Post Holdings: Reports Results for Q4 and FY 2013

St. Louis / MO. (pfh) Post Holdings Inc. reported results for the fourth quarter and fiscal year ended September 30, 2013. Highlights: Net sales of 291,7 million USD for the quarter, up 44,5 million USD from prior year, including 37,8 million USD from acquisitions. Net sales of 1’034,1 million USD for the fiscal year, up 75,2 million USD from prior year, including 51,3 million USD from acquisitions. Adjusted Ebitda of 57,2 million USD for the quarter and 216,7 million USD for fiscal year 2013. Post Foods U.S. Dollar market share of 10,4 percent for the 52 weeks ended September 28, 2013, according to Nielsen.

Fourth Quarter Consolidated Operating Results

Net sales for the fourth quarter were 291,7 million USD and increased 44,5 million USD or 18,0 percent, compared to the prior year. Acquisitions, net of 0,3 million USD of inter-segment eliminations, contributed 37,8 million USD of the overall growth, while the Post Foods segment accounted for 6,7 million USD of the overall growth, representing an increase of 2,7 percent versus the prior year.

Gross profit improved 2,4 million USD to 112,5 million USD for the fourth quarter compared to the prior year. Gross profit benefited from 11,1 million USD of incremental gross profit from acquisitions and was negatively impacted by 4,8 million USD of accelerated depreciation associated with the Modesto, California plant closure. Excluding these two items, gross profit for the fourth quarter declined 3,9 million USD to 106,2 million USD, with gross margin of 41,8 percent (on net sales excluding acquisitions), down approximately 270 basis points compared to the prior year.

Selling, general and administrative (SG+A) expenses for the fourth quarter increased 7,5 million USD to 79,2 million USD compared to the prior year. Excluding 5,7 million USD in SG+A related to acquired businesses, SG+A of 73,5 million USD was 28,9 percent of net sales excluding acquisitions, flat compared to prior year.

Adjusted Ebitda was 57,2 million USD for the fourth quarter, up 3,7 million USD compared to the prior year, including 6,3 million USD from acquisitions.

For the fourth quarter, the net loss attributable to common stockholders was 3,2 million USD or (0,10 USD) per diluted common share. Adjusted net earnings available to common stockholders and adjusted diluted earnings per common share for the quarter were 5,3 million USD and 0,16 USD, respectively.

Fiscal Year 2013 Consolidated Operating Results

Net sales were 1’034,1 million USD for fiscal year 2013, up 75,2 million USD or 7,8 percent, versus the prior year. The Post Foods segment grew 2,5 percent, while acquisitions, net of 0,4 million USD of inter-segment eliminations, contributed 51,3 million USD to overall growth.

Gross profit for the fiscal year decreased 4,0 million USD to 424,9 million USD versus the prior year. Acquisitions contributed 14,1 million USD to gross profit, offsetting 9,6 million USD in accelerated depreciation. Excluding these two items, fiscal year gross profit declined 8,5 million USD to 420,4 million USD, with gross margin of 42,8 percent (on net sales excluding acquisitions), a decline of approximately 190 basis points from the prior year.

SG+A increased 19,9 million USD to 294,4 million USD for the fiscal year versus the prior year. Excluding 8,6 million USD in SG+A related to acquired businesses, SG+A increased 11,3 million USD to 285,8 million USD, 29,1 percent of net sales excluding acquisitions, up approximately 50 basis points compared to prior year.

Adjusted Ebitda improved 2,1 million USD to 216,7 million USD for fiscal year 2013 compared to prior year, with acquisitions contributing 8,0 million USD.

Net earnings available to common stockholders were 9,8 million USD or 0,30 USD per diluted common share, for the fiscal year ended September 30, 2013. Adjusted net earnings available to common stockholders and adjusted diluted earnings per common share for the fiscal year ended September 30, 2013 were 31,1 million USD and 0,94 USD, respectively.

Post Foods

In the Post Foods segment, which includes predominately the Post branded cereal business, net sales for the fourth quarter were 253,9 million USD and increased 2,7 percent or 6,7 million USD. The increase was due to higher volumes partially offset by a slight decrease in average net selling prices. Post Foods segment profit was 42,9 million USD and 40,9 million USD for fourth quarter 2013 and 2012, respectively.

Post Foods segment net sales for the fiscal year were 982,8 million USD and increased 23,9 million USD or 2,5 percent, on higher volumes and lower average net selling prices. Segment profit was 168,1 million USD and 165,9 million USD for fiscal years 2013 and 2012, respectively.

According to Nielsen, U.S. ready to eat cereal category Dollars were down 3,5 percent for the 13 weeks ended September 28, 2013, compared to prior year and category pounds declined 2,8 percent.

Post Foods U.S. Dollar market share was 10,2 percent and 10,4 percent for the 13 weeks and 52 weeks ended September 28, 2013, respectively, flat compared to the year ago quarter and down 0,1 share point compared to the prior year 52 week period. Post Foods´ U.S. pounds share was 10,4 percent for the 13 weeks ended September 28, 2013, up 0,1 share point compared to the prior year.

Attune Foods

The Attune Foods segment combines the results of Attune Foods (acquired on December 31, 2012) and the Hearthside private label and branded cereal, granola and snack businesses (the assets of which were acquired on May 28, 2013). Net sales for the segment (including inter-segment sales) were 24,2 million USD and 37,8 million USD for the fourth quarter and the fiscal year, respectively. Attune Foods´ segment profit was 2,9 million USD and 2,5 million USD for the quarter and the fiscal year, respectively.

Active Nutrition

The Active Nutrition segment comprises the results of Premier Nutrition Corporation (PNC), which was acquired on September 01, 2013. The segment contributed 13,9 million USD to net sales for the fourth quarter and the fiscal year, with segment profit of 1,0 million USD for the quarter and the fiscal year.

Interest and Tax

Net interest expense was 25,5 million USD for the fourth quarter compared to 16,1 million USD for the prior year quarter. For the fiscal year ended September 30, 2013, net interest expense was 85,5 million USD, compared to 60,3 million USD for the fiscal year ended September 30, 2012. The increase for both the quarter and the fiscal year is driven primarily by the issuance of 250,0 million USD and 350,0 million USD of aggregate principal value of senior notes in October 2012 and July 2013, respectively.

Income tax benefit was 0,2 million USD in the fourth quarter of fiscal 2013 primarily resulting from a loss before income taxes combined with certain non-deductible transaction expenses incurred in the quarter related to the acquisition of PNC. The effective income tax rate was 36,5 percent for the same period a year ago. For the fiscal year ended September 30, 2013, income tax expense was 7,1 million USD, an effective income tax rate of 31,8 percent, compared to an expense of 30,5 million USD and an effective income tax rate of 37,9 percent for the fiscal year ended September 30, 2012. The decrease in the effective income tax rate from fiscal year 2012 to fiscal year 2013 was primarily the result of an uncertain tax position taken on the Company´s 2012 short-period tax return and higher non-deductible transaction expenses in the prior year.

Dakota Growers Pasta Company Acquisition Update

In September 2013 the Company announced that it has signed a definitive agreement to acquire Dakota Growers Pasta Company. The transaction was granted early termination under the Hart-Scott-Rodino Act in October and is expected to be completed in January 2014, subject to various closing conditions including the delivery of audited financial statements for the Dakota Growers business.

Modesto, California Plant Closure Update

As announced in April 2013, Post management has decided to close its manufacturing facility in Modesto, California. Upon completion of the transfer and start-up of production to other facilities, Post expects to achieve net pre-tax annual cash manufacturing cost savings of approximately 14,0 million USD. The first phase of the closure project is on track to be completed in the first quarter of fiscal 2014 and is expected to achieve approximately 20 percent of the savings or approximately 2,8 million USD, in fiscal 2014. The second phase is expected to be completed by September 2014 and the remaining savings are expected to be fully phased in by fiscal 2015.

During the fourth quarter, Post incurred an incremental 4,8 million USD of accelerated depreciation expense recorded in cost of sales and 0,8 million USD related to employee termination benefits. For the fiscal year, Post incurred an incremental 9,6 million USD of accelerated depreciation expense and 3,8 million USD related to employee termination benefits. Post anticipates recognizing additional accelerated depreciation expense of 8,5 million USD through the completion of the project in September 2014 and an additional 1,4 million USD of employee termination benefits.

Outlook

Including results of acquisitions completed through fiscal 2013, Post management expects fiscal 2014 Adjusted Ebitda to be between 245 million USD and 260 million USD. As previously announced, Dakota Growers is expected to contribute approximately 42 to 46 million USD to Adjusted Ebitda on a full year basis. Additionally, Post management expects fiscal 2014 capital expenditures to between 65 million USD and 75 million USD, inclusive of acquisitions completed through fiscal 2013. 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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