SecProbe.io

CORRESP
1
filename1.htm

corresp

November 22, 2011

VIA EDGAR

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549-4628

    Attention:

    H. Roger Schwall

Assistant Director, Division of Corporation Finance

    Re:

     Post Holdings, Inc.
Registration Statement on Form 10
Filed September 26, 2011
File No. 1-35305

Dear Mr. Schwall:

     I am writing this letter on behalf of Post Holdings, Inc. (the “Company”) in response to the
comment letter of the Staff of the Commission dated October 24, 2011 regarding the above-referenced
registration statement filed by the Company. We plan to file Pre-Effective Amendment No. 1 to
Registration Statement on Form 10 (the “Amendment”) in the coming weeks. As discussed with the
members of Staff, we are providing this letter to address the Staff’s comments as promptly as
possible and describe how we intend to revise our disclosure in response thereto. Note that,
although some of our responses refer to financial results for the period ended, and as of, June
30, 2011, financial statements for the fiscal year ended September 30, 2011 are expected to be
available at the time the Amendment will be filed, and the financial
information included in the registration statement would be updated accordingly.

     This letter sets forth each comment of the Staff in the comment letter (numbered in accordance
with the comment letter) and, following each comment, sets forth the Company’s response.

Registration Statement on Form 10-12B

General

     1. References in this letter to your document or filing include the Form 10 or the information
statement filed as exhibit 99.1, as appropriate. Page references and captions are to the
information statement, unless the context requires otherwise.

     Response: The Company acknowledges the Staff’s comment.

     2. You will expedite the review process if you address each portion of every numbered comment
that appears in this letter. Provide complete responses and, where disclosure has changed,
indicate precisely where in the marked version of the amendment we will find your responsive
changes. Similarly, to minimize the likelihood that we will reissue comments, please make
corresponding changes where applicable throughout your document. For example, we might comment on
one section or example in the document, but our silence on similar or related disclosure elsewhere
does not relieve you of the need to make similar revisions elsewhere as appropriate. If parallel

Mr. H. Roger Schwall

November 22, 2011

Page 2

information appears at more than one place in the document, provide in your response letter
page references to all responsive disclosure.

     Response: The Company acknowledges the Staff’s comment.

     3. Please file all omitted exhibits and provide other omitted disclosure. Once you file all
the omitted items, including any material contracts required to be filed pursuant to Item
601(b)(10) of Regulation S-K, we may have additional comments. Ensure that you allow sufficient
time for your response to our review in each case.

     Response: The Company acknowledges the Staff’s comment and undertakes to file all
exhibits, including any material contracts required to be filed pursuant to Item 601(b)(10) of
Regulation S-K, once available.

     4. We may have additional comments once you provide updated disclosure. Please update
generally, and in particular, provide current information regarding the following items once known
or available:

    •

    The omitted phone numbers for the Investor Relations units listed on page ix;

    •

    The receipt and contents of the requested IRS letter ruling;

    •

    The particular terms, conditions, and covenants set forth in the new credit
facilities and indenture (see page 3);

    •

    The identities and pertinent biographical information of those who will serve as
your directors or executive officers post-separation (page 68); and

    •

    A summary of the conflict of interest policy you adopt (page 80).

     Response: The Company acknowledges the Staff’s comment and undertakes to provide the
necessary disclosure once known or available.

     5. Please provide us with supplemental, highlighted copies of the third party sources or
reports upon which you refer for your statistical assertions which appear throughout the document.
Advise us whether these statistics are publicly available or were only available for a fee. In
that regard, please revise the disclosure under “Industry and Market Data” at page iv to eliminate
any suggestion that the disclosure which appears in your filings is unreliable or may be
inaccurate, and revise to clarify that you are responsible for the accuracy of all such disclosure.

     Response: The Company is separately transmitting, pursuant to Rule 418(b) of the
Securities Act of 1933, highlighted paper copies of the third party sources used to support certain
statistical assertions contained in the above-referenced registration statement. Such supplemental
information is not to be filed with or deemed a part of the registration statement, and the Company
is requesting that the supplemental information be returned to the undersigned promptly following
completion of the Staff’s review of the supplemental information. The supplemental information is
available from Nielsen for a nominal subscription fee, and was not prepared
exclusively for the Company. The Company will revise its disclosure under “Industry and
Market Data” in substantially the form attached as Exhibit A-5.

Risk Factors, page 10

Mr. H. Roger Schwall

November 22, 2011

Page 3

     6. Please revise to eliminate text which mitigates the risks you present, such as some clauses
which precede or follow “Although,” “While,” or “However.” Also revise to state the risks plainly
and directly, rather than indicating that there can be “no assurance” of a particular outcome.

     Response: The Company will revise its disclosure to address the Staff’s comment in
substantially the form attached as Exhibit B-6.

Commodity price volatility and high energy costs could negatively, page 11

     7. Please confirm to us that you intended to refer to your hedging program for heating oil
relating to diesel fuel prices, and revise as necessary to explain briefly the reference.

     Response: The Company has determined that heating oil
 serves as an effective
hedging vehicle for diesel fuel prices. The commodity price volatility and higher energy cost
risk factor disclosure will be revised in substantially the form attached as Exhibit C-7.

Following the separation, we will have substantial debt and high leverage, which could
adversely affect our business, page 14

     8. We note your statement that “we will significantly increase the amount of leverage in our
business.” If possible, please provide quantitative disclosure to clarify how much your leverage
is anticipated to increase.

  Response: As will be described in the Amendment under “Description of Financing
Transactions and Material Indebtedness,” in connection with the separation, the Company now expects
to incur approximately $900 million of new indebtedness for which it will not receive any cash
proceeds. The Company will clarify its disclosure in the risk factors section in response to the
Staff’s comment in substantially the form attached as
Exhibit D-8. The Company will also make adjustments to the
remainder of the document to reflect this change from the
Company’s original assumptions.

The Separation, page 23

     9. Please revise your disclosure to explain briefly how the financial terms of the separation
were determined, including but not limited to the financing arrangements.

     Response: The Company will revise its disclosure to address the Staff’s comment in
substantially the form attached as Exhibit E-9.

Unaudited Pro Forma Condensed Combined Balance Sheet, page 45

     10. Generally, pro forma adjustments should be presented gross on the face of the pro forma
statement. Alternatively, components of the adjustments should be broken out in sufficient detail
in the notes to the pro forma statements. As such, please revise your presentation to reflect the
cash inflows from the issuances of debt and the cash outflows from the repayment of long-term
intercompany debt as well as the cash distribution to Ralcorp.

     Response: The Company will revise its disclosure to address the Staff’s comment in
substantially the form attached as Exhibit F-10.

Management’s Discussion and Analysis, page 48

Mr. H. Roger Schwall

November 22, 2011

Page 4

     11. Please revise to discuss in necessary detail any material known trends which are expected
to continue. Refer generally to Item 303(a)(1) through 303(a)(4) and Item 303(b) of Regulation
S-K.

     Response: The Company acknowledges the staff’s comments. Primary trends affecting
the Company are:

    1.

    The Company competes in a mature category with strong
competition. In recent years, sales volume in the
category has not grown, and in some periods has declined, which has intensified this
competition.

    2.

    The Company has been subject to inflationary pressures through higher raw material and fuel
costs.

     We will add the following
discussion under Net Sales: “The Company’s net sales have been
impacted by significant competition within the ready to eat cereal category. In recent years, the
category has not grown, and in some periods has declined, which has tended to intensify this
competition. We expect that this trend will continue in the future.”

     Regarding the inflation trend, it is our opinion that this is adequately disclosed under the
Inflation heading within Management’s Discussion and Analysis of Financial Condition and Results of
Operations.

Liquidity and Capital Resources, page 53

     12. Please expand your discussion of liquidity and capital resources to identify and discuss
factors relevant to providing an understanding of the company’s future liquidity and capital
resources, particularly in relation to your pending financing arrangements and cash distribution to
Ralcorp. Your discussion should include your expectations regarding your liquidity, debt levels
and servicing abilities, sources and uses of cash, future costs of capital, expected availability
of capital, and ability to generate cash and to meet existing and known or reasonably likely future
cash requirements. Please refer to FRC 501.03 and FRC 501.13.

     Response: The Company will revise its disclosure to address the Staff’s comment in
substantially the form attached as Exhibit G-12.

     Critical Accounting Policies and Estimates, page 56

     13. We note from the disclosure regarding your goodwill impairment analysis on page 57 that
you assumed future revenue growth rates ranging from two to three percent, with a long term growth
rate of three percent. We further note your statement that such assumptions were based on actual
trends observed in the first nine months of fiscal 2011. Please tell us why you believe your
assumptions regarding future revenue growth rates are appropriate given the recent net sales
declines from fiscal 2009 to 2010, and for the nine months ended June 30, 2010 compared to the nine
months ended June 30, 2011, discussed on page 49.

     Response: The Company acknowledges the Staff’s comment and will revise the disclosure
as further discussed below.

     Although the Staff comment that net sales declined from fiscal 2009 to fiscal 2010 and
for the nine months ended June 30, 2010 compared to the nine months ended June 30, 2011 is
accurate, the sales trend we were referring to was a sequential quarterly improvement in net sales.
First quarter fiscal 2011 net sales declined 10% compared to the same period in the prior year and
second quarter net sales declined 2% compared to the prior year second quarter. Third quarter net
sales for fiscal 2011 actually increased 1% compared to fiscal 2010. This is the trend to which we
were referring.

Mr. H. Roger Schwall

November 22, 2011

Page 5

     Regarding the appropriateness of our future sales assumptions, Ralcorp undertook a full
business review of the Post segment in May of 2011. The purpose of this review was to evaluate
potential strategic alternatives for Ralcorp’s ownership of Post including potential joint
ventures, obtaining equity partners, outright sale of the business or a spin off to Ralcorp
shareholders. Ralcorp was assisted in this review by its investment advisors. The business
assumptions developed by Post management were thoroughly reviewed by Ralcorp management and the
Board of Directors and culminated in a meeting on July 12, 2011 where the Board of Directors of
Ralcorp agreed in principle to separate Ralcorp and Post Foods in a tax-free spin-off to Ralcorp
shareholders. These future assumptions for Post were the primary basis for our goodwill impairment
test as of June 30, 2011. The fiscal 2012 budget and three year business plan of Post were
reviewed and approved by Ralcorp’s Board of Directors at its meeting on September 22, 2011. These
future assumptions for Post did not vary materially from the July 2011 assumptions discussed above
and were expected to form the basis for Post’s goodwill impairment test as of September 30, 2011
(see further discussion below).

     It is the opinion of Ralcorp management that the future revenue growth rate assumptions used
in the goodwill impairment analysis conducted as of June 30, 2011, were reasonable and appropriate.
Factors entering into this opinion include the aforementioned sequential improvement in net sales,
the early success of new products introduced during fiscal 2012 (particularly Honey Bunches of Oats
Raisin Medley and Pebbles Treats), the successful reintroduction of Great Grains brand in April
2011 and plans for Great Grains future line extensions, current pricing actions (pricing increase on the
largest brand was taken in June) as well as  pricing actions
planned for fiscal 2012 in response to significantly higher raw material costs which have impacted our industry on an overall basis.
In addition, Post had
developed a robust pipeline of innovative new products to be introduced in fiscal 2012 and
thereafter. These new products included traditional ready-to-eat line extensions using new flavor
and product technologies as well as planned introduction of Post branded products into adjacent
categories (i.e. hot cereals, breakfast and nutritional bars, licensed products with health
benefits, etc.).

     On September 26, 2011, Post filed its Form 10 and concurrently announced that W. P. Stiritz,
the Chairman of the Board of Ralcorp Holdings, Inc., was appointed as the Chief Executive Officer
of Post and James Holbrook was appointed as Executive Vice President, Marketing of Post, effective
October 3, 2011. On October 13, 2011, Ralcorp announced the appointment of Robert Vitale as Chief
Financial Officer of Post.
Both Mr. Holbrook and Mr. Vitale had no previous affiliations with Ralcorp or Post.
Shortly after its appointment, the new Post management team conducted a
preliminary review of the Post cereals business. The analysis undertaken during this review,
considered the unanticipated adverse trends in sales in October 2011 and general weakness in the
ready-to-eat cereal category,
neither of which were apparent at the time the June 30, 2011 goodwill impairment assessment was performed.
During late September and October, Ralcorp also made the decision to
replace several senior managers at Post (including the President, the Vice President of Marketing
and the Vice President of Innovation and R & D Strategy). Upon completion of the strategic review
on October 31, 2011, the new Post management team concluded that Post’s long-term strategy needed
to be revised and revenue growth assumptions should be lowered. The new business plan for Post
developed by the new Post management team was discussed with the Ralc