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The following discussion summarizes the significant factors affecting the combined operating results, financial condition, liquidity and capital resources of BellRing Brands, Inc. ("BellRing") and its subsidiaries. This discussion should be read in conjunction with the balance sheet and accompanying notes for BellRing Brands, Inc., the historical combined financial statements and the accompanying notes for Post Holdings, Inc.'s ("Post") Active Nutrition business ("Active Nutrition"), as well as the "Cautionary Statement Regarding Forward-Looking Statements" on page 1. Active Nutrition's historical combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Post. The combined financial statements reflect the historical results of operations, financial position and cash flows of Active Nutrition and the allocation of certain Post corporate expenses relating to Active Nutrition based on the historical financial statements and accounting records of Post. In the opinion of management, the assumptions underlying the Active Nutrition historical combined financial statements, including the basis on which the expenses have been allocated from Post, are reasonable. However, the allocations may not reflect the expenses that BellRing may have incurred as a separate company for the periods presented. For additional information, see "Risk Factors" in Item 1A.

growing awareness of the numerous health benefits of protein, including sustained energy, muscle recovery and satiety; and

a rise in snacking and the desire for products that can be consumed on-the-go as nutritious snacks or meal replacements.

Nonetheless, the consumer food and beverage industry faces a number of challenges and uncertainties, including:

changing consumer preferences which require food manufacturers to identify changing preferences and to offer products that appeal to consumers.

In addition to the trends described above, we also experienced short-term supply constraints for our RTD protein shakes during the year ended September 30, 2019. With the rapid consumption growth of our Premier Protein RTD shakes, we added significant capacity at our contract manufacturing partners in order to keep up with consumer demand. However, due to a combination of better than expected volume growth for our Premier Protein RTD shakes in the second half of fiscal 2018 and delays in planned incremental production capacity by our third party contract manufacturer network, our customer demand exceeded our available capacity and resulted in inventory below acceptable levels at September 30, 2018. To increase inventory and to minimize the overall impact to customers and consumers, Active Nutrition temporarily reduced its available RTD protein shake flavors in the

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first quarter of fiscal 2019 from seven to its two best-selling flavors, chocolate and vanilla. This decision adversely impacted the year-over-year growth rate for the year ended September 30, 2019 compared to growth trends experienced in fiscal 2018 and 2017. During the second quarter of fiscal 2019, all flavors were re-introduced and available to our customers. Additionally, we have significantly increased our RTD shake inventory levels, and believe we are positioned to meet customer demand and accelerate growth. Seasonality

separation costs of $6.7 million related to our separation from Post for the year ended September 30, 2019;

the reclassification of certain payments to customers of $8.8 million from selling, general and administrative expenses to net sales in the year ended September 30, 2019, in connection with the adoption of Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606);"

litigation settlement accruals of $9.0 million in the year ended September 30, 2018;

a goodwill impairment charge of $26.5 million in the year ended September 30, 2017; and

insurance proceeds of $2.0 million in the year ended September 30, 2017.

For further discussion, refer to "Results of Operations" within this section.


                                                                             Active Nutrition
                                            Fiscal 2019 compared to 2018                          Fiscal 2018 compared to 2017
        $ in millions;
        favorable/(unfavorable)    2019         2018        $ Change      % Change        2018           2017        $ Change    % Change
        Net Sales                $    854.4   $    827.5   $    26.9         3  %     $        827.5   $    713.2   $  114.3         16  %
        Cost of goods sold            542.6        549.8         7.2         1  %              549.8        467.4      (82.4 )      (18 )%
        Gross Profit                  311.8        277.7        34.1        12  %              277.7        245.8       31.9         13  %
        Selling, general and
        administrative expenses       127.1        135.1         8.0         6  %              135.1        131.0       (4.1 )       (3 )%
        Amortization of
        intangible assets              22.2         22.8         0.6         3  %               22.8         22.8          -          -  %
        Impairment of goodwill            -            -           -       n/a                     -         26.5       26.5        100  %
        Other operating income,
        net                               -            -           -       n/a                     -         (0.1 )     (0.1 )     (100 )%
        Earnings before Income
        Taxes                         162.5        119.8        42.7        36  %              119.8         65.6       54.2         83  %
        Income tax expense             39.4         23.7       (15.7 )     (66 )%               23.7         30.4        6.7         22  %
        Net Earnings             $    123.1   $     96.1   $    27.0        28  %     $         96.1   $     35.2   $   60.9        173  %
        Gross Profit Margin           36 %         34 %                                        34 %         34 %
        EBIT Margin                   19 %         14 %                                        14 %          9 %
        Effective Income Tax
        Rate                          24 %         20 %                                        20 %         46 %

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Net Sales

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        Income Taxes
        The effective income tax rate for fiscal 2019 was 24.2%, compared to 19.8% for
        fiscal 2018 and 46.3% for fiscal 2017. A reconciliation of income tax expense
        with amounts computed at the federal statutory tax rate follows:
                                                                           Active Nutrition
                                                                       Year Ended September 30,
        ($ in millions)                                             2019            2018         2017
        Computed tax (a)                                       $    34.1         $   29.4     $   23.0
        Enacted tax law and changes, including the Tax Act (a)         -             (9.4 )          -
        State income taxes, net of effect on federal tax             4.9              3.3          2.2
        Non-deductible goodwill impairment loss                        -                -          6.0
        Other, net (none in excess of 5% of statutory tax)           0.4              0.4         (0.8 )
        Income tax expense                                     $    39.4         $   23.7     $   30.4

(a) Fiscal 2019 and 2017 federal corporate income tax was computed at the federal statutory tax rates of 21% and 35%, respectively. The fiscal 2018 federal corporate income tax was computed using a blended United States ("U.S.") federal corporate income tax rate of 24.5%. The fiscal 2018 federal corporate income tax rate was impacted by the Tax Cuts and Jobs Act (the "Tax Act"), as discussed below.

In fiscal 2018, the effective income tax rate was impacted by the Tax Act, which was enacted on December 22, 2017. The Tax Act resulted in significant impacts to the accounting for income taxes with the most significant of these impacts relating to the reduction of the U.S. federal corporate income tax rate, a one-time transition tax on unrepatriated foreign earnings and full expensing of certain qualified depreciable assets placed in service after September 27, 2017 and before January 1, 2023. The Tax Act enacted a new U.S. federal corporate income tax rate of 21% that went into effect for the 2019 tax year and was prorated with the pre-December 22, 2017 U.S. federal corporate income tax rate of 35% for the 2018 tax year. This proration resulted in a blended U.S. federal corporate income tax rate of 24.5% for fiscal 2018. During the year ended September 30, 2018, Active Nutrition: (i) remeasured its existing deferred tax assets and liabilities considering both the 2018 fiscal blended rate and the 21% rate for future periods and recorded a tax benefit of $9.9 million and


                                                                      Year Ended September 30,
        ($ in millions)                                            2019          2018         2017
        Cash provided by (used in):
        Operating activities                                   $    98.3      $  141.2     $   80.4
        Investing activities                                        (3.2 )        (5.0 )        2.1
        Financing activities                                      (100.2 )      (133.0 )      (84.0 )
        Effect of exchange rate changes on cash and cash
        equivalents                                                 (0.3 )        (0.1 )        0.4
        Net (decrease) increase in cash and cash equivalents   $    (5.4 )    $    3.1     $   (1.1 )

Financial resources for our U.S. operations have historically been provided by Post, which has managed cash and cash equivalents on a centralized basis. Under Post's centralized cash management system, cash requirements are provided directly by Post, and cash generated by us is generally remitted directly to Post. Transaction systems (e.g. payroll and employee benefits) used to record and account for cash disbursements are generally provided by Post. Cash receipts associated with our U.S. business have been transferred to Post on a daily basis and Post has funded our cash disbursements. Financial resources for our international operations have been historically managed by us.

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On October 21, 2019, BellRing closed its IPO of 39.4 million shares of its Class A Common Stock, $0.01 par value per share, which number of shares included the underwriters' exercise in full of their option to purchase up to an additional 5.1 million shares of Class A Common Stock, at an offering price of $14.00 per share. The Company received net proceeds from the IPO of $524.4 million, after deducting underwriting discounts and commissions.

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Under its amended and restated limited liability company agreement, BellRing Brands, LLC may make distributions to its members from time to time at the discretion of the Board of Managers. Such distributions will be made to the members on a pro rata basis in proportion to the number of BellRing Brands, LLC units held by each member, except that the Board of Managers may cause BellRing Brands, LLC to make non-proportionate distributions to BellRing in connection with any cash redemption of BellRing's Class A Common Stock. The amended and restated limited liability company agreement provides, to the extent cash is available, for distributions pro rata to the holders of BellRing Brands, LLC units such that members receive an amount of cash sufficient to cover the estimated taxes payable by them including, in the case of BellRing, an amount sufficient to allow BellRing to make any payments required under the tax receivable agreement. In addition, the amended and restated limited liability company agreement will provide that BellRing Brands, LLC will reimburse BellRing for any reasonable out-of-pocket expenses incurred on behalf of us, including all fees, costs and expenses of BellRing associated with being a public company and maintaining its corporate existence. Operating Activities

Nov 22, 2019

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