# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_POST_2019/NYSE_POST_2019.mmd` · pages 7-13_

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To Our Shareholders

With all deference to Dickens, 2019 was neither the best of times nor the worst of times. Our ultimate scorecard, the change in our share price, grew approximately 8% in fiscal 2019. This well outpaced the broader market indices, but fell well below our historical long term growth rate. Since forming in 2012, our share price has compounded at an average of 20% per annum. Among this year's accomplishments, we:

• Delivered on financial targets for the year, including generating Adjusted EBITDA \( ^{(1)} \)  of 1.2 billion and 141 million in free cash flow \( ^{(1)} \) .

• Completed the recapitalization of 8th Avenue Food & Provisions, Inc. ("8th Avenue") via a partnership with Thomas H. Lee Partners, L.P ("THL").

• Executed the initial public offering (the "IPO") of BelLRing Brands, Inc.—the Active Nutrition segment of Post, which began trading on the NYSE under the ticker symbol BRBR on October 17, 2019.

• Continued progress on various substantial, multi-year projects within Post Consumer Brands, Foodservice and Refrigerated Retail, all aimed at improving flexibility, increasing customer service levels and reducing costs.

• Delivered on synergies resulting from the Weetabix and Bob Evans Farms acquisitions.

Notably absent from the above list is M&A—a hallmark of our first seven years as a public company. It was not from lack of interest or effort. In May 2019, we announced our agreement to acquire from Treehouse Foods, Inc. its private label ready-to-eat cereal business. We believed, and we

POST CONSUMER BRANDS

#3

ready-to-eat U.S. cereal manufacturer \( ^{(2)} \) 

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continue to believe, that combining their private label business with ours will add competition to an already competitive category. As of the date of this letter, the transaction remains under regulatory review, so it has not been completed. This experience however has not changed our appetite or focus, and we expect to continue pursuing M&A opportunities.

## FACING CHANGE

The environment in which we compete remains dynamic and challenging. It is no surprise that consumers are changing. Some examples:

• Increasingly, consumers occupy realities of their own selection. It turns out that facts are far less stubborn things than Mr. Adams suggested. And if consumers are selecting their facts, the construction of each paradigm hardens not just the political perspectives—the most obvious manifestation of this phenomenon—it also entrenches biases that drive purchase selection.

• In general, consumers trust in voices of authority has eroded. Technologies like blockchain are attractive because the transparency lifts the burden of trust.

• There is a generational shift in how consumers relate to brands. Without putting too fine a point on the cutoff between "older" and "younger," older consumers tend to think about brands as messages about quality and product characteristics. Younger consumers demand a purpose.

• Consumer decisions are more mobile. Not a blinding insight, but no contextual summary would be complete without noting that consumers purchase in dramatically different ways than even a few short years ago.

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WEETABIX

#1

ready-to-eat U.K. cereal brand \( ^{3)} \) 

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This year, Post celebrated 125 years since its formation. Can a 125-year old company compete in such a changing world? Of course we can. But to do so we must constantly be willing to adapt. Tolstoy wrote that "all happy families are alike, but all unhappy ones are unhappy in their own ways." Like happy families, we believe companies that thrive for long periods of time share one common trait—the ability to read their environment and adapt to it.

Our focus on adaptability starts with our holding company model. Our structure enabled us to acquire active nutrition businesses, manage them independently enough to maintain their own identity distinct from Post, and ultimately turn them into a free standing company. At the same time, our model provided ample room to acquire and add onto one of the best foodservice platforms in the country. Decentralized decision making attracts terrific managers and empowers them to make an impact. However, the model comes with complexity and it makes our business arguably more difficult to value than many of our peers. To value Post, the parts comprising the whole must be separately considered. With some of the parts, recent transactions (such as the IPO) have moved this from the abstract to the demonstrable.

## OUR BUSINESSES

BellRing Brands We are quite proud of the BellRing Brands story. Between September 2013 and October 2014, Post acquired three businesses that came to form our Active Nutrition segment. We acquired approximately \(50 million in Adjusted EBITDA for approximately \)700 million in purchase price. In connection with the IPO, Post received proceeds of \(1.225 billion and retained 71% of the equity of our historical Active Nutrition business. This newly constituted business is well-positioned as a leader in convenient nutrition to produce attractive growth for the future.
FOODSERVICE

3%

volume growth in fiscal 2019 on a pro forma basis \( ^{(4)} \) 

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Post Consumer Brands Since its formation resulting from the combination of MOM Brands and Post Foods, Post Consumer Brands has performed exceptionally well. The initial mission was to reduce costs enabled by the combination and the team delivered over $100 million in savings. Meanwhile, market share expanded with success in our core franchises and newly licensed products. We determined that building upon that success required an organization that was foundationally more adaptable. To be more specific, we wanted to strengthen the innovation process and the ability to be a platform for acquisitions in other categories. We also wanted to execute this effort without a reduction in margin. This process was launched in late 2018 and continued this year. It has had its share of speedbumps, but such is the nature of change. We are committed to the effort and we expect to see modest payoffs in 2020, but to be more impactful starting in 2021.

Weetabix Our other cereal business is the UK's leading brand, Weetabix. Weetabix performed remarkably well this year. We are quite pleased with the prospects for this business as a platform upon which to build.

Brexit remains a source of frustration. We continue to carry higher levels of working capital in order to mitigate the risk of supply chain disruption. It has a small cost. The more meaningful exposure to Brexit is in currency volatility.

Foodservice and Refrigerated Retail These segments were formed as a result of our decision to make pure channel organizations from the combined Michael Foods and Bob Evans organizations.

Foodservice had a terrific year growing in volume and profit in line with our long-term algorithm. This is an excellent business and we would like to find acquisition opportunities to leverage its capabilities.

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REFRIGERATED RETAIL

13%

volume growth in Bob Evans branded side dishes in fiscal 2019 on a pro forma basis \( ^{(4)} \) 

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Refrigerated Retail is comprised of our Bob Evans and Simply Potatoes brands. In terms of volume and market share, 2019 was a success. Most notably the Bob Evans branded side dish business continued growing producing a 13% volume increase from the pro forma prior year \( ^{(4)} \) .

The two segments share an integrated supply chain and an integrated approach to product development. The supply chain—specifically related to retail products—underperformed this year. The root cause was a decision to accelerate to transition from a "made to order" to a "made to forecast" process. This is the right thing to do and will position the business for further success.

8th Avenue Food & Provisions We started the year by completing the recapitalization of 8th Avenue Food & Provisions. To briefly review, Post had acquired a handful of private label business. Over time, these businesses were not getting the strategic focus they deserved and we decided to separate them into a free standing business—8th Avenue—which we formed in partnership with THL. Our strategy is to be a consolidator in private label in attractive categories.

To execute on this strategy, we first needed to bring three different categories onto one information technology platform and a single route to market system. This integration went poorly and caused us to incur substantial costs in 2019 which better execution would have avoided.

In short, we are one year behind our plan, but we continue to believe there is considerable opportunity to build value.

## CAPITAL ALLOCATION

As important as the results of our businesses is how we position our company for what comes next. 2019 was a challenging year with respect to planning assumptions. As we entered 2019, our chief concern was the impact of

BELLRING BRANDS

#1

in convenient nutrition and convenient nutrition ready-to-drink categories with the Premier Protein brand \( ^{(5)} \) 

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an over-heating economy. People who know these things predicted the 10 Year Treasury would top 3%. What developed instead during the year was a bifurcation of consumer strength and industrial unease that pushed the rate—at its low—to 1.46%. Much of how we think about capital allocation and sourcing is influenced by this capital cost and how it relates to the value of financial assets.

In 2019, we generated free cash flow \( ^{(1)} \)  of 414 million, a decline from the prior year resulting from two key investments to support future growth. First, we experienced an increase in net working capital resulting from inventory builds, primarily within Active Nutrition. Second, our capital expenditures rose above our baseline level to support growth within our Foodservice business as we built a new precooked egg facility.

In conjunction with receipt of proceeds from the IPO transaction, we reduced our net debt to Adjusted EBITDA \( ^{(1)} \)  ratio, as measured by our credit facility, from 5.4x to 4.8x. Throughout 2019 we repurchased 3.3 million shares of our common stock for a total investment of 331 million.

We look forward to 2020 with anticipation that we are well positioned to compete in this dynamic and exciting environment. We cannot guarantee success, but we promise that Post has a bias for action grounded on adapting to meet the opportunities ahead of us.

As always, we thank you for your support.

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William P. Stiritz
Chairman of the Board

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Robert V. Vitale
President and Chief Executive Officer