Post Holdings: Reports Results for Fiscal Q1/2014

St. Louis / MO. (pfh) Post Holdings Inc. reported results for the fiscal quarter ended December 31, 2013. Highlights:

  • Net sales of 297,0 million USD for the first quarter, up 60,1 million USD from prior year resulting from acquisitions
  • Post Foods U.S. Dollar market share up 0,3 share points to 10,6 percent for the 13 weeks ended December 28, 2013 compared to the year ago quarter, according to Nielsen
  • Adjusted Ebitda of 55,9 million USD for the first quarter

First Quarter Consolidated Operating Results

Net sales for the first quarter were 297,0 million USD and increased 60,1 million USD or 25,4 percent, compared to the prior year. Acquisitions, which represent the Attune Foods and Active Nutrition segments, contributed 60,1 million USD to consolidated net sales, net of 0,3 million USD of inter-segment eliminations. Net sales for the Post Foods segment were flat at 236,9 million USD.

Gross profit improved 8,8 million USD to 114,5 million USD for the first quarter compared to the prior year. Gross profit benefited from 17,5 million USD of incremental gross profit from acquisitions and was negatively impacted by 2,7 million USD of accelerated depreciation associated with the Modesto, California plant closure. Excluding these two items, gross profit for the first quarter declined 6,0 million USD to 99,7 million USD, with gross margin of 42,1 percent (on net sales excluding acquisitions), down approximately 250 basis points compared to the prior year.

Selling, general and administrative (SG+A) expenses for the first quarter increased 10,9 million USD to 83,0 million USD compared to the prior year; 8,1 million USD of which represents SG+A related to acquired businesses. Excluding these amounts, SG+A was 74,9 million USD or 31,6 percent of net sales excluding acquisitions, an increase of approximately 120 basis points compared to the prior year.

Adjusted Ebitda was 55,9 million USD for the first quarter, up 3,4 million USD compared to the prior year and included 10,2 million USD from acquisitions.

For the first quarter, the net loss attributable to common stockholders was (5,0) million USD or (0,15 USD) per diluted common share. Adjusted net earnings available to common stockholders and adjusted diluted earnings per common share for the quarter were 0,7 million USD and 0,02 USD, respectively.

Post Foods

In the Post Foods segment, which includes predominately the Post branded cereal business, net sales for the first quarter were 236,9 million USD, flat compared to prior year.

The Post Foods segment profit was 46,5 million USD and 47,0 million USD for first quarter 2014 and 2013, respectively. Post Foods segment Adjusted Ebitda was 59,7 million USD and 62,0 million USD for first quarter 2014 and 2013, respectively.

According to Nielsen, U.S. ready to eat cereal category Dollars were down 3,9 percent and category pounds declined 2,9 percent for the 13 weeks ended December 28, 2013, compared to prior year.

Post Foods´ U.S. Dollar market share was 10,6 percent for the 13 weeks ended December 28, 2013, up 0,3 share points compared to the year ago quarter. Compared to the 13 weeks ended September 28, 2013, Post Foods´ U.S. Dollar market share grew 0,4 share points. Post Foods´ U.S. pounds share was 10,8 percent for the 13 weeks ended December 28, 2013, up 0,3 share points compared to the prior year.

Attune Foods

The Attune Foods segment includes the cereal and snack business of the Attune, Uncle Sam and Erewhon brands (acquired on December 31, 2012) and the private label and branded cereal, granola and snack business of the Golden Temple, Peace Cereal, Sweet Home Farm and Willamette Valley Granola Company brands (acquired on May 28, 2013). Net sales for the segment (including inter-segment sales) were 23,2 million USD for first quarter 2014, up 17,8 percent or 3,5 million USD compared to the year ago pre-acquisition quarter. The Attune Foods segment profit and segment Adjusted Ebitda for first quarter 2014 were 2,6 million USD and 4,4 million USD, respectively.

Active Nutrition

The Active Nutrition segment includes the business of Premier Nutrition Corporation, which was acquired on September 1, 2013. Net sales for the segment were 37,2 million USD for first quarter 2014, up 34,8 percent or 9,6 million USD compared to the year ago pre-acquisition quarter. The Active Nutrition segment profit and segment Adjusted Ebitda for first quarter 2014 were 4,2 million USD and 5,8 million USD, respectively.

Interest and Income Tax

Net interest expense was 29,0 million USD for the first quarter compared to 19,2 million USD for the prior year quarter. The increase is driven primarily by the issuance of 350,0 million USD and 525,0 million USD of aggregate principal value of senior notes in July 2013 and November 2013, respectively.

Income tax benefit was (1,4) million USD in the first quarter of fiscal 2014 primarily resulting from a loss before income taxes combined with certain non-deductible compensation and corporate expenses incurred in the quarter and a higher weighted average statutory tax rate as a result of acquisitions. The effective income tax rate was 36,8 percent for the first quarter of fiscal 2014 compared to 31,5 percent for the same period a year ago.

Update on Acquisitions

On January 2, 2014, Post announced the closing of the Dakota Growers Pasta Company Inc. acquisition, effective January 1, 2014. In addition, Post announced the completion of the acquisitions of Golden Boy Foods Ltd. and Dymatize Enterprises, LLC on February 3, 2014; these acquisitions closed effective February 1, 2014.

In a release dated February 3, 2014, Post announced it has agreed to acquire the PowerBar and Musashi brands and related worldwide assets from Nestle S.A. in a transaction expected to be completed in Post´s fiscal third quarter, subject to customary closing conditions. Post has agreed to pay 150 million USD for the brands, subject to working capital and other adjustments. The portion of the total transaction purchase price allocated to the U.S. assets acquired is subject to a «step-up» in fair value for the purpose of determining tax deductible depreciation and amortization. Post management estimates the present value of the tax benefit of the step-up to be approximately 18 to 20 million USD.

Post management anticipates that for calendar year 2014 PowerBar and Musashi would generate net sales of approximately 165 to 175 million USD and Adjusted Ebitda of approximately 15 to 17 million USD if the brands were part of Post´s Active Nutrition Group for the entire period. Post expects to incur transition and integration expenses of approximately ten to 15 million USD over fifteen months following the close of the transaction.

Modesto, California Plant Closure Update

Post completed the first phase of its Modesto, California manufacturing facility closure in the first quarter of fiscal 2014, which is expected to achieve savings of approximately 2,8 million USD in fiscal 2014. The second phase of the facility closure is expected to be completed by September 2014, with the total net pre-tax annual cash savings of approximately 14,0 million USD expected to be fully phased in by fiscal 2015.

During the first quarter of 2014, Post incurred an incremental 2,7 million USD of accelerated depreciation expense recorded in cost of sales and 0,5 million USD related to employee termination benefits. Post anticipates recognizing additional accelerated depreciation expense of 5,8 million USD through the completion of the project in September 2014 and an additional 0,9 million USD of employee termination benefits.

Outlook

Including results of all completed acquisitions to date (which excludes the acquisition of the PowerBar and Musashi brands), Post management expects fiscal 2014 Adjusted Ebitda to be between 315 million USD and 340 million USD. Additionally, Post management expects fiscal 2014 capital expenditures to be between 75 million USD and 85 million USD, inclusive of all completed acquisitions to date. Capital expenditure outlook reflects requirements to complete the start-up and transfer of production to other facilities related to the Company´s previously announced Modesto, California facility closure along with corporate initiatives.

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