Post Holdings: Reports First Quarter 2015 Results

St. Louis / MO. (pfh) Post Holdings Inc., a consumer packaged goods holding company in the United States, announced its financial results for the fiscal quarter ended December 31, 2014. Highlights: adjusted Ebitda of 127.6 million USD; net sales of 1’073.9 million USD; announcement of the MOM Brands acquisition, a leader in the RTE cereal value segment. For more information, please visit the company server and read the «Quarterly Report», which provides a detailed view of a company´s financial position.

First Quarter Consolidated Operating Results

First quarter net sales were 1’073.9 million USD, an increase of 776.9 million USD, or 261.6 percent, compared to the prior year. Gross profit increased 134.6 million USD to 249.1 million USD for the first quarter compared to the prior year. The sales and gross profit increases were driven by businesses acquired after December 31, 2013.

Selling, general and administrative (SG+A) expenses for the first quarter were 166.0 million USD or 15.5 percent of net sales. First quarter 2015 SG+A expenses included 5.0 million USD of acquisition related transaction expenses for announced transactions. Post incurred one-time SG+A expenses of approximately 3.9 million USD in the first quarter of fiscal 2015 associated with a business reorganization, previously announced in October 2014.

Adjusted Ebitda was 127.6 million USD for the first quarter, up 71.7 million USD compared to the prior year, driven by businesses acquired after December 31, 2013.

Other expense, net was 54.6 million USD for the first quarter and related to non-cash mark to market adjustments on interest rate swaps.

For the first quarter, the net loss attributable to common shareholders was (101.6 USD) million, or (2.04 USD) per diluted common share. Adjusted net loss attributable to common shareholders was (57.2) million USD, or (1.15 USD) per diluted common share. Weighted- average diluted common shares outstanding increased to 49.8 million shares for first quarter 2015 compared to 32.7 million for the prior year quarter. The increase resulted from issuances in fiscal 2014 of an additional 12.1 million shares of common stock and 4.9 million shares related to Post´s tangible equity units, which are calculated on an «if-converted» basis.

Segment Results

As a result of a previously announced business reorganization, Post´s first quarter results are reported in the following three segments: Consumer Brands, Michael Foods Group and Private Label. See the supplemental segment information table presented later in this release which lists the segment in which each of Post´s recently acquired businesses is reported.

In fiscal year 2015, Post changed its methodology for allocating certain corporate costs to segment profit. Accordingly, segment profit for fiscal year 2014 has been adjusted to align with fiscal year 2015 presentation. This change only impacted the Consumer Brands segment profit. See the historical segment information tables in this release for the adjusted presentation, as well as the presentation aligned with Post´s segment reporting structure as described above.

Consumer Brands

Consumer Brands includes the Post Foods ready-to-eat (RTE) cereal brands and active nutrition brands.

Net sales were 347.9 million USD for the first quarter, up 73.8 million USD, or 26.9 percent, over reported prior year first quarter. On a comparable basis, net sales declined 5.2 percent, or 19.0 million USD, over the same period in fiscal 2014, with active nutrition sales up 1.5 percent and RTE cereal sales declining 8.8 percent. As anticipated, Consumer Brands experienced weakness in RTE cereal sales, despite strong consumption data as reported by Nielsen.

Segment profit was 31.3 million USD, compared to 47.4 million USD in the prior year. Segment Adjusted Ebitda was 54.5 million USD, compared to 62.2 million USD in the prior year. Segment profit and segment Adjusted Ebitda for the first quarter of fiscal 2015 were negatively impacted by one-time expenses of 2.8 million USD associated with Post´s business reorganization and continued elevated operating expenses at Dymatize. Additionally, segment profit for the first quarter of fiscal 2015 was negatively impacted by an inventory adjustment of 1.9 million USD resulting from acquisition accounting.

Michael Foods Group

Michael Foods Group includes the predominantly foodservice and food ingredient egg, potato and pasta businesses and the retail cheese business.

Net sales were 599.3 million USD for the first quarter, and on a comparable basis, were up 4.0 percent, or 22.9 million USD, over the same period in fiscal 2014, with volume up 0.9 percent. Egg products sales were up 0.8 percent, on a comparable basis, with volume up 0.7 percent. Refrigerated potato products sales were up 7.0 percent, on a comparable basis, with volume up 1.7 percent. Pasta products sales were up 2.3 percent, on a comparable basis, with volume up 0.7 percent. Cheese and other dairy case products sales were up 18.3 percent, with volume up 1.7 percent.

Segment profit and segment Adjusted Ebitda for the first quarter were 42.1 million USD and 72.4 million USD, respectively, and, as anticipated, were negatively impacted by 5.1 million USD in costs and lost volumes for corrective actions undertaken in connection with isolated fourth quarter fiscal year 2014 product quality issues at Michael Foods.

Private Label

Private Label includes the Golden Boy (including American Blanching as of November 01, 2014) peanut butter, other nut butters, and dried fruit and nut businesses and the Attune Foods cereal, granola and snack businesses.

Net sales were 127.8 million USD for the first quarter, up 104.6 million USD over reported prior year first quarter. On a comparable basis, net sales were up 12.4 percent, or 15.5 million USD, over the same period in fiscal 2014, with Golden Boy up 13.2 percent and Attune Foods up 9.1 percent.

Segment profit was 6.9 million USD, compared to 2.6 million USD in the prior year. Segment Adjusted Ebitda was 14.3 million USD, compared to 4.4 million USD in the prior year. Segment profit for the first quarter of fiscal 2015 was negatively impacted by an inventory adjustment of 1.3 million USD resulting from acquisition accounting.

Interest and Income Tax

Net interest expense was 60.1 million USD for the first quarter compared to 29.0 million USD for the prior year quarter. The increase was driven by the issuance of 1’505.0 million USD in aggregate principal amount of senior notes in fiscal year 2014, as well as an increase in outstanding debt from the term loan and the amortizing note portion of the tangible equity units.

Income tax expense was 23.5 million USD in the first quarter of fiscal 2015, compared to a benefit of (1.4) million USD in the first quarter of fiscal 2014. The effective income tax rate was negative (31.8 percent) for the first quarter of fiscal 2015. The effective income tax rate was adversely impacted by permanent differences incurred in the current year for certain items, including, but not limited to, non-deductible acquisition transaction expenses, partially offset by the favorable impact of the Domestic Production Activities Deduction and tax planning strategies implemented for certain acquisitions. The effective income tax rate is also a function of Post´s estimated range of full year earnings (loss) before income taxes for fiscal 2015, excluding the impact of pending acquisitions. Small variations in earnings (loss) before income taxes and permanent differences are anticipated to have a magnified impact on the effective income tax rate for fiscal 2015.

Update on Acquisitions and Financing

On January 26, 2015, Post announced it has agreed to acquire MOM Brands Company (MOM Brands), a leader in the RTE cereal value segment with over 95 years of experience in providing high quality RTE and hot cereal products. The transaction is expected to be completed by the third calendar quarter of 2015, Post´s fiscal fourth quarter, subject to customary closing conditions including the expiration of waiting periods under U.S. antitrust laws.

Post will acquire MOM Brands for 1.15 billion USD on a cash-free, debt-free basis, subject to working capital and other customary closing adjustments. Under the terms of the agreement, at closing Post will pay 1.05 billion USD in cash and issue the current owners of MOM Brands approximately 2.45 million shares of Post common stock.

Concurrent with the signing of the agreement, Post obtained financing commitments under which various lenders have committed to provide up to 700 million USD under a secured term loan facility. On February 03, 2015, Post closed a common stock offering, which resulted in net proceeds to Post of 341.7 million USD after commissions. Post intends to use the proceeds of the common stock offering, together with cash on hand and up to 700 million USD of new term loan borrowings, to fund the cash portion of the MOM Brands purchase price.

Outlook

Post management continues to expect fiscal 2015 Adjusted Ebitda to be between 540.0 million USD and 580.0 million USD, excluding any contribution from the pending acquisition of MOM Brands. Post management expects progressive improvement in quarterly Adjusted Ebitda throughout fiscal 2015 on a consolidated basis. Expected sequential improvement is primarily driven by recovery at Dymatize, seasonality and cost management initiatives at Post Foods and the timing of commodity cost decreases impacting operating results.

Post management continues to expect fiscal 2015 capital expenditures to be between 115.0 million USD and 125.0 million USD, excluding any contribution from the pending acquisition of MOM Brands. This reflects approximately 40.0 million USD related to growth activities, mostly at Michael Foods for projects carried over from the prior year which are expected to be completed in the first half of fiscal 2015. Maintenance capital expenditures are expected to be between 75.0 million USD and 85.0 million USD.