Post Holdings, Inc. Reports Results for the Second Quarter of Fiscal Year 2013

Post Holdings, Inc. Reports Results for the Second Quarter of Fiscal Year 2013

PR Newswire

ST. LOUIS, May 13, 2013

ST. LOUIS, May 13, 2013 /PRNewswire/ -- Post Holdings, Inc. (NYSE:POST), a
leading manufacturer, marketer and distributor of branded ready to eat cereals
today reported results for the fiscal quarter ended March 31, 2013. In a
separate release dated May 9, the Company announced that it has signed a
definitive agreement to acquire the private label and branded cereal, granola
and snack business of Hearthside Food Solutions. The acquisition is expected
to be completed by June 2013, subject to regulatory approval and other limited
closing conditions.

(Logo: http://photos.prnewswire.com/prnh/20120523/CG12577LOGO)

Second Quarter 2013 Highlights:

  oNet sales of $248.2 million
  oU.S. dollar market share of 10.5% for the thirteen weeks ended March 30,
    2013, according to Nielsen
  oCompleted convertible preferred stock offering in February 2013 with net
    proceeds of approximately $234.1 million

Post net sales decreased slightly for the quarter ended March 31, 2013 as
compared to the prior year resulting from a 4% decrease in average selling
prices partially offset by 3% higher volumes. For the six months ended March
31, 2013, net sales were $485.1 million, up $15.3 million or 3% over the prior
year, driven by 5% higher volumes and a slight decrease in average net selling
prices. Fiscal 2013 volume improvements have been driven by growth in our
Great Grains, Grape Nuts and Good Morenings brands. Additionally, the Company
has had meaningful growth in revenue from co-manufacturing agreements.

Gross profit decreased $8.5 million, or 8%, to $102.5 million for the second
quarter versus prior year. Gross profit margin decreased by 300 basis points
to 41.3%, as a result of unfavorable product mix and higher trade spending,
including higher slotting fees for new product introductions. Gross profit for
the six months ended March 31, 2013 decreased $0.8 million to $208.2 million
compared to the six months ended March 31, 2012. Gross profit margin decreased
160 basis points to 42.9%, as a result of unfavorable product mix and higher
trade spending, including higher slotting fees for new product introductions
and higher raw material costs (primarily grains).

Selling, general and administrative (SG&A) expenses decreased $4.1 million to
$70.1 million for the second quarter versus prior year. As a percentage of net
sales, SG&A decreased 140 basis points to 28.2%. This decrease was driven by
reduced advertising and promotion costs that were partially offset by
incremental holding company costs. For the six months ended March 31, 2013,
SG&A increased $4.5 million to $142.2 million. As a percentage of net sales,
SG&A was flat to prior year at 29.3%. The drivers were primarily incremental
holding company costs which were partially offset by decreased advertising and
promotion spending.

Adjusted EBITDA for the quarter was $51.0 million versus $54.1 million for the
same time period a year ago. For the six months ended March 31, 2013,
Adjusted EBITDA was $103.5 million versus $99.7 million for the same time
period a year ago.

Interest expense was $21.6 million for the quarter ended March 31, 2013,
compared to $15.1 million for the quarter ended March 31, 2012. The increase
is driven primarily by the $250.0 million increase in outstanding debt through
the issuance of senior notes in October 2012 and the increased debt incurred
at the time of the spin-off from Ralcorp in February 2012. Additionally,
interest expense for the quarter ended March 31, 2013 includes the write-off
of approximately $1.6 million of deferred financing costs associated with the
company's term loan, the balance of which was paid in full on February 28,
2013. Management estimates the company incurred after tax carrying costs
related to its average cash balances of approximately $4.4 million, or
approximately $0.13 per diluted share, during the second quarter of fiscal
2013. This estimate was calculated based on the average cash balance at the
beginning and the end of the quarter, or $338.2 million, the Company's
effective tax rate during the quarter and an interest rate of 7.375%, which is
the interest rate on the Company's senior notes.

Income tax expense was $2.2 million, which represents an effective income tax
rate of 30.1% for the second quarter, compared to an effective income tax rate
of 45.0% for the same period a year ago. For the six months ended March 31,
2013, income tax expense was $5.7 million, an effective income tax rate of
31.0%, compared to an expense of $14.7 million, and an effective income tax
rate of 38.7%, for the six months ended March 31, 2012. The decreases in the
current quarter and year to date effective income tax rate versus the same
time periods a year ago are primarily the result of certain non-deductible
transaction costs incurred the prior year. Additionally, the effective tax
rate for the 2013 second fiscal quarter benefitted from an estimated fiscal
year 2012 research and development credit which was retroactively reinstated
by legislation enacted during January 2013. Excluding this retroactive
credit, the effective tax rate for the second quarter would have been
approximately 32.9%. Management anticipates that the effective income tax rate
will be in the range of 32% - 34% for the remainder of fiscal 2013.

On February 26, 2013, Post issued approximately 2.4 million shares of 3.75%
cumulative perpetual convertible preferred stock. Post received net proceeds
of $234.1 million which was used to pay the remaining principal balance of a
$168.4 million on the company's term loan. For both the three and six months
ended March 31, 2013, the accumulated preferred stock dividend was $0.8
million and represents a reduction of net earnings available to common
stockholders.

Net earnings available to common stockholders were $4.3 million, or $0.13 per
diluted common share, for the second quarter. For the six months ended March
31, 2013, net earnings available to common stockholders were $11.9 million, or
$0.36 per diluted common share. Adjusted net earnings available to common
stockholders and Adjusted diluted earnings per common share for the quarter
were $6.3 million and $0.19, respectively. Adjusted net earnings available to
common stockholders and Adjusted diluted earnings per common share for the six
months ended March 31, 2013 were $16.3 million and $0.50, respectively.

According to Nielsen, U.S. ready to eat cereal category dollars were down 2.4%
for the 13 weeks ended March 30, 2013, compared to prior year, and category
pounds declined 2.0%. Category pounds for the quarter were not down as
significantly as consumption dollars due to slight declines in everyday
non-promoted selling prices.

Post's dollar market share was 10.5% for the thirteen weeks ended March 30,
2013, down 0.1 share point versus the same prior year time period. Nielsen's
data for the 13 weeks ending March 30, 2013 includes Post's recent acquisition
of Attune Foods which was not part of the prior year. Compared to the first
quarter, Post's dollar market share grew 0.3 share points, driven by new item
introductions, increased trade and in-store promotional activity and the
Attune acquisition. Post's pounds share was 10.7%, down 0.1 compared to prior
year.

Modesto Plant Closure Update

As announced in April, Post management has decided to close its manufacturing
facility in Modesto, California. The transfer of production capabilities and
closure of the plant is expected to be complete by September 2014. Upon
completion of the transfer and start-up of production to other facilities,
which is estimated to require capital expenditures of approximately $29.8
million, Post expects to achieve net pretax annual cash manufacturing cost
savings of approximately $14.0 million. Approximately 20% of the savings are
expected to be achieved in fiscal 2014, and the remainder of the savings are
expected to be fully phased-in by fiscal 2015.

Outlook

Including the partial year expected results of the cereal, granola and snacks
business of Hearthside and Attune Foods, Post management now expects fiscal
2013 Adjusted EBITDA to be between $216 million and $225 million.

Use of Non-GAAP Measures

Management has determined that the Adjusted EBITDA, Adjusted net earnings
available to common stockholders and Adjusted diluted earnings per common
share metrics presented herein are key metrics that will help investors
understand the ultimate income and near-term cash flows generated by our
business. Adjusted EBITDA is a non-GAAP measure which represents net earnings
excluding income taxes, net interest expense, net other nonoperating
income/expense, depreciation and amortization, non-cash stock based
compensation, nonrecurring cash compensation for retention/severance,
inventory revaluation adjustments on acquired businesses, accounts receivable
servicing fees, costs to effect Post's separation from Ralcorp and to
establish stand-alone systems and processes, mark to market adjustments on
economic hedges and intangible asset impairments, if any, and including an
estimate of incremental costs Post would have incurred had it been a
stand-alone public company for the entirety of the periods presented. The
Company believes that Adjusted EBITDA is useful to an investor in evaluating
the Company's operating performance and liquidity because (i) it is widely
used to measure a company's operating performance without regard to items such
as depreciation and amortization, which can vary depending upon accounting
methods and the book value of assets, (ii) it presents a meaningful measure of
corporate performance exclusive of the Company's capital structure and the
method by which the assets were acquired, and (iii) it is a widely accepted
financial indicator of a company's ability to service its debt, as the Company
is required to comply with certain covenants and limitations that are based on
variations of EBITDA in the Company's financing documents. Adjusted net
earnings available to common stockholders is a non-GAAP measure which
represents net earnings available to common stockholders excluding costs to
effect Post's separation from Ralcorp and to establish stand-alone systems and
processes, nonrecurring cash compensation for retention/severance, inventory
revaluation adjustments on acquired businesses, items not transferred to Post
after the separation from Ralcorp such as equity income and currency gains on
intercompany debt, and includes an estimate of incremental selling, general
and administrative costs and interest expense Post would have incurred had it
been a stand-alone public company for the entirety of all periods reported.
The Company believes Adjusted net earnings available to common stockholders
and Adjusted diluted earnings per common share are useful to investors in
evaluating the Company's operating performance because they exclude items that
could affect the comparability of our financial results and could potentially
distort the trends in business performance. In addition, for the historical
periods presented, they provide investors with insight into the Company's
performance on a basis consistent with being a stand-alone public company
rather than an operating segment of Ralcorp. The calculations of Adjusted
EBITDA, Adjusted net earnings available to common stockholders and Adjusted
diluted earnings per common share are not specified by United States generally
accepted accounting principles. Our calculations of Adjusted EBITDA, Adjusted
net earnings available to common stockholders and Adjusted diluted earnings
per common share may not be comparable to similarly-titled measures of other
companies. See the reconciliation tables provided at the end of this press
release.

Conference Call to Discuss Earnings Results, Guidance and Acquisition

The Company will host a conference call later today, Monday, May 13, 2013 at
4:30 p.m. Eastern Time. During the call, Terence E. Block, President and
Chief Operating Officer, and Robert V. Vitale, Chief Financial Officer, will
discuss the results for the second quarter of 2013, fiscal 2013 guidance and
the Hearthside acquisition. The call will be broadcast over the Internet and
can be accessed by visiting the investor relations section of the Company's
website at www.postfoods.com. Participants may join the conference call by
dialing (877) 540-0891 in the United States and (678) 408-4007 from outside
the United States. The conference identification number for all participants
is 50087042.

For those unable to participate during the live call and webcast, a replay
will be available on the Company's website until May 27, 2013.

Forward-Looking Statements

Certain matters discussed in this press release and on the conference call are
forward-looking statements, including our Adjusted EBITDA guidance for fiscal
2013, our expected effective tax rate for the remainder of fiscal 2013, our
estimated capital expenditures related to the Modesto closure, our expected
net pretax annual cash manufacturing cost savings related to the closure, and
the timing of the cost savings. Such statements involve certain risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. Potential risks and uncertainties include
the impact of our separation from Ralcorp and risks relating to our ability to
operate effectively as a stand-alone, publicly traded company; our high
leverage and substantial debt, including covenants that will restrict the
operation of our business; our ability to effectively migrate to our own
information technology systems, currently planned for summer 2013; changes in
our cost structure, management, financing and business operations; our ability
to identify and complete acquisitions, manage our growth and integrate
acquisitions; labor strikes or work stoppages by our employees; significant
increases in the costs of certain commodities, packaging or energy used to
manufacture our products; consolidation among the consumer goods, retail
grocery and foodservice industries; our ability to continue to compete in our
product market against manufacturers of both branded and private label cereal
products and our ability to retain our market position; our ability to
recognize the expected benefits of the closing of our Modesto, California
manufacturing facility; our ability to maintain competitive pricing,
successfully introduce new products or successfully manage our costs; our
ability to successfully implement business strategies to reduce costs;
impairment in the carrying value of goodwill or other intangibles; the loss or
bankruptcy of a significant customer; allegations that our products cause
injury or illness, product recalls and product liability claims and other
litigation; our ability to anticipate changes in consumer preferences and
trends; changes in consumer demand for ready-to-eat cereals; our ability to
service our outstanding debt or obtain additional financing; disruptions in
the U.S. and global capital and credit markets; labor strikes or work
stoppages by our employees; legal and regulatory factors, including changes in
food safety, advertising and labeling laws and regulations; disruptions or
inefficiencies in supply chain; fluctuations in foreign currency exchange
rates; change in estimates in critical accounting judgments and changes to or
new laws and regulations affecting our business; losses or increased funding
and expenses related to our qualified pension plan; loss of key employees;
changes in weather conditions, natural disasters and other events beyond our
control; business disruptions caused by information technology failures; and
other risks described in the Company's filings with the Securities and
Exchange Commission. These forward-looking statements represent the Company's
judgment as of the date of this press release. The Company disclaims, however,
any intent or obligation to update these forward-looking statements.

About Post Holdings, Inc.

Post Holdings, Inc. is the parent company of Post Foods, LLC. Post has
enriched the lives of consumers, bringing quality foods to the breakfast table
since the company's founding in 1895. Post's products are generally sold to
supermarket chains, wholesalers, supercenters, club stores, mass
merchandisers, distributors, convenience stores and the foodservice channel in
North America. Those products are manufactured at four facilities located in
Battle Creek, Michigan; Jonesboro, Arkansas; Modesto, California; and Niagara
Falls, Ontario. Post's portfolio of brands includes diverse offerings to meet
the taste and nutritional needs of all families, including such favorites as
Honey Bunches of Oats®, Pebbles™, Great Grains®, Post Shredded Wheat®, Post®
Raisin Bran, Grape-Nuts®, and Honeycomb®. With the acquisition of Attune
Foods, Post's portfolio of brands now also includes Attune®, Uncle Sam® and
Erewhon®. Post is dedicated to health and wellness, offering consumers a
variety of cereal choices to meet their nutritional needs from whole grain and
fiber to lower sugar offerings. For more information, visit www.postfoods.com.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



(in millions, except per share data)
                                        Quarter ended       Six months ended

                                        March 31,           March 31,
                                        2013      2012      2013      2012
Net Sales                               $ 248.2   $ 250.5   $ 485.1   $ 469.8
Cost of goods sold                      145.7     139.5     276.9     260.8
Gross Profit                            102.5     111.0     208.2     209.0
Selling, general and administrative     70.1      74.2      142.2     137.7
expenses
Amortization of intangible assets       3.2       3.1       6.4       6.3
Other operating expenses, net           0.3       0.5       0.4       0.5
Operating Profit                        28.9      33.2      59.2      64.5
Interest expense                        21.6      15.1      40.8      28.1
Other income                            —         (1.0)     —         (1.6)
Earnings before Income Taxes            7.3       19.1      18.4      38.0
Income tax provision                    2.2       8.6       5.7       14.7
Net Earnings                            $ 5.1     $ 10.5    $ 12.7    $ 23.3
Preferred stock dividends               (0.8)     —         (0.8)     —
Net Earnings Available to Common        $ 4.3     $ 10.5    $ 11.9    $ 23.3
Stockholders
Earnings per Common Share:
Basic                                   $ 0.13    $ 0.31    $ 0.36    $ 0.68
Diluted                                 $ 0.13    $ 0.30    $ 0.36    $ 0.68
Weighted-Average Common Shares
Outstanding:
Basic                                   32.65     34.30     32.62     34.30
Diluted                                 32.90     34.50     32.80     34.50



CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions)
                                           March 31,   September30,

                                           2013        2012
ASSETS
Current Assets
Cash and cash equivalents                  $ 365.4     $  58.2
Receivables, net                           74.3        56.5
Inventories                                97.3        78.6
Prepaid expenses and other current assets  20.6        16.4
Total Current Assets                       557.6       209.7
Property, net                              388.0       405.1
Goodwill                                   1,370.0     1,366.6
Other intangible assets, net               733.4       736.0
Other assets                               25.6        14.9
Total Assets                               $ 3,074.6   $  2,732.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt          $ —         $  15.3
Accounts payable                           57.6        50.0
Other current liabilities                  53.2        61.1
Total Current Liabilities                  110.8       126.4
Long-term debt                             1,039.5     930.3
Deferred income taxes                      310.1       314.9
Other liabilities                          131.9       129.2
Total Liabilities                          1,592.3     1,500.8
Stockholders' Equity
Preferred stock                            —           —
Common stock                               0.3         0.3
Additional paid-in capital                 1,512.2     1,272.6
Retained earnings                          49.3        36.6
Accumulated other comprehensive loss       (26.1)      (24.6)
Treasury stock, at cost                    (53.4)      (53.4)
Total Stockholders' Equity                 1,482.3     1,231.5
Total Liabilities and Stockholders' Equity $ 3,074.6   $  2,732.3



SELECTED CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(in millions)
                                                      Six Months Ended

                                                      March 31,
                                                      2013      2012
Cash provided by (used in):
Operating activities                                  $ 18.6    $ 77.1
Investing activities                                  (20.2)    (15.8)
Financing activities                                  309.1     0.7
Effect of exchange rates on cash and cash equivalents (0.3)     0.4
Net increase in cash and cash equivalents             $ 307.2   $ 62.4



RECONCILIATION OF NET EARNINGS TO ADJUSTED EBITDA (Unaudited)

(in millions)
                                       Quarter ended       Six months ended

                                       March 31,           March 31,
                                       2013      2012      2013       2012
Net Earnings                           $ 5.1     $ 10.5    $ 12.7     $ 23.3
Income tax expense                     2.2       8.6       5.7        14.7
Interest expense, net                  21.6      15.1      40.8       28.1
Depreciation and amortization          16.2      16.0      32.4       30.9
Spin-Off costs/post Spin-Off           2.4       5.3       5.2        8.0
non-recurring costs
Non-cash stock-based compensation      2.9       0.8       5.4        1.2
Mark to market adjustments on economic 0.1       —         0.8        0.6
hedges
Inventory revaluation adjustment on    0.5       —         0.5        —
acquired business
Nonrecurring cash                      —         0.1       —          0.4
compensation/retention
Other nonoperating income, net         —         (1.0)     —          (1.6)
Accounts receivable servicing fees     —         —         —          (0.8)
Public company costs ^(1)              —         (1.3)     —          (5.1)
Adjusted EBITDA                        $ 51.0    $ 54.1    $ 103.5    $ 99.7
Adjusted EBITDA as a percentage of Net 20.5   %  21.6   %  21.3    %  21.2   %
Sales

    Represents Post management's estimate of the incremental cash costs Post
    would have incurred as a separate, stand-alone public company if the
    Company had been separated from Ralcorp for the entire quarter and six
(1) months ended March 31, 2012. These costs were not actually incurred during
    the quarter and six months ended March 31, 2012. The estimated costs have
    been deducted in the calculation of Adjusted EBITDA to provide a frame of
    reference for future periods.



RECONCILIATION OF NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS

TO ADJUSTED NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS (Unaudited)

(in millions, except per share data)
                                            Quarter ended     Six months ended

                                            March 31,         March 31,
                                            2013     2012     2013     2012
Net Earnings Available to Common            $ 4.3    $ 10.5   $ 11.9   $ 23.3
Stockholders
Spin-Off costs/post Spin-Off non-recurring  2.4      5.3      5.2      8.0
costs
Mark to market adjustments on economic      0.1      —        0.8      0.6
hedges
Inventory revaluation adjustment on         0.5      —        0.5      —
acquired business
Nonrecurring cash compensation/retention    —        0.1      —        0.4
Other nonoperating income, net              —        (1.0)    —        (1.6)
Accounts receivable servicing fees          —        —        —        (0.8)
Incremental interest expense ^(1)           —        (1.1)    —        (4.3)
Public company costs ^(2)                   —        (1.3)    —        (5.1)
                                            3.0      2.0      6.5      (2.8)
Income tax effect on adjustments            (1.0)    (0.7)    (2.1)    0.8
Incremental tax expense for transaction     —        1.8      —        1.8
costs
Adjusted Net Earnings Available to Common   $ 6.3    $ 13.6   $ 16.3   $ 23.1
Stockholders
Weighted-Average Shares Outstanding -       32.90    34.50    32.80    34.50
Diluted
Adjusted Diluted Earnings per Common Share  $ 0.19   $ 0.39   $ 0.50   $ 0.67

    Represents Post management's estimate of incremental interest expense Post
    would have incurred if the debt incurred on February 3, 2012 to effect the
    spin-off from Ralcorp had been outstanding for all of fiscal 2012. These
(1) costs were not actually incurred during the quarter and six months ended
    March 31, 2012. The estimated costs have been deducted in the calculation
    of Adjusted Net Earnings and Adjusted Diluted Earnings per Share to
    provide a frame of reference for future periods.
    Represents Post management's estimate of the incremental cash costs Post
    would have incurred as a separate, stand-alone public company if the
    Company had been separated from Ralcorp for the quarter and six months
(2) ended March 31, 2012. These costs were not actually incurred during the
    quarter and six months ended March 31, 2012. The estimated costs have been
    deducted in the calculation of Adjusted Net Earnings and Adjusted Diluted
    Earnings per Share to provide a frame of reference for future periods.

SOURCE Post Holdings, Inc.

Website: http://www.postfoods.com
Contact: Pia Koster, Director, Investor Relations, (314) 644-7678 (POST)
 
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