Home > Market + Management > Post Holdings: Reports FY 2020 First Quarter Results

Post Holdings: Reports FY 2020 First Quarter Results

St. Louis / MO. (pfh) Post Holdings Inc., a consumer packaged goods holding company, reported results for the first fiscal quarter ended December 31, 2019. Highlights:

  • Net sales of USD 1.5 billion
  • Operating profit of USD 196.0 million; net earnings of USD 99.2 million and Adjusted Ebitda of USD 303.1 million
  • Reaffirmed fiscal year 2020 Adjusted Ebitda (non-GAAP) guidance range of USD 1.22-USD 1.27 billion, including the results of BellRing Brands

Basis of Presentation

On October 21, 2019, the initial public offering (the «IPO») of a minority interest in the BellRing Brands business, Post’s historical active nutrition business, was completed. Post fully consolidates the results of BellRing Brands Inc. («BellRing») and its subsidiaries within Post’s financial statements and effective October 21, 2019 allocates 28.8 percent of its consolidated net earnings/loss and net assets to noncontrolling interest within Post’s financial statements.

First Quarter Consolidated Operating Results

Net sales were USD 1,456.8 million, an increase of 3.2 percent, or USD 45.5 million, compared to the prior year period net sales of USD 1,411.3 million. Gross profit was USD 471.5 million, or 32.4 percent of net sales, an increase of USD 45.0 million compared to the prior year period gross profit of USD 426.5 million, or 30.2 percent of net sales.

Selling, general and administrative («SG+A») expenses were USD 235.3 million, or 16.2 percent of net sales, an increase of USD 18.2 million compared to the prior year period SG+A expenses of USD 217.1 million, or 15.4 percent of net sales. Operating profit was USD 196.0 million, a decrease of 33.3 percent, or USD 97.9 million, compared to the prior year period operating profit of USD 293.9 million. Operating profit in the first quarter of 2019 included a USD 124.7 million gain related to the separate capitalization of 8th Avenue Food + Provisions Inc. («8th Avenue»), which was treated as an adjustment for non-GAAP measures.

Net earnings were USD 99.2 million, a decrease of 21.0 percent, or USD 26.4 million, compared to the prior year period net earnings of USD 125.6 million. Net earnings included loss on extinguishment of debt of USD 12.9 million and USD 6.1 million in the first quarter of 2020 and 2019, respectively, which is discussed later in this release and was treated as an adjustment for non-GAAP measures. Net earnings included income on swaps, net of USD 61.4 million in the first quarter of 2020 and expense on swaps, net of USD 51.7 million in the first quarter of 2019, both of which are discussed later in this release and were treated as adjustments for non-GAAP measures. Net earnings excluded net earnings attributable to noncontrolling interest of USD 7.9 million and USD 0.3 million in the first quarter of 2020 and 2019, respectively. Net earnings included equity method losses, net of tax of USD 7.3 million and USD 10.7 million in the first quarter of 2020 and 2019, respectively.

Net earnings available to common shareholders were USD 99.2 million, or USD 1.38 per diluted common share, compared to the prior year period net earnings available to common shareholders of USD 123.6 million, or USD 1.67 per diluted common share. Adjusted net earnings were USD 54.7 million, or USD 0.76 per diluted common share, compared to the prior year period Adjusted net earnings of USD 83.3 million, or USD 1.11 per diluted common share.

Adjusted Ebitda was USD 303.1 million, an increase of 3.6 percent, or USD 10.6 million, compared to the prior year period Adjusted Ebitda of USD 292.5 million. Adjusted Ebitda in the first quarter of 2020 included an adjustment of USD 7.4 million primarily for the portion of BellRing’s consolidated net earnings which was allocated to noncontrolling interest, resulting in Adjusted Ebitda including 100 percent of the consolidated Adjusted Ebitda of BellRing.

Post Consumer Brands

North American ready-to-eat («RTE») cereal.

For the first quarter, net sales were USD 441.2 million, a decrease of 3.1 percent, or USD 14.1 million, compared to the prior year period. Volumes decreased 3.4 percent driven by higher promotional activity in the prior year period and customer order patterns in advance of a price increase in the prior year. Segment profit was USD 80.6 million, a decrease of 4.0 percent, or USD 3.4 million, compared to the prior year period. Segment Adjusted Ebitda was USD 109.7 million, a decrease of 3.4 percent, or USD 3.9 million, compared to the prior year period.

Weetabix

Primarily United Kingdom RTE cereal and muesli.

For the first quarter, net sales were USD 101.5 million, an increase of 0.6 percent, or USD 0.6 million, compared to the prior year period, reflecting 8.7 percent improved average net pricing which was partially offset by a 7.6 percent volume decline. Segment profit was USD 23.7 million, an increase of 25.4 percent, or USD 4.8 million, compared to the prior year period. Segment Adjusted Ebitda was USD 31.9 million, an increase of 17.7 percent, or USD 4.8 million, compared to the prior year period.

Foodservice

Primarily egg and potato products.

For the first quarter, net sales were USD 420.6 million, an increase of 3.1 percent, or USD 12.5 million, compared to the prior year period. Volumes increased 3.0 percent, driven by increases of 2.0 percent in egg volumes and 8.8 percent in potato volumes, which were partially offset by declines in all other products. Segment profit was USD 47.0 million, a decrease of 10.8 percent, or USD 5.7 million, compared to the prior year period due to unfavorable manufacturing costs including startup costs at the new precooked egg facility in Norwalk, Iowa. Segment Adjusted Ebitda was USD 75.3 million, a decrease of 2.3 percent, or USD 1.8 million, compared to the prior year period.

Refrigerated Retail

Side dishes and egg, cheese and sausage products.

For the first quarter, net sales were USD 249.9 million, a decrease of 4.5 percent, or USD 11.7 million, compared to the prior year period, with volumes declining 7.0 percent. Side dish volumes declined 5.2 percent, driven by lower breakfast sides volume, partially offset by higher Bob Evans branded sides which grew 5.4 percent. Egg product sales decreased 19.3 percent due to losses in branded egg product volume and lower average net selling prices resulting from lower market-based egg prices. Volume information for additional products is disclosed in a table presented later in this release. Segment profit was USD 26.0 million, a decrease of 14.8 percent, or USD 4.5 million, compared to the prior year period due to lower volume, higher raw material costs (particularly in cheese), higher third party consulting costs and increased integration costs. Segment Adjusted Ebitda was USD 43.8 million, a decrease of 8.8 percent, or USD 4.2 million, compared to the prior year period.

BellRing Brands

Ready-to-drink («RTD») protein shakes, other RTD beverages, powders and nutrition bars.

For the first quarter, net sales were USD 244.0 million, an increase of 31.3 percent, or USD 58.2 million, compared to the prior year period. Net sales and volume growth were primarily driven by the Premier Protein brand as net sales increased 45.0 percent, with volumes increasing 38.4 percent driven by distribution gains for RTD protein shakes, lapping RTD protein shake capacity constraints in the first quarter of 2019 and higher average net selling prices.

Segment profit was USD 49.3 million, an increase of 40.1 percent, or USD 14.1 million, compared to the prior year period. Segment profit in the first quarter of 2020 included public company costs and separate stand-alone company costs of USD 3.2 million (of which USD 1.4 million was stock-based compensation which was treated as an adjustment for non-GAAP measures). Segment profit for the first quarter of 2020 included transaction costs of USD 1.5 million to effect BellRing’s separation from Post and to support BellRing’s transition into a separate stand-alone entity, which was treated as an adjustment for non-GAAP measures. Segment Adjusted Ebitda was USD 58.6 million, an increase of 40.9 percent, or USD 17.0 million, compared to the prior year period.

As of December 31, 2019, BellRing had USD 780.0 million in total principal value of debt and USD 29.9 million in cash and cash equivalents.

For further information, please refer to the BellRing first quarter 2020 earnings release and conference call.

Interest, Loss on Extinguishment of Debt, (Income) Expense on Swaps and Income Tax

Interest expense, net was USD 102.9 million for the first quarter of 2020, compared to USD 59.4 million for the first quarter of 2019. Interest expense, net in the first quarter of 2020 included (i) USD 11.6 million attributable to BellRing in connection with the creation of BellRing’s capital structure in the first quarter of 2020, (ii) a reduction in interest of approximately USD 11.3 million from the repayment of Post’s term loan, and (iii) a loss of USD 7.2 million resulting from the reclassification of losses previously recorded in accumulated other comprehensive loss to interest expense. Interest expense, net in the first quarter of 2019 included (i) a gain of USD 30.1 million resulting from the reclassification of gains previously recorded in accumulated other comprehensive loss to interest expense and (ii) USD 4.3 million of interest expense payable, under certain circumstances, to former holders of shares of Bob Evans Farms Inc. («Bob Evans») common stock who demanded appraisal of their shares under Delaware law and had not withdrawn their demands.

Loss on extinguishment of debt, net of USD 12.9 million was recorded in the first quarter of 2020 in connection with (i) Post’s repayment of the entire principal balance of its term loan and (ii) the assignment of debt to BellRing Brands, LLC related to the creation of BellRing’s capital structure. Loss on extinguishment of debt, net of USD 6.1 million was recorded in the first quarter of 2019 in connection with (i) Post’s repayment of USD 863.0 million in total principal value of its term loan, (ii) the assignment of debt to 8th Avenue related to its separate capitalization and (iii) Post’s open market purchases of USD 60.0 million in total principal value of certain senior notes.

Income (expense) on swaps, net relates to non-cash mark-to-market adjustments and cash settlements on interest rate swaps. Income on swaps, net was USD 61.4 million in the first quarter of 2020, compared to an expense of USD 51.7 million in the first quarter of 2019.

Income tax expense was USD 30.4 million in the first quarter of 2020, an effective income tax rate of 21.0 percent, compared to an expense of USD 43.8 million in the first quarter of 2019, an effective income tax rate of 24.3 percent.

Share Repurchases

During the first quarter of 2020, Post repurchased 2.2 million shares for USD 223.1 million at an average price of USD 102.97 per share.

On December 6, 2019, Post announced that its Board of Directors had approved a new two-year USD 400.0 million share repurchase authorization, beginning on December 6, 2019. At the end of the first quarter of 2020, Post had USD 367.9 million remaining under its new share repurchase authorization.

Recent Announcements

On December 19, 2019, Post and TreeHouse Foods Inc. («Treehouse») announced that the Federal Trade Commission notified the companies that it would file a complaint opposing Post’s proposed acquisition of TreeHouse’s private label RTE cereal business. As a result of this development, Post announced on January 13, 2020 that it had terminated the agreement to acquire TreeHouse’s private label RTE cereal business.

Outlook

Post management continues to expect fiscal year 2020 Adjusted Ebitda, including 100 percent contribution from BellRing and excluding any contribution from 8th Avenue, to range between USD 1.22-USD 1.27 billion, with modest favorability to the second half of fiscal 2020.

Post management continues to expect Post’s fiscal year 2020 capital expenditures to range between USD 240-USD 260 million, including approximately USD 4 million attributable to BellRing.

Post provides Adjusted Ebitda guidance only on a non-GAAP basis and does not provide a reconciliation of its forward-looking Adjusted Ebitda non-GAAP guidance measure to the most directly comparable GAAP measure due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for gain/loss on sale of business, income/expense on swaps, net, equity method investment adjustment, transaction and integration costs, restructuring and facility closure costs, mark-to-market adjustments on commodity and foreign exchange hedges and other charges reflected in Post’s reconciliations of historical numbers, the amounts of which, based on historical experience, could be significant. For additional information regarding Post’s non-GAAP measures, see the related explanations presented under «Post’s Use of Non-GAAP Measures.»

BellRing Outlook

BellRing management continues to expect its fiscal year 2020 net sales to range between USD 1.0-USD 1.05 billion, Adjusted Ebitda to range between USD 192-USD 202 million and capital expenditures to be approximately USD 4 million.

BellRing provides Adjusted Ebitda guidance only on a non-GAAP basis and does not provide a reconciliation of its forward-looking Adjusted Ebitda non-GAAP guidance measure to the most directly comparable GAAP measure due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for separation costs and other charges reflected in BellRing’s reconciliation of historical numbers, the amounts of which, based on historical experience, could be significant. For additional information regarding BellRing’s non-GAAP measures, see the related explanations presented under «Use of Non-GAAP Measures» in BellRing’s first quarter 2020 earnings release. BellRing, as a separate publicly traded company, releases guidance regarding its future performance. These statements are prepared by BellRing’s management, and Post does not accept any responsibility for any such statements.

8th Avenue Standalone Financial Information and Outlook

Post owns a 60.5 percent common equity interest in 8th Avenue, which is an unconsolidated affiliate that sells private label nut butter, dried fruit and nut, granola and pasta.

For the first quarter of 2020, net sales were USD 218.4 million, an increase of 2.0 percent, or USD 4.3 million, compared to the prior year period. Net loss was USD 0.9 million, an improvement of 80.0 percent, or USD 3.6 million, compared to the prior year period. Adjusted Ebitda was USD 23.7 million, an increase of 3.5 percent, or USD 0.8 million, compared to the prior year period.

As of December 31, 2019, 8th Avenue is capitalized with USD 35.2 million of unrestricted cash, USD 629.8 million of senior secured debt, USD 60.0 million related to a sale leaseback transaction, USD 250.0 million in principal amount of preferred equity and USD 36.9 million of accumulated, but unpaid, preferred dividends. Summarized financial information for 8th Avenue is disclosed later in this release.

For 8th Avenue, Post management continues to expect fiscal year 2020 Adjusted Ebitda to range between USD 100-USD 105 million.

Post provides Adjusted Ebitda guidance for 8th Avenue only on a non-GAAP basis and does not provide a reconciliation of its forward-looking Adjusted Ebitda non-GAAP guidance measure to the most directly comparable GAAP measure due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including transaction, integration and sale-leaseback costs, non-cash stock-based compensation and other charges reflected in 8th Avenue’s reconciliation of historical numbers, the amounts of which, based on historical experience, could be significant. For additional information regarding Post’s non-GAAP measures, see the related explanations presented under «Post’s Use of Non-GAAP Measures.»