trust and mortgagees) which, in the aggregate, do not, or would not be reasonably be expected to, materially interfere with the occupation, use, and enjoyment of the Assets encumbered thereby in the normal course of the Business or materially impair the marketability or value of the Asset subject thereto, and (vi) the Encumbrances described on Schedule 11.3 .
“ Person ” means any individual, sole proprietorship, enterprise, firm, partnership, limited liability company, joint venture, trust, unincorporated association, corporation, entity or Governmental Authority.
“ Pre-Closing Periods ” shall have the meaning ascribed in Section 6.6(a) .
“ Pre-Closing Straddle Period ” shall have the meaning ascribed in Section 6.6(a) .
“ Pre-Closing Tax Obligations ” means unpaid income Tax (including, without duplication, unpaid estimated Tax with respect to such income and gain recognized on or prior to the Closing Date) (a) that is due in respect of income Tax Returns for Pre-Closing Periods or Pre-Closing Straddle Periods described in Section 6.6(a) ; and (b)(i) in the case of income Taxes other than estimated Taxes, which income Taxes the Seller is required to remit or cause to be remitted, with respect to such Tax Returns pursuant to Section 6.6(a) , and (ii) in the case of estimated Tax, which Tax is due in respect of income or gain recognized on or prior to the Closing Date, regardless of whether such estimated taxes are payable prior to, on, or after the Closing Date.
“ Products ” shall have the meaning ascribed in Section 3.24(a)(i) .
“ Purchase Price ” shall have the meaning ascribed in Section 1.2 .
“ Purchased Shares ” shall have the meaning ascribed in the Recitals.
“ Release Agreement ” shall have the meaning ascribed in Section 8.3(d) .

69


“ Releasees ” shall have the meaning ascribed in Section 8.3(a) .
“ Releasing Parties ” shall have the meaning ascribed in Section 8.3(a) .
“Remediation” means any action necessary to comply with Environmental Requirements associated with the presence or Environmental Release of any Hazardous Substance.
“ Representative ” means any officer, director, principal, agent, contractor, employee or other authorized representative.
“ Required Amendments ” means the Closing Condition Amendments and the Non-Closing Condition Amendments.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ SEC ” means the United States Securities and Exchange Commission.
“ Seller ” shall have the meaning ascribed in the first paragraph of this Agreement.
“ Seller Engagement ” shall have the meaning ascribed in Section 10.14 .
“ Seller LLC Agreement ” shall have the meaning ascribed in Section 6.17 .
“ Straddle Period ” shall have the meaning ascribed in Section 6.6(a) .
“ Straddle Period Tax Matter ” shall have the meaning ascribed in Section 6.6(f)(ii) .
“ Subsequent Event ” shall have the meaning ascribed in Section 6.1(d) .
“ Subsidiaries ” means with respect to any Person of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) is such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term Subsidiary shall include all Subsidiaries of such Subsidiary.
“ Survival Period ” shall have the meaning ascribed in Section 8.1 .
“ Target Net Working Capital ” shall have the meaning ascribed in Section 1.6(c) .
“ Tax Benefit ” shall have the meaning ascribed in Section 8.2(f).

70


“ Tax Detriment ” shall have the meaning ascribed in Section 8.2(f) .
“ Tax Matter ” shall have the meaning ascribed in Section 6.6(f)(i) .
“ Tax Returns ” shall mean all returns, reports, declarations, estimates, claims for refund, information statements or returns relating to or required to be filed in connection with any Taxes, including any schedule or attachment thereto, and including any amendment thereof. Any of the foregoing Tax Returns may also be referred to as a “Tax Return.”
“ Taxes ” shall mean, without limitation, all taxes, charges, fees, levies, or other like assessments, including all federal, possession, state, city, county, and foreign income, profits, employment (including social security, unemployment insurance and employee withholding), franchise, gross receipts, sales, use, transfer, stamp, occupation, property, capital, severance, premium, windfall profits, customs, duties, ad valorem, value added and excise taxes; including any interest, penalty, or addition thereto or with respect to any Tax Return or failure to file a Tax Return, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other person, whether arising by contract, by Law, equity or other means Any of the foregoing may also be referred to as a “Tax.”
“ Termination Date ” shall have the meaning ascribed in Section 9.1(b) .
“ Title Commitment ” shall have the meaning ascribed in Section 6.15 .
“ Title Company ” shall have the meaning ascribed in Section 6.15 .
“ Title Policy ” and “ Title Policies ” shall have the meaning ascribed in Section 6.15 .
“ To the Knowledge of the Company ,” or “ to the Knowledge of the Seller ” shall have the meaning ascribed in Section 10.9 .
“Trade Secrets” means all know-how, trade secrets, designs, confidential or proprietary information, customer lists, recipes, formulae, specifications, technical information, data, manuals, blueprints, patterns, dies, process technology, plans, drawings, inventions, and discoveries, whether or not patentable, and similar materials recording or evidencing expertise.
“ Transactions ” shall have the meaning ascribed in Section 2.1 .
“ Transaction Expenses ” shall mean (without duplication), to the extent not paid prior to the close of business on the day immediately preceding the Closing, (i) the aggregate amount payable by the Company to outside legal counsel, accountants, advisors, investment bankers, brokers and other third parties, and all other out-of-pocket costs and expenses incurred by the Company (or by the Seller, to the extent such costs and expenses are deemed a liability of the Company) in connection with the execution and delivery of this Agreement or the consummation of the Transactions, (ii) any amounts payable by the Company under, or in connection with the termination of, the Management Agreements, (iii) all change of control, closing or signing bonuses, severance, termination, retention or similar payments payable by the Company, or benefits provided by the Company to, any officer, director or employee of the Company or any other Person in connection with the execution and delivery of this Agreement or the consummation of the Transactions, including any gross up payments relating to any Tax imposed under Section 4999 of the Code arising in connection with any of the foregoing and the aggregate amount of the employer portion of any payroll Taxes attributable to any of the foregoing, and (iv) all transfer, sales, use, bulk sales, recording, registration, documentary, stamp, or other similar Taxes and all conveyance fees, recording charges and similar fees and charges (including any penalties and interest) payable by the Company under Section 10.11 .

71


“ Warning Letter ” means any letter issued by the FDA notifying a party that, upon inspection, it has been found to be in violation of one or more FDA regulations, or any letter issued by the FTC notifying a party that it has been found to be in violation of one or more provisions of the FTC Act.
“ Working Capital Adjustment ” shall have the meaning ascribed in Section 1.6(c) .


72


IN WITNESS WHEREOF, the Parties have caused this Stock Purchase Agreement to be duly executed and delivered as of the day and year first above written.
 
BUYER:
 
 
 
NUTS DISTRIBUTOR OF AMERICA INC. , a Washington corporation
 
 
 
 
 
 
By:
/s/ Robert V. Vitale
 
 
Robert V. Vitale, Treasurer
 
 
 
 
 
 
 
PARENT:
 
 
 
POST HOLDINGS, INC. , a Missouri corporation
 
 
 
 
 
 
By:
/s/ Robert V. Vitale
 
 
Robert V. Vitale, Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
COMPANY:
 
 
 
AMERICAN BLANCHING COMPANY , a Georgia corporation
 
 
 
 
 
 
By:
/s/ Jack Warden
 
 
Jack Warden, President and Chief Executive Officer
 
 
 
 
 
 
 
SELLER:
 
 
 
ABC PEANUT BUTTER, LLC , a Delaware limited liability company
 
 
 
 
 
 
By:
/s/ Rich Baum
 
 
Rich Baum, Manager
 
 
 


Signature Page to Stock Purchase Agreement


Exhibit 21.1
SUBSIDIARIES OF POST HOLDINGS, INC. (MO)

Name
 
Jurisdiction of Incorporation/Formation
Post Foods, LLC
 
Delaware
Post Foods Canada Inc.
 
British Columbia
Attune Foods, LLC
 
Delaware
Premier Nutrition Corporation
 
Delaware
Agricore United Holdings Inc.
 
Delaware
Dakota Growers Pasta Company, Inc.
 
North Dakota
Primo Piatto, Inc.
 
Minnesota
DNA Dreamfields Company, LLC
 
Ohio
GB Acquisition USA, Inc.
 
Washington
Nuts Distributor of America Inc.
 
Washington
Golden Nut Company (USA) Inc.
 
Washington
Golden Boy Nut Corporation
 
Delaware
Golden Boy Portales, LLC
 
Delaware
PHI Acquisition LP ULC
 
British Columbia
Golden Acquisition Sub, LLC
 
Delaware
PHI Acquisition GP ULC
 
British Columbia
PHI Acquisition Limited Partnership
 
British Columbia
Golden Boy Foods Ltd.
 
British Columbia
Dymatize Holdings, LLC
 
Delaware
TA/DEI-A Acquisition Corp.
 
Delaware
TA/DEI-B1 Acquisition Corp.
 
Delaware
TA/DEI-B2 Acquisition Corp.
 
Delaware
TA/DEI-B3 Acquisition Corp.
 
Delaware
Dymatize Enterprises, LLC
 
Delaware
Supreme Protein, LLC
 
Delaware
Custom Nutriceutical Laboratories, LLC
 
Delaware
Post Foods Australia Pty Ltd
 
Australia
Post Acquisition Sub IV, Inc.
 
Delaware
MFI Holding Corporation
 
Delaware
Michael Foods Group, Inc.
 
Delaware
Michael Foods, Inc.
 
Delaware
MFI Food Canada Ltd.
 
Canada
Michael Foods of Delaware, Inc.
 
Delaware
Farm Fresh Foods, Inc.
 
Nevada
Crystal Farms Refrigerated Distribution Company
 
Minnesota
MFI International, Inc.
 
Minnesota
Northern Star Co.
 
Minnesota
M.G. Waldbaum Company
 
Nebraska
Casa Trucking, Inc.
 
Minnesota
Papetti’s Hygrade Egg Products, Inc.
 
Minnesota
MFI Food Asia, LLC
 
Delaware
MFOSI, LLC
 
Delaware
American Blanching Company
 
Georgia





Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-179316 and No.333-179315) and Form S-3 (No. 333-194459) of Post Holdings, Inc. of our report dated November 26, 2014 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
November 26, 2014






EXHIBIT 31.1

Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, William P. Stiritz, certify that:

1.
I have reviewed this annual report on Form 10-K of Post Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
 
November 26, 2014
 
By:
/s/ William P. Stiritz
 
 
 
 
 
William P. Stiritz
 
 
 
 
 
Executive Chairman
 
 
 
 
 
 






EXHIBIT 31.2

Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002


I, Robert V. Vitale, certify that:

1.
I have reviewed this annual report on Form 10-K of Post Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
 
November 26, 2014
 
By:
/s/ Robert V. Vitale
 
 
 
 
 
Robert V. Vitale
 
 
 
 
 
President and Chief Executive Officer







EXHIBIT 31.3

Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002


I, Jeff A. Zadoks, certify that:

1.
I have reviewed this annual report on Form 10-K of Post Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
 
November 26, 2014
 
By:
/s/ Jeff A. Zadoks
 
 
 
 
 
Jeff A. Zadoks
 
 
 
 
 
SVP and Chief Financial Officer





EXHIBIT 32.1


Certification Pursuant to
U.S.C. Section 1350, as adopted pursuant to
to Section 906 of the Sarbanes-Oxley Act of 2002


The undersigned, the Executive Chairman of Post Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a)
the annual report on Form 10-K for the period ended September 30, 2014, filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934: and

(b)
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:
 
November 26, 2014
 
By:
/s/ William P. Stiritz
 
 
 
 
 
William P. Stiritz
 
 
 
 
 
Executive Chairman
 
 
 
 
 
 

A signed original of this written statement required by Section 906 has been provided to Post Holdings, Inc. and will be retained by Post Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Certification Pursuant to
U.S.C. Section 1350, as adopted pursuant to
to Section 906 of the Sarbanes-Oxley Act of 2002


The undersigned, the President and Chief Executive Officer of Post Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a)
the annual report on Form 10-K for the period ended September 30, 2014, filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934: and

(b)
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:
 
November 26, 2014
 
By:
/s/ Robert V. Vitale
 
 
 
 
 
Robert V. Vitale
 
 
 
 
 
President and Chief Executive Officer
 
 
 
 
 
 

A signed original of this written statement required by Section 906 has been provided to Post Holdings, Inc. and will be retained by Post Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.






Certification Pursuant to
U.S.C. Section 1350, as adopted pursuant to
to Section 906 of the Sarbanes-Oxley Act of 2002


The undersigned, the Chief Financial Officer of Post Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a)
the annual report on Form 10-K for the period ended September 30, 2014, filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934: and

(b)
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:
 
November 26, 2014
 
By:
/s/ Jeff A. Zadoks
 
 
 
 
 
Jeff A. Zadoks
 
 
 
 
 
SVP and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Post Holdings, Inc. and will be retained by Post Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.







Exhibit 10.46

SEPARATION AND RELEASE AGREEMENT

This Separation and Release Agreement (“Agreement”) is made and entered into this 9 day of October 2014 (“Effective Date”) by and between Post Holdings, Inc., Post Foods, LLC and its parent company, subsidiaries, affiliated and related companies (collectively, the “Company”) and Terrence E. Block (“Executive”) (collectively, “the Parties”).

In consideration of the mutual promises contained in this Agreement, the Parties agree as follows:

1. Termination Date/Transition . Executive and the Company agree that Executive will remain on the job and perform all of Executive’s duties until November 1, 2014 (“Termination Date”). After that date, Executive will no longer be required to report for work or perform further duties and shall be removed from the Company’s payroll. Executive acknowledges and agrees that he will be available on a consulting basis as needed and as determined by the Company until December 31, 2014. Executive is retiring and termination is a voluntary termination of his employment.

2. Resignation of Title and Positions . As of the Termination Date, Executive acknowledges that he will resign his position as President and COO of the Company and all other positions that Executive holds with the Company. Executive further acknowledges and agrees to resign from all boards of directors of the Company, effective as of the Termination Date. The Company acknowledges that it shall accept all such resignations.

3. Consideration. In consideration of Executive’s execution and performance of this Agreement, including the consulting services acknowledged in Section 1, and upon Executive’s Termination Date, the Company agrees to the following:

a.
The Company agrees to provide Executive until the Termination Date with continued salary and benefits at the same level and rate as of the Effective Date of this Agreement. Upon the Termination Date, Executive will be removed from the Company’s payroll;
b.
The Company agrees to pay Executive additional compensation in an amount equal to $1,100,000.00 in one lump sum, cash payment following Executive’s Termination Date;
c.
Upon Executive’s Termination Date, Executive and any covered dependents at the time of the Termination Date shall, upon proper application, be eligible for COBRA healthcare continuation coverage under the Company’s health, dental and vision group health plans. Executive shall be responsible for a portion of the cost of COBRA continuation coverage based on the current cost sharing percentage for active employees under the plans and the Company shall pay the remaining portion for a period of 12 weeks (“Benefit Subsidy Period”) or until such time that Executive retains group health coverage under a subsequent employer plan, whichever is earlier, subject to certain other limits required by law. Following the end of the Benefit Subsidy Period, Executive shall be responsible for all costs associated with COBRA continuation coverage as provided for by the Company’s benefit plans and procedures; and
d.
payment for all accrued but unused vacation time.

The Executive and the Company acknowledge and agree that only the payment identified in Paragraph 3(d) will be considered benefit earnings for applicable benefit plans of the Company. To the extent not specified above, any payments made under this Paragraph 3 will be paid on the date that is 60 days following the Termination Date subject to the execution and return of this Agreement and provided that any applicable revocation period has expired. All payments shall be made in accordance with normal employee payroll practices, including withholding and/or deductions for income, social security and Medicare taxes. Executive’s obligations under this Agreement are expressly contingent upon the approval of the Board of Directors of resolutions to accelerate vesting of unvested stock options and restricted stock.


1



Notwithstanding the foregoing, to the extent a FY2014 bonus is awarded to Executive under the terms of the Post Holdings, Inc. Senior Management Bonus Program, Executive’s bonus shall be no less, as represented by a percentage of base salary, as the FY2014 bonuses awarded to the Chief Financial Officer of Post Holdings, Inc. and Executive Vice President of Post Holdings, Inc./President of Post Foods, LLC.


4. Employment during the Benefit Subsidy Period . Executive and the Company understand and agree that if Executive obtains and begins employment with another company during the Benefit Subsidy Period, Executive must notify the Company within seven (7) days of accepting such position and provide written verification to the Company regarding any applicable waiting period for benefits. Upon eligibility for other group health plan benefits, the Company will immediately terminate its payments under Paragraph 3(c) of this Agreement.

5. Release . The promises and payments contained in Paragraph 3 above are in addition to any wages, bonuses and commissions to which Executive already is entitled because of Executive’s work for the Company. Executive agrees to accept the promises and terms in Paragraph 3 above in consideration for the settlement, waiver and release and discharge of any and all claims or actions against the Company as detailed in this paragraph. Unless otherwise specifically provided for in this Agreement, Executive hereby irrevocably and unconditionally releases, acquits and forever discharges the Company and each of the Company’s stockholders, predecessors, successors, assigns, subsidiaries, divisions, affiliated, related and parent partnerships and corporations and each of its past and present officers, directors, agents, employees, partners and representatives (“Released Parties”) from any and all claims, complaints, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to those that arose as consequence of Executive’s employment by the Company, or arising out of the termination of employment relationship or arising out of any acts committed or omitted during or after the existence of the employment relationship, all up and through and including the date hereof, but including, and not limited to those claims which were, could have been, or could be the subject of an administrative or judicial proceeding filed by Executive or on Executive’s behalf under any federal, state or local law or regulation, including but not limited to actions at common law or equity, in contract or tort, and including, but not limited to, claims for back pay, front pay, wages, bonuses, fringe benefits, any form of discrimination (including but not limited to claims of race, color, sex, handicap/disability, religion, genetic information, national origin, marital status, sexual orientation or preference or age discrimination), claims under Titles 29 and 42 of the United States Code, Title VII of the Civil Rights Act of 1964, as amended, the Family and Medical Leave Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, as amended, the Occupational Safety and Health Act, the Civil Rights Act of 1866, the Rehabilitation Act of 1973, as amended, the National Labor Relations Act, as amended, the Fair Labor Standards Act, and/or any other federal, state or local wage payment law; the Equal Pay Act, as well as but not limited to any claim, right or cause of action under the Missouri Human Rights Act and all claims for emotional distress, interference with contract, pain and suffering, compensatory and punitive damages, costs, interests, attorney’s fees and expenses, reinstatement or reemployment.

Other than as required by law or under power of subpoena, Executive agrees not to assist, provide information acquired up to the date of this Agreement, aid, or in any way cooperate with anyone seeking to pursue claims against or otherwise litigate or initiate or file any claims or actions against the Released Parties other than claims advanced under the auspices of an Equal Employment Opportunity Commission investigation, hearing or proceeding. Notwithstanding the foregoing, Executive agrees that Executive will not provide any third party with any information, statements or anything else acquired up until the date of this Agreement which would be considered assistance to them in their efforts to pursue claims, whether in tort or in contract or pursuant to any other applicable theory of law or equity.

Notwithstanding anything herein to the contrary, the release in this Section 5 is not intended to limit in any way Executive’s rights under Executive’s restricted stock or stock option agreements or Executive’s right to receive bonus compensation for FY 2014.

2





6. ADEA Waiver . By execution of this Agreement, Executive expressly waives any and all rights to claims under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq .: (a) Executive acknowledges that Executive’s waiver of rights or claims refers to rights or claims arising under the Age Discrimination in Employment Act of 1967, is in writing and is understood by Executive; (b) Executive expressly understands that by execution of this document, Executive does not waive any rights or claims that may arise after the date the waiver is executed; (c) Executive acknowledges that the waiver of Executive’s rights or claims arising under the Age Discrimination in Employment Act is in exchange for the consideration outlined in this Agreement which is above and beyond that to which Executive is entitled; (d) Executive acknowledges that the Company expressly advised Executive to consult with an attorney of Executive’s choosing prior to executing this document and that Executive has been given a period of not less than twenty-one (21) days within which to consider this document; and (e) Executive acknowledges that Executive has been advised by the Company that Executive is entitled to revoke (in the event Executive executes this document) Executive’s waiver of rights or claims arising under the Age Discrimination in Employment Act within seven (7) days after executing this document and that said waiver will not and does not become effective or enforceable until the seven (7) day revocation period has expired. This Agreement shall not become effective or enforceable until the revocation period has expired and no payments pursuant to this Agreement shall be made until the 8 th day following execution of this Agreement.

7. Revocation Notice. This Agreement may be revoked by Executive by providing written notice of revocation to Diedre Gray, General Counsel, Post Holdings, Inc. within seven (7) days of Executive’s execution of this Agreement. Any revocation must be in writing and delivered by the close of business on the seventh (7 th ) day from the date that Executive signs the Agreement, addressed to Diedre Gray, General Counsel, 2503 S. Hanley Road, St. Louis, MO 63144.

8. Confidentiality. Executive acknowledges that Executive has held positions of trust and confidence with the Company and that during the course of Executive’s employment, Executive has been exposed to and worked with others in the employ of the Company sharing data, trade secrets, research and development information, technical processes and material which are proprietary in nature, confidential to the Company and not generally available to the public or its competitors and which, if divulged, would be potentially damaging to the Company’s ability to compete in the marketplace. Executive agrees to abide by all confidentiality obligations undertaken while an Executive of the Company and as set forth herein. Executive will maintain such confidential and proprietary information and trade secrets in strict confidence and not disclose such information to any person except as required by law. Executive shall not breach this provision if Executive is subpoenaed and required to disclose information; provided that Executive notifies the Company promptly before any such disclosure is made.

9. Cooperation . Executive agrees that upon reasonable request by the Company, Executive will participate in the investigation, prosecution or defense of any matter involving the Company or any matter that arose during Executive’s employment, provided the Company shall reimburse Executive for any reasonable travel and out-of-pocket expenses incurred in providing such participation at its request, the purpose of which reimbursement is to avoid the cost to Executive and not to influence Executive’s participation.

10. No Admissions of Wrongdoing. This Agreement shall not in any way be construed as an admission by Executive that Executive has acted wrongfully with respect to the Company or any other person, or that the Company has any claims whatsoever against Executive, and Executive specifically disclaims any liability to or wrongful acts against Company, its employees or agents, or any other person. Further, this Agreement shall not in any way be construed as an admission by the Company that it has acted wrongfully with respect to Executive or any other person, or that Executive has any claims whatsoever against the Company, and the Company specifically disclaims any liability to or wrongful acts against Executive or any other person, on the part of itself, its employees or its agents.

3




11. Return of All Company Property and Information. Upon Executive’s Termination Date, Executive will immediately surrender to the Company, without demand, all originals and all copies of any documents, reports, notes, manuals, memoranda, blueprints, drawings, prototypes, records, photographs, or other items (whether maintained in tangible, documentary form, or in computer memory or other electronic format) in Executive’s possession or under Executive’s control that contain or reflect any confidential or proprietary information or trade secrets. In addition, Executive shall promptly return all Company property, such as files, desktop or laptop computers, software, access cards, cellular phones, personal digital assistants and pagers. Unless specifically authorized in writing, Executive understands that there is no authority to keep and/or retain any confidential or proprietary information or trade secrets, either in original format or any copy, whether as a document or computer file format.

12. Confidential Nature of Agreement. Notwithstanding Paragraph 6 of this Agreement, Executive agrees the terms and provisions of this Agreement and the fact and amount of consideration paid pursuant to this Agreement, shall at all times remain confidential and not be disclosed to anyone not a party to this Agreement, other than (a) to the extent disclosure is required by law, or (b) to Executive’s spouse, or (c) to Executive’s attorneys, accountant or tax advisors who have a need to know in order to render Executive professional advice or service. Executive agrees to ensure said individuals maintain such confidentiality.

13. Non-Disparagement. Executive agrees that Executive shall make no statement, oral or written, which is not truthful or for which Executive lacks a factual basis, and which, by itself, may significantly or substantially damage the reputation of the Company, or any director, officer or employee of the Company. The Company agrees that it shall make no statement, oral or written, which is not truthful, or for which the Company lacks a factual basis, and which may significantly or substantially damage the reputation of Executive.

14. Third Party Representations. This Agreement shall not inure to the benefit of anyone other than Executive and the Company and its successor and assigns and no third party may bring an action to enforce any term hereof and no third party beneficiary rights are created by this Agreement.

15. Divisibility/Severability. In the event any one or more of the provisions contained in this Agreement or any application shall be invalid or unenforceable in any respect, the validity, the legality and enforceability of the remaining provisions of this Agreement and any other application shall not in any way be affected or impaired.

16. Entire Agreement. This Agreement contains all the promises, agreements, conditions, understandings, warranties and representations between the parties hereto with respect to the subject matter thereof, and there are no promises, agreements, conditions, understandings, warranties or representations, oral or written, express or implied, between them with respect to such matters other than as set forth herein. Any and all prior agreements between the parties hereto with respect to such matters are hereby revoked and are deemed null and void. This Agreement is, and is intended by the Parties to be, an integration of any and all prior agreements or understandings, oral or written, with respect to the subject matter hereof.

17. Amendments and Assignments. Any amendment or change to this Agreement shall be reduced to writing and duly executed by the Parties hereto before the same shall become effective. This Agreement may be assigned by the Company. Executive may not assign the performance of Executive’s duties under this Agreement.

18. Headings. The headings and other captions in this Agreement are for convenience and reference only and shall not be used in interpreting, construing or enforcing any portion of this Agreement.

4





19. Acknowledgements. Executive hereby acknowledges that Executive has read this Separation Agreement and Release consisting of 5 pages, 19 numbered paragraphs; that Executive has had a reasonable period of time within which to consider this Agreement and fully understands and accepts all of its terms of Executive’s own voluntary free will; that no promises or representations have been made other than as expressly stated herein; that Executive has been advised to consult with an attorney and had an adequate opportunity to discuss this document with an attorney and has done so or has voluntarily elected not to do so; and by executing this Agreement and accepting the considerations outlined herein from the Company, Executive will abide by the terms hereof.

Executive
 
Company
 
 
 
 
 
 
 
 
/s/ Terence E. Block
 
By:
/s/ Robert V. Vitale
Terence E. Block
 
Robert V. Vitale
 
 
Chief Financial Officer
 
 
 
 
 
 
Signed this 10 th  day of
 
Signed this 9 th  day of
October , 2014
 
October , 2014


5



Exhibit 10.47

NON-QUALIFIED STOCK OPTION AGREEMENT


Post Holdings, Inc. grants a Non-Qualified Stock Option (the “Option”) to William P. Stiritz (“Optionee”), effective October 9, 2014 (“Grant Date”), to purchase a total of 1,000,000 shares of its Stock at an exercise price of $55.00 per share pursuant to the Post Holdings, Inc. 2012 Long-Term Incentive Plan (the “Plan”), upon the terms hereafter provided in this Non-Qualified Stock Option Agreement (this “Agreement”). Any capitalized terms, not otherwise defined herein, have the meanings given to such terms in the Plan.

NOW THEREFORE , the Company and Optionee agree, for and in consideration of the terms hereof, as set forth below.

1.     Exercise . Subject to the provisions of the Plan and the following terms, Optionee may exercise the Option from time to time by tendering to the Company (or its designated agent), written notice of exercise, which will state the number of shares under the Option to be exercised, together with the purchase price in either cash or, if the Committee so permits, in Shares at the Fair Market Value. Notwithstanding the foregoing, if the Committee so permits, the purchase price may be payable through a net or cashless exercise as permitted by the Committee or through such other methods or forms as the Committee may approve in its discretion subject to such rules and procedures as it may establish.

2.     Vesting and When Exercisable .

(a)    The Option vests and becomes exercisable in accordance with Section 2(b) below. Subject to the provisions of the Plan and any vesting and other terms herein, the Option remains exercisable through the tenth anniversary of the Grant Date (“Expiration Date”) unless Optionee is no longer employed by the Company (or its Affiliates or Parent, if any), in which case the Option is exercisable only if permitted by, and in accordance with, the provisions of Section 3 below.

(b)    The Option vests while Optionee is employed by the Company (or an Affiliate or Parent, if any), and is exercisable, as follows:

(i)    one third (1/3) of the shares covered by the Option shall vest on each of the first, second and third anniversaries of the Grant Date; provided, however, that upon Optionee’s death or Disability, the number of shares of Stock subject to the Option that would have vested during the Company’s fiscal year in which Optionee’s death or Disability occurs (but which had not vested in such fiscal year prior to the date of Optionee’s death or Disability), will fully vest as of the date of Optionee’s death or Disability; and

(ii)    the Option is exercisable when Optionee is not any of the following (a “Covered Employee”): (A) the chief executive officer of the Company (or acting in such capacity), or (B) any other officer of the Company.

3.     Accelerated Vesting and Limitation on Exercise Period .

(a)    Notwithstanding Section 2(b) above, the Option shall vest before the normal vesting dates set forth in Section 2(b) above upon the occurrence of a Change in Control while Optionee is employed by the Company (or an Affiliate or Parent, if any) if the Option will not remain outstanding following such Change in Control and the surviving corporation or Parent makes settlement of the full value of the outstanding Option (whether or not then exercisable) in cash or cash equivalents followed by the cancellation of the Option. If, upon the occurrence of a Change in Control while Optionee is employed by the Company (or an Affiliate or Parent, if any), the Option remains outstanding following the Change in Control, the Option is assumed by the surviving corporation or Parent, or the surviving corporation or Parent substitutes options with substantially the same terms for the Option, then the Option shall continue to vest in accordance with Section 2(b)(i) above, unless Optionee has a “Qualifying Termination” as hereafter defined. Upon the occurrence of a Qualifying Termination, the Option shall automatically become fully vested, notwithstanding the normal vesting dates set forth in Section 2(b) above.





(b)    Once the Option vests and becomes exercisable as provided above, the Option shall remain exercisable for the periods set forth below or until the Expiration Date, whichever occurs first. Thereafter, the unexercised portion of the Option is forfeited and may not be exercised.

(i)    In the event of the death of Optionee, the Option is exercisable for three years.

(ii)    In the event of the Disability of Optionee, the Option is exercisable for three years.

(iii)    In the event of the voluntary termination of Optionee’s employment with the Company (and its Affiliates and Parent, if any), the Option is exercisable for three years.

(iv)    In the event of the involuntary termination of Optionee’s employment with the Company (and its Affiliates and Parent, if any), other than a termination for death, Disability, or Cause, the Option is exercisable for six months.

(c)    For purposes hereof, a “Qualifying Termination” means a termination of Optionee’s employment with the Company (and its Affiliate and Parent, if any) within two years of a Change in Control Date (i) by the Company (or an Affiliate or the Parent, if any) without Cause, or (ii) by the Optionee for “Good Reason”. For purposes hereof, “Good Reason” means (A) Optionee is not the chief executive officer and chairman of the Board of Directors of Parent; (B) a reduction in Optionee’s base salary, bonuses or incentive compensation; (C) a material reduction in the kind or level of employee benefits, fringe benefits or perquisites to which Optionee is from time to time entitled; (D) a diminution or adverse change in Optionee’s titles, authorities, duties, responsibilities or reporting relationships, or the assignment to Optionee of duties that are inconsistent with, or materially impair his ability to perform, the duties of his position prior to the Change in Control; (E) a change in the geographic location by 50 miles or more at which Optionee must perform his services, or (F) any other action or inaction that constitutes a material breach by the Company (or an Affiliate or Parent, if any) of the agreement under which Optionee provides services.

4.     Forfeiture .

(a)    This Section 4 sets forth the circumstances under which the Option will be forfeited. All shares not vested shall be forfeited upon Optionee’s receipt of written notice from the Committee of the occurrence of any of the following events (such notice is referred to as the “Forfeiture Notice”):

(i)    Optionee is terminated for Cause;

(ii)    Optionee engages in competition with the Company; or

(iii)    Optionee engages in any of the following actions: (A) intentional misconduct in the performance of Optionee’s job with the Company or any subsidiary; (B) being openly critical in the media of the Company or any subsidiary or its directors, officers, or employees or those of any subsidiary; (C) pleading guilty or nolo contendere to any felony or any charge involving moral turpitude; (D) misappropriating or destroying Company or subsidiary property including, but not limited to, trade secrets or other proprietary property; (E) improperly disclosing material nonpublic information regarding the Company or any subsidiary; (F) after ceasing employment with the Company, inducing or attempting to induce any employee of the Company or any Subsidiary to leave the employ of the Company or any subsidiary; (G) after ceasing employment with the Company, hiring any person who was a manager level employee of the Company or any subsidiary; or (H) inducing or attempting to induce any customer, supplier, lender, or other business relation of the Company or any subsidiary to cease doing business with the Company or any subsidiary.

    

2


(b)    Upon Optionee’s receipt of the Forfeiture Notice, the portions of the Option not vested will be forfeited and may not be exercised. Notwithstanding any other provision of the Option, any portion of the Option that is vested (either in accordance with the normal vesting dates set forth in Section 2 or pursuant to an acceleration of vesting under Section 3) and is or becomes exercisable on or after the date on which Optionee receives the Forfeiture Notice shall remain exercisable for seven (7) days following the date on which Optionee receives the Forfeiture Notice (but in no event later than the Expiration Date). Therefore, any vested and exercisable portion of the Option that is not exercised within such seven (7) day period (or by the Expiration Date if earlier) will be forfeited and may not be exercised. The Committee or entire Board may waive any condition of forfeiture described in this Section.

5.     Covenant Not to Compete; Non Solicitation; and Confidentiality .

(a)    During the term of the Optionee’s employment with the Company and until the third anniversary of the effective date of the termination of Optionee’s employment with the Company, Optionee shall not:

(i)    engage (whether as an owner, operator, manager, employee, officer, director, consultant, advisor, representative or otherwise) directly or indirectly in any business that produces, develops, markets or sells any type of food products that compete with those food products produced by the Company; provided however, that ownership of less than ten percent (10%) of the outstanding stock of any publicly-traded corporation (other than the Company) shall not be deemed to be engaging solely by reason thereof in any of the Company’s businesses; or

(ii)    induce or attempt to induce any customer, supplier, lender or other business relation of the Company to cease doing business with the Company or any of its subsidiaries.

(b)    Optionee agrees to treat and hold as confidential any information concerning the business and affairs of the Company that is not or does not become generally available to the public other than as a result of a disclosure in violation of this Agreement (the “ Confidential Information ”), refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to the Company or destroy, at the request and option of the Company, all tangible embodiments (and all copies) of the Confidential Information which are in Optionee’s possession.

(c)    Optionee acknowledges and agrees that in the event of a breach by Optionee of any of the provisions of this Section 5, monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach, the Company shall be entitled to, in addition to the other rights and remedies existing in their favor, specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof from any court of competent jurisdiction in each case without the requirement of posting a bond or proving actual damages.

(d)    Optionee agrees that except in connection with any legal proceeding relating to the enforcement of this Agreement, following the effective date of the termination of Optionee’s employment with the Company, Optionee shall not publicly disparage the Company or its officers or directors.

(e)    The term “ indirectly ” as used in this Section 5 with respect to Optionee is intended to mean any acts authorized or directed by or on behalf of Optionee or any entity controlled by Optionee.

6.     Governing Law . This Agreement shall be governed by the laws of the State of Missouri without reference to the conflict of laws provisions thereof. The Optionee shall be solely responsible to seek advice as to the laws of any jurisdiction to which he may be subject, and participation by the Optionee in the Plan shall be on the basis of a warranty by the Optionee that he may lawfully so participate without the Company being in breach of the laws of any such jurisdiction.

7.     Amendment . No amendment or modification of this Agreement shall be valid unless the same shall be in writing and signed by the Company and Optionee. The foregoing, however, shall not prevent the Company from amending or modifying the Plan except that no such amendment or modification shall adversely affect the Optionee’s rights under this Agreement.

3



8.     No Assignment or Transfer . During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. The Option shall not be assignable or transferable other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Optionee may request authorization from the Committee to assign his rights with respect to the Option granted herein to a trust or custodianship, the beneficiaries of which may include only the Optionee, the Optionee’s spouse or the Optionee’s lineal descendants (by blood or adoption), and, if the Committee grants such authorization, the Optionee may assign his rights accordingly. In the event of any such assignment, such trust or custodianship shall be subject to all the restrictions, obligations, and responsibilities as apply to the Optionee under the Plan and this Agreement and shall be entitled to all the rights of the Optionee under the Plan.

ACKNOWLEDGED
AND ACCEPTED:
 
POST HOLDINGS, INC.
 
 
 
 
/s/ William P. Stiritz
 
By:
/s/ Diedre J. Gray
Optionee: William P. Stiritz
 
 
 
 
 
Name:
Diedre J. Gray
 
 
 
 
Date
 
Title:
SVP, General Counsel and Secretary


4

Exhibit 10.48

AMENDMENT TWO TO EMPLOYMENT AGREEMENT

This AMENDMENT TWO TO EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into between Post Holding, Inc., a Missouri corporation, (“ Post” ) and William P. Stiritz (the “Executive”) dated as of October 9 , 2014 (the “ Effective Date ”).

RECITALS

A.    Post and Executive previously entered into an Employment Agreement dated May 29, 2012, as amended by that Amendment One to Employment Agreement dated October 15, 2013 (together, “ Employment Agreement” ).

B.    Post and Executive desire to amend the Employment Agreement in certain respects pursuant to Section 8 of the Employment Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the recitals, covenants and agreements contained herein, the parties agree to the provisions set forth below.

1.     Section 1 of the Employment Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

1.     Employment Term . Subject to the remaining provisions of this Agreement, Executive shall continue employment with Post until October 9, 2017 (the “ Employment Term ”) on the terms and subject to the conditions set forth in this Agreement. Notwithstanding the preceding sentence, commencing on October 9, 2017 and on each October 9 thereafter (each, an “ Extension Date ”), the Employment Term shall be automatically extended for an additional one year period, unless Post or Executive provides the other party hereto at least sixty (60) days’ prior written notice before the relevant Extension Date that the Employment Term shall not be so extended. For the avoidance of doubt, the term “Employment Term” shall include any extension that becomes applicable pursuant to the preceding sentence.

2.     Section 3(a) of the Employment Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

(a)     Position . Executive shall serve as the Executive Chairman of Post. Subject to the oversight and direction of the Board of Post, Executive shall (i) be actively engaged in, and have responsibility for, the overall leadership and strategic direction of the Company, working with the Board and the Chief Executive Officer, (ii) provide the Board and the executive management team with advice on the financial performance of the Company, and (iii) coordinate the activities of the Board. Executive shall report exclusively and directly to the Board of Post. During the Employment Term, the Company will cause the Board of Directors of the Company (the “ Board ”) to nominate Executive for re-election to the Board when his term as director expires.





3.     Except as specifically amended herein, the Employment Agreement shall remain in full force and effect.




IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the Effective Date.


POST HOLDINGS, INC.
 
 
 
 
 
 
 
By:
/s/ Diedre J. Gray
 
Name:
Diedre J. Gray
 
Title:
SVP, General Counsel and Secretary
 
 
 
 
 
 
 
 
 
EXECUTIVE
 
 
 
/s/ William P. Stiritz
 
William P. Stiritz