Bellring Brands, Inc.: Form 10-Q for the period ended Mar 31, 2020

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of BellRing Brands, Inc. and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein, our audited Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and the “Cautionary Statement on Forward-Looking Statements” section included below. The terms “our,” “we,” “us,” “Company” and “BellRing” as used herein refer to BellRing Brands, Inc. and its consolidated subsidiaries.

OVERVIEW

We are a consumer products holding company operating in the global convenient nutrition category and a provider of ready-to-drink (“RTD”) protein shakes, other RTD beverages, powders, nutrition bars and nutritional supplements. Our primary brands are Premier Protein, Dymatize and PowerBar.

On October 21, 2019, BellRing Brands Inc. (“BellRing Inc.”) closed its initial public offering (the “IPO”) of 39.4 million shares of its Class A common stock, $0.01 par value per share (the “Class A Common Stock”), 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. The IPO was completed at an offering price of $14.00 per share and BellRing Inc. received net proceeds from the IPO of approximately $524.4 million, after deducting underwriting discounts and commissions, all of which were contributed to BellRing Brands, LLC, a Delaware limited liability company and BellRing Inc.’s subsidiary (“BellRing LLC”), in exchange for 39.4 million BellRing LLC non-voting membership units (the “BellRing LLC units”).

As a result of the IPO and certain other transactions completed in connection with the IPO (the “formation transactions”), BellRing Inc. became the holder of the historical active nutrition business of Post Holdings, Inc. (“Post”), which until the completion of the IPO, had been comprised of Premier Nutrition Company, LLC (the successor of Premier Nutrition Corporation), Dymatize Enterprises, LLC, Supreme Protein, LLC, the PowerBar brand and Active Nutrition International GmbH. As a holding company, BellRing Inc. has no material assets other than its ownership of BellRing LLC units and its indirect interests in the subsidiaries of BellRing LLC and has no independent means of generating revenue or cash flow. For additional information on the IPO, see Note 1 within “Notes to Condensed Consolidated Financial Statements.”

The members of BellRing LLC are Post and BellRing Inc. BellRing Inc. holds the voting membership unit of BellRing LLC (which represents the power to appoint and remove the members of the Board of Managers of, and no economic interest in, BellRing LLC). BellRing Inc. has the right to appoint the members of the BellRing LLC Board of Managers, and therefore, controls BellRing LLC. The Board of Managers is responsible for the oversight of BellRing LLC’s operations and overall performance and strategy, while the management of the day-to-day operations of the business of BellRing LLC and the execution of business strategy are the responsibility of the officers and employees of BellRing LLC and its subsidiaries. Post, in its capacity as a member of BellRing LLC, does not have the power to appoint any members of the Board of Managers or voting rights with respect to BellRing LLC.

As of March 31, 2020, BellRing Inc. owned 28.8% of the outstanding BellRing LLC units. The financial results of BellRing LLC and its subsidiaries were consolidated with BellRing Inc., and effective as of October 21, 2019, 71.2% of the consolidated net earnings of BellRing LLC were allocated to the redeemable noncontrolling interest (the “NCI”) to reflect the entitlement of Post to a portion of the consolidated net earnings.

COVID-19

The COVID-19 pandemic has created global economic disruption and uncertainty, including in our business. We are closely monitoring the impact of the COVID-19 pandemic and are taking necessary actions to ensure our ability to safeguard the health of our employees, maintain the continuity of our supply chain to serve customers and manage our financial performance and liquidity. Examples of actions we have taken in response to the pandemic include enhancing facility safety measures, working closely with public health officials to follow additional health and safety guidelines and drawing an additional $65.0 million of our revolving credit facility to further enhance liquidity.

Since the effects of the COVID-19 pandemic, including the actions of public health and other governmental officials in response to the pandemic, began to impact the category in which we operate, our products sold through the food, drug and mass (“FDM”), club and eCommerce channels generally experienced an increase in sales driven by consumer pantry loading during March. However, there is no guarantee that such increase in sales will continue or be realized. Other actions in response to the pandemic, such as store closures and domestic and international governmental “stay at home” orders , have negatively impacted sales for Dymatize and PowerBar products sold in specialty channels. For additional discussion, refer to “Liquidity and Capital Resources” and “Cautionary Statement on Forward-Looking Statements,” within this section, as well as “Risk Factors” in Part II of this report.

Lease Accounting

On October 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” At adoption, we recognized right-of-use assets and lease liabilities of $14.8 million and $16.0 million, respectively, on the balance sheet at October 1, 2019. For additional information regarding the ASUs, refer to Notes 2 and 12 within “Notes to Condensed Consolidated Financial Statements.”

RESULTS OF OPERATIONS

dollars in millions

Net Sales

Net sales increased $41.0 million, or 19%, during the three months ended March 31, 2020, compared to the corresponding prior year period. Sales of Premier Protein products were up $44.2 million, or 26%, with volume up 27%. Volume increases were driven by higher RTD protein shake product volumes which primarily related to increased consumer purchases in response to the COVID-19 pandemic, distribution gains, increased promotional activity and lapping short-term capacity constraints in the second quarter of 2019. This positive impact was partially offset by a decrease in average net selling prices in the three months ended March 31, 2020 due to increased promotional spending. Sales of Dymatize products were down $0.7 million, or 2%, with volume up 1%. Sales decreased primarily due to an unfavorable sales mix resulting from an increase in lower-priced powder volumes. Volumes increased primarily due to eCommerce gains partially offset by lower FDM sales (lapping prior year promotional activity) and international sales (resulting largely from temporary specialty retail store closures in reaction to the COVID-19 pandemic). Sales of PowerBar products were down $2.5 million, or 20%, with volume down 27%, driven by lower international volumes associated with lapping a prior year distribution center transition and planned product discontinuations of certain products in North America. Sales of all other products were flat during the three months ended March 31, 2020 compared to the corresponding prior year period.

Net sales increased $99.2 million, or 25%, during the six months ended March 31, 2020, compared to the corresponding prior year period. Sales of Premier Protein products were up $107.4 million, or 34%, with volume up 32%. Volume increases were driven by higher RTD protein shake product volumes which primarily related to distribution gains, lapping short-term capacity constraints in the prior year period and increased consumer purchases in response to the COVID-19 pandemic. Average net selling prices increased in the six months ended March 31, 2020 resulting from targeted price increases that occurred in the second quarter of fiscal 2019. Sales of Dymatize products were down $3.7 million, or 6%, with volume down 1%. Sales decreased primarily due to an unfavorable sales mix resulting from an increase in lower-priced powder volumes. Volumes decreased primarily due to lower FDM sales (lapping prior year promotional activity) and lower international sales (resulting largely from temporary specialty retail store closures in reaction to the COVID-19 pandemic), partially offset by higher eCommerce volumes. Sales of PowerBar products were down $3.7 million, or 16%, with volume down 27%, driven by planned product discontinuations of certain products in North America and lower international volumes associated with lapping a prior year distribution center transition. Sales of all other products were down $0.8 million.

Operating Profit

Operating profit decreased $5.7 million, or 14%, during the three months ended March 31, 2020, when compared to the prior year period. This decrease was primarily driven by increased advertising and promotional spend of $9.9 million, higher net product costs of $4.8 million, as unfavorable raw materials costs were partially offset by lower manufacturing and freight costs, higher employee-related expenses of $2.2 million and incremental public company costs of $2.7 million (including higher stock-based compensation expense of $0.8 million). These negative impacts were partially offset by higher net sales, as previously discussed, and lower costs related to the separation from Post of $1.4 million.

Operating profit increased $10.7 million, or 15%, during the six months ended March 31, 2020, when compared to the prior year period. This increase was primarily driven by higher net sales, as previously discussed, partially offset by higher net product costs of $6.5 million, as unfavorable raw materials costs were partially offset by lower manufacturing and freight costs, increased advertising and promotional spending of $11.7 million, higher employee-related expenses of $5.0 million, incremental public company costs of $4.8 million (including higher stock-based compensation expense of $1.7 million) and higher warehousing costs of $2.3 million.

Interest Expense, Net

Interest expense, net was $14.3 million and $25.9 million during the three and six months ended March 31, 2020, respectively, compared to zero during each of the three and six months ended March 31, 2019. The increases in interest expense each period were due to the issuance of debt in the first quarter of fiscal 2020. We had no debt outstanding in fiscal 2019. See Note 15 for additional information on our debt.

Income Taxes

Our effective income tax rate was 10.6% and 13.8% during the three and six months ended March 31, 2020, respectively, and 24.0% and 23.9% during the three and six months ended March 31, 2019, respectively. The decrease in the effective income tax rate compared to each of the prior year periods was primarily due to us taking into account for U.S. federal income tax purposes our 28.8% distributive share of the items of income, gain, loss and deduction of BellRing LLC in the periods subsequent to the IPO as a result of the formation transactions. Prior to the IPO and formation transactions, we reported 100% of the income, gain, loss and deduction of BellRing LLC. In accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” we recorded income tax expense for interim periods using the estimated annual effective income tax rate for the full fiscal year adjusted for the impact of discrete items occurring during the interim periods.

LIQUIDITY AND CAPITAL RESOURCES

On October 21, 2019, BellRing Inc. closed its IPO of 39.4 million shares of Class A Common Stock, 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. BellRing Inc. received net proceeds from the IPO of $524.4 million, after deducting underwriting discounts and commissions.

On October 11, 2019, in connection with the IPO and the formation transactions, Post entered into a $1,225.0 million Bridge Facility Agreement (the “Bridge Loan Facility”) and borrowed $1,225.0 million under the Bridge Loan Facility (the “Bridge Loan”). Certain of Post’s domestic subsidiaries (other than BellRing Inc. but including BellRing LLC and its domestic subsidiaries) guaranteed the Bridge Loan. On October 21, 2019, BellRing LLC entered into a Borrower Assignment and Assumption Agreement with Post and the administrative agent under the Bridge Loan Facility, under which (i) BellRing LLC became the borrower under the Bridge Loan and assumed all interest of $2.2 million thereunder, and Post and its subsidiary guarantors (other than BellRing LLC or its domestic subsidiaries) were released from all material obligations under the Bridge Loan, (ii) the domestic subsidiaries of BellRing LLC continued to guarantee the Bridge Loan, and (iii) BellRing LLC’s obligations under the Bridge Loan became secured by a first priority security interest in substantially all of BellRing LLC’s assets and substantially all of the assets of its subsidiary guarantors (other than real estate). BellRing LLC did not receive any of the proceeds of the Bridge Loan.

On October 21, 2019, BellRing LLC entered into a credit agreement (“Credit Agreement”) which provides for a term B loan facility in an aggregate principal amount of $700.0 million (the “Term B Facility”), and a revolving credit facility in an aggregate principal amount of $200.0 million (the “Revolving Credit Facility”). During the three months ended December 31, 2019, BellRing LLC borrowed the full amount under the Term B Facility and $120.0 million under the Revolving Credit Facility and used the proceeds, together with the net proceeds of the IPO that were contributed to it by BellRing Inc., (i) to repay in full the $1,225.0 million of borrowings under the Bridge Loan and all interest thereunder and related costs and expenses, (ii) to pay directly, or reimburse Post for, as applicable, all fees and expenses incurred by BellRing LLC or Post in connection with the IPO and the formation transactions, (iii) to reimburse Post for the amount of cash on BellRing LLC’s balance sheet immediately prior to the completion of the IPO and (iv) for general corporate and working capital purposes, as well as to repay $40.0 million of borrowings under the Revolving Credit Facility.

BellRing LLC has $80.0 million of available borrowing capacity under the secured Revolving Credit Facility as of March 31, 2020, and letters of credit are available under the Revolving Credit Facility in an aggregate amount of up to $20.0 million. During the second quarter of fiscal 2020, BellRing LLC borrowed $65.0 million and repaid $25.0 million under the Revolving Credit Facility.

For additional information on the IPO, the formation transactions and the Credit Agreement, see Notes 1 and 15 within “Notes to Condensed Consolidated Financial Statements.”

We expect to generate positive cash flows from operations and believe our cash on hand, cash flows from operations and possible future credit facilities will be sufficient to satisfy our future working capital requirements, research and development activities and other financing requirements for the foreseeable future. Our asset-light business model requires modest capital expenditures, with annual capital expenditures over the last three fiscal years averaging less than 1% of net sales. No significant capital expenditures are planned for the remainder of fiscal 2020. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures and other business risk factors. As a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we have taken steps to limit spending on travel and other operating expenses, and we continue to focus on cash flow generation and have borrowed under BellRing LLC’s Revolving Credit Facility in order to increase our cash position and financial flexibility. If we are unable to generate sufficient cash flows from operations, or otherwise to comply with the terms of BellRing LLC’s credit facilities, we may be required to seek additional financing alternatives.

The following table shows select cash flow data, which is discussed below.

dollars in millions

Operating Activities

Cash used in operating activities for the six months ended March 31, 2020 was $5.1 million compared to cash provided by operating activities of $1.6 million in the prior year period. The decrease was primarily driven by higher interest payments of $23.4 million due to the increase in the principal balance of our outstanding debt and incremental income tax payments of $3.3 million. These increased cash outflows were partially offset by higher operating profit and favorable working capital changes of $6.4 million, primarily due to the build up of inventory in the prior year period related to short-term supply constraints partially offset by fluctuations in the timing of sales and collections of trade receivables.

Investing Activities

Cash used in investing activities for the six months ended March 31, 2020 decreased $0.2 million compared to the prior year period, resulting from a decrease in capital expenditures.

Financing Activities

Cash provided by financing activities for the six months ended March 31, 2020 was $77.6 million compared to cash used in financing activities of $8.0 million in the prior year period. In the six months ended March 31, 2020, BellRing LLC received proceeds of $686.0 million, net of discount, related to the issuance of the Term B Facility and drew an aggregate of $185.0 million on the Revolving Credit Facility. In addition, BellRing Inc. received $524.4 million from the issuance of its Class A Common Stock in conjunction with the IPO. BellRing LLC had net cash transfers of $9.5 million to Post which included cash deposits prior to the IPO and a tax distribution to Post pursuant to BellRing LLC’s amended and restated limited liability company agreement. BellRing LLC also repaid the $1,225.0 million outstanding principal balance of the Bridge Loan assumed from Post, repaid $65.0 million of outstanding borrowings on the Revolving Credit Facility and repaid $8.7 million on the principal balance of the Term B Facility. In connection with the issuance of BellRing LLC’s long-term debt, BellRing LLC paid $9.6 million in debt issuance costs and deferred financing fees. In the six months ended March 31, 2019, financing activities primarily related to cash transfers to and from Post, including cash deposits to Post and cash borrowings received from Post used to fund operations or capital expenditures and allocations of Post’s corporate expenses.

Debt Covenants

Under the terms of the Credit Agreement, BellRing LLC is required to comply with a financial covenant requiring BellRing LLC to maintain a total net leverage ratio (as defined in the Credit Agreement) not to exceed 6.00 to 1.00, measured as of the last day of each fiscal quarter. BellRing LLC was in compliance with its financial covenant as of March 31, 2020, and we do not believe non-compliance is reasonably likely in the foreseeable future.

The Credit Agreement provides for incremental revolving and term facilities, and also permits other secured or unsecured debt, if, among other conditions, certain financial ratios are met, as defined and specified in the Credit Agreement.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

On October 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842),” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” For additional information, refer to Notes 2 and 12 within “Notes to Condensed Consolidated Financial Statements.”

Our critical accounting policies and estimates are more fully described in our Annual Report on Form 10-K for the year ended September 30, 2019, as filed with the Securities and Exchange Commission (“SEC”) on November 22, 2019. Except as noted above, there have been no significant changes to our critical accounting policies and estimates since September 30, 2019.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 within “Notes to Condensed Consolidated Financial Statements” for a discussion regarding recently issued accounting standards.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made throughout this report, including statements regarding the effect of the COVID-19 pandemic on our business and our continuing response to the COVID-19 pandemic. These forward-looking statements are sometimes identified from the use of forward-looking words such as “believe,” “should,” “could,” “potential,” “continue,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “aim,” “intend,” “plan,” “forecast,” “target,” “is likely,” “will,” “can,” “may,” or “would” or the negative of these terms or similar expressions elsewhere in this report. Our results of operations, financial condition and cash flows 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:

• the impact of the COVID-19 pandemic, including negative impacts on the global economy and capital markets, our ability and the ability of our third party manufacturers to manufacture and deliver our products, our supply chain and our operations generally;
• disruptions or inefficiencies in the supply chain, including as a result of our reliance on third party suppliers or manufacturers for the manufacturing of many of our products, pandemics, changes in weather conditions, natural disasters, agricultural diseases and pests and other events beyond our control;
• significant volatility in the costs or availability of certain commodities (including raw materials and packaging used to manufacture our products), higher freight costs or higher energy costs;
• changes in economic conditions, disruptions in the United States and global capital and credit markets, changes in interest rates and fluctuations in foreign currency exchange rates;
• our ability to attract key employees, loss of key employees, employee absenteeism, labor strikes, work stoppages or unionization efforts;
• our high leverage, our ability to obtain additional financing (including both secured and unsecured debt) and our ability to service our outstanding debt (including covenants that restrict the operation of our business);
• our dependence on sales from our RTD protein shakes;
• our dependence on a limited number of third party contract manufacturers and suppliers for the manufacturing of most of our products, including one manufacturer for the substantial majority of our RTD protein shakes;
• our operation in a category with strong competition;
• our reliance on a limited number of third party suppliers to provide certain ingredients and packaging;
• consolidation in our distribution channels;
• our ability to anticipate and respond to changes in consumer and customer preferences and trends and to introduce new products;
• our ability to maintain favorable perceptions of our brands;
• our ability to expand existing market penetration and enter into new markets;
• allegations that our products cause injury or illness, product recalls and withdrawals and product liability claims and

other litigation;

• legal and regulatory factors, such as compliance with existing laws and regulations and changes to and new laws and regulations affecting our business, including current and future laws and regulations regarding food safety and advertising;
• our ability to manage our growth and to identify, complete and integrate any acquisitions or other strategic transactions;
• fluctuations in our business due to changes in our promotional activities and seasonality;
• risks associated with our international business;
• risks related to our ongoing relationship with Post, including Post’s control over us and ability to control the direction of our business, conflicts of interest or disputes that may arise between Post and us and our obligations under various agreements with Post, including under the tax receivable agreement;
• the loss of, a significant reduction of purchases by or the bankruptcy of a major customer;
• the ultimate impact litigation or other regulatory matters may have on us;
• the accuracy of our market data and attributes and related information;
• economic downturns that limit customer and consumer demand for our products;
• our ability to protect our intellectual property and other assets;
• costs, business disruptions and reputational damage associated with information technology failures, cybersecurity incidents and/or information security breaches;
• risks associated with our public company status, including our ability to operate as a separate public company following the IPO and the additional expenses we will incur to create the corporate infrastructure to operate as a public company;
• changes in estimates in critical accounting judgments;
• impairment in the carrying value of goodwill or other intangibles;
• significant differences in our actual operating results from any guidance we may give regarding our performance;
• our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002; and
• other risks and uncertainties included under “Risk Factors” in this report and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, filed with the SEC on November 22, 2019.

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 report to conform these statements to actual results or to changes in our expectations.

The COVID-19 pandemic has resulted in significant volatility and uncertainty in the markets in which the Company operates. At the time of this filing, the Company is unable to predict or determine the impacts that the COVID-19 pandemic may have on its exposure to market risk from commodity prices, foreign currency exchange rates and interest rates, among others. For additional discussion, refer to “Liquidity and Capital Resources” and “Cautionary Statement on Forward-Looking Statements” within this Item 2 of this report, as well as “Risk Factors” in Part II of this report.

Commodity Price Risk

In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and fuels. The Company manages the impact of cost increases, wherever possible, on commercially reasonable terms, by locking in prices on the quantities through purchase commitments required to meet production requirements. In addition, the Company may attempt to offset the effect of increased costs by raising prices to customers. However, for competitive reasons, the Company may not be able to pass along the full effect of increases in raw materials and other input costs as they are incurred.

Foreign Currency Risk

Related to Active Nutrition International GmbH whose functional currency is the euro, the Company is exposed to risks of fluctuations in future cash flows and earnings due to changes in exchange rates.

Interest Rate Risk

Long-term debt

As of March 31, 2020, BellRing LLC had an aggregate principal amount of $691.3 million outstanding on its Term B Facility and an aggregate principal amount of $120.0 million outstanding under its Revolving Credit Facility. Borrowings under the Term B Facility and the Revolving Credit Facility bear interest at variable rates. Including the impact of interest rate swaps, a hypothetical 10% increase in interest rates would have an immaterial impact on both interest expense and interest paid during the three and six months ended March 31, 2020. BellRing LLC had no outstanding debt as of September 30, 2019. For additional information regarding BellRing LLC’s debt, see Note 15 within “Notes to Condensed Consolidated Financial Statements.”

Interest rate swaps

As of March 31, 2020, the Company had interest rate swaps with a notional value of $350.0 million. A hypothetical 10% adverse change in interest rates would have decreased the fair value of the interest rate swaps by approximately $1 million as of March 31, 2020. The Company held no interest rate swaps as of September 30, 2019. For additional information regarding the Company’s interest rate swap contracts, see Note 13 within “Notes to Condensed Consolidated Financial Statements.”

Evaluation of Disclosure Controls and Procedures

Management, with the Executive Chairman, Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, has evaluated the effectiveness of its 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, the 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.

Changes in Internal Control Over Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In addition to the information set forth elsewhere in this Quarterly Report on Form 10-Q and the risk factor set forth below, you should carefully consider the risk factors we previously disclosed in our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission on November 22, 2019, as of and for the year ended September 30, 2019 (the “Form 10-K”). These risks could materially and adversely affect our business, financial condition, results of operations and cash flows. The enumerated risks have been or may be heightened, or in some cases manifested, by the impacts of the COVID-19 pandemic and are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.

The COVID-19 pandemic has negatively impacted and is expected to continue to negatively impact the global economy and capital markets. In addition the COVID-19 pandemic has and we expect it to continue to impact our financial and operational performance.

The COVID-19 pandemic has and is likely to continue to negatively impact the global economy and capital markets, which could result in a prolonged economic downturn or a global economic recession. These impacts could limit our ability to satisfy our debt obligations or the cost or availability of additional capital transactions. As of March 31, 2020, we had $756.4 million in aggregate principal amount debt and $76.7 million in cash and cash equivalents.

In addition, the regional or global impact of the outbreak, including official or unofficial quarantines and governmental restrictions on activities taken in response to such event, could limit our ability and the ability of our third party manufacturers to manufacture and deliver our products, which would have a material adverse impact on our business, financial condition, results of operations and cash flows. The impact of the COVID-19 pandemic could include voluntary or mandatory closures of our facilities, interruptions in our supply chain, which could impact the cost or availability of materials, restrictions on our ability to deliver our products, closures of our customers and labor shortages. The COVID-19 pandemic could result in reduced consumer demand for our products due to, among other things, reduced consumer traffic in locations where our products are sold. Also, the voluntary or mandatory closure of clubs, FDM, eCommerce and other retailers where our products are sold could result in a decrease in the sale of our products. We may incur additional expenses to comply with new requirements imposed by governmental authorities, including purchases of equipment or supplies that are in high demand, as well as engaging third party resources.

These and other impacts of the COVID-19 pandemic have heightened, or in some cases manifested, many of the other risks we previously disclosed in the “Risk Factors” section of the Form 10-K, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of as of the date hereof. The extent and potential short and long term impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows, which could be material, will depend on future developments, including the duration, severity and spread of the pandemic, actions that have and may be taken by governmental authorities in response to the pandemic and the impact on our supply chain, operations, workforce and the financial markets, all of which are highly uncertain and cannot be predicted.