Post Holdings Reports Large Loss in Q4

25 Nov 2014 --- Post Holdings, Inc., a consumer packaged goods holding company, has reported results for the fourth quarter and fiscal year ended September 30, 2014. In fiscal 2014, Post operated five reportable segments: Post Foods, Michael Foods, Active Nutrition, Private Brands and Attune Foods.

Results include four acquisitions completed in fiscal 2014 and three acquisitions completed in fiscal 2013. As a result, fourth quarter of fiscal 2013, fiscal 2013 and fiscal 2014 each include partial period results. Acquisitions, as referred to throughout this release, is defined as the entire results of the Michael Foods, Active Nutrition, Private Brands and Attune Foods segments.

Fourth quarter net sales were $1,043.1 million, an increase of $751.4 million, or 257.6%, compared to prior year. Acquisitions contributed $794.6 million to consolidated net sales.

Gross profit increased $116.2 million to $228.7 million for the fourth quarter compared to the prior year. This included $127.0 million in gross profit from acquisitions, after incorporating the negative impact of inventory adjustments of $1.1 million resulting from acquisition accounting.

Selling, general and administrative (SG&A) expenses for the fourth quarter increased $58.5 million to $137.9 million compared to the prior year. SG&A was 13.2% of net sales and included $64.9 million of SG&A from acquisitions. Fourth quarter 2014 SG&A included $2.4 million of acquisition related transaction expenses, $1.4 million of which was related to announced transactions.

Adjusted EBITDA was $137.3 million for the fourth quarter, up $80.1 million compared to the prior year. Fourth quarter 2014 included $87.7 million from acquisitions.

Non-cash goodwill and intangible asset impairment charges of $295.6 million were recorded in the fourth quarter of 2014 within the Post Foods and Active Nutrition segments. Post Foods recognized charges of $264.3 million primarily as a result of the acceleration of declines within the branded ready-to-eat (RTE) cereal category. Additionally, the expectation is that revenue and profit growth for Post Foods will be challenged in the medium to long-term. Active Nutrition recognized charges of $31.3 million resulting from reduced near-term profitability related to supply chain disruptions at Dymatize and incremental remediation expenses. Post remains confident in the long-term growth opportunities for the active nutrition business given the attractive growth dynamics of the global category in the upcoming years.

Other expense, net was $28.7 million for the fourth quarter, primarily driven by mark to market adjustments on interest rate swaps.

For the fourth quarter, the net loss attributable to common stockholders was ($291.7) million, or ($5.86) per diluted common share. Adjusted net earnings available to common stockholders and adjusted diluted earnings per common share for the quarter were $6.9 million and $0.13, respectively. Weighted-average diluted common shares outstanding increased to 49.8 million shares for fourth quarter 2014 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 the Company's tangible equity units, which are calculated on an "if-converted" basis.

Net sales for fiscal year 2014 were $2,411.1 million, an increase of $1,377.0 million, or 133.2%, over the prior year. Acquisitions contributed $1,448.0 million to consolidated net sales.

Gross profit increased $196.3 million to $621.2 million compared to the prior year. Fiscal year 2014 included $227.5 million in gross profit from acquisitions, after incorporating the negative impact of inventory adjustments of $26.1 million resulting from acquisition accounting.

SG&A expenses increased $150.1 million to $444.4 million compared to the prior year and were 18.4% of net sales. SG&A from acquisitions was $133.2 million in fiscal year 2014. SG&A for fiscal year 2014 included $29.7 million of acquisition related transaction expenses, $27.7 million of which was related to announced transactions.

Losses on foreign currency were $14.0 million for fiscal year 2014 compared to $0.1 million in the prior year; the losses in 2014 were primarily driven by a hedge of the Canadian Dollar $320.0 million Golden Boy Foods purchase price.

Adjusted EBITDA was $344.5 million for fiscal year 2014, up $127.8 million compared to the prior year. Fiscal year 2014 included $159.4 million from acquisitions.

Other expense, net was $35.5 million for fiscal year 2014, primarily driven by mark to market adjustments and settlements on interest rate swaps.

For the fiscal year ended September 30, 2014, the net loss attributable to common stockholders was ($358.6) million, or ($9.03) per diluted common share. Adjusted net loss attributable to common stockholders was ($16.6) million, or ($0.42) per diluted common share.

Post Foods (includes the Post branded RTE cereal business) net sales for the fourth quarter were $248.5 million, a decline of $5.4 million, or 2.1%, compared to the prior year. Gross profit of $107.5 million increased $0.9 million, or 0.8%, compared to prior year. Gross margin of 43.3% was up approximately 130 basis points compared to prior year. SG&A of $53.4 million declined $1.9 million compared to prior year. Segment profit was $50.3 million, compared to $47.8 million in the prior year. Segment Adjusted EBITDA was $63.0 million, compared to $61.6 million in the prior year.

Net sales for the fiscal year were $963.1 million, a decrease of $19.7 million, or 2.0%, compared to the prior year. Gross profit declined $14.1 million to $408.2 million, with gross margin of 42.4%, down approximately 60 basis points compared to the prior year. SG&A declined from $220.8 million to $208.0 million for the fiscal year. Segment profit was $186.7 million and $187.4 million for fiscal years 2014 and 2013, respectively. Segment Adjusted EBITDA was $238.3 million and $246.2 million for fiscal years 2014 and 2013, respectively.

According to research, U.S. RTE cereal category dollars were down 4.6% and category pounds declined 4.2% for the 13 weeks ended September 27, 2014, compared to the prior year period. For the same time period, Post Foods' U.S. dollar market share was 10.7%, up 0.5 share points compared to the year ago quarter, and Post Foods' U.S. pounds share was 10.8%, up 0.4 share points compared to the year ago quarter. For the 52 weeks ended September 27, 2014, Post Foods' U.S. dollar market share was 11.0%, up 0.6 share points compared to the prior year. For the same time period, Post Foods' U.S. dollar consumption sales were up 1.0% compared to the prior year.

Post completed its final production run out of its Modesto, California facility at the end of August 2014 and is on track to achieve total net pretax annual cash savings of approximately $14.0 million, fully phased in with fiscal year 2015. Post Foods realized net pretax cash savings of approximately $2.8 million in fiscal year 2014 associated with the closure.

Michael Foods manufactures and distributes value-added egg products and refrigerated potato products and distributes cheese and other dairy case products through the Papetti's, All Whites, Better'n Eggs, Easy Eggs, Abbotsford Farms, Simply Potatoes and Crystal Farms brands across the foodservice, retail and food ingredient channels.

Net sales (including intersegment sales) were $534.3 million for the fourth quarter, and on a comparable basis, were up 9.7%, or $47.4 million, over the same period in 2013, with volume up 8.0%. Egg products sales were $393.0 million, up 7.3%, or $26.6 million, on a comparable basis, with volume up 7.9%. Refrigerated potato products sales were $46.6 million, up 12.8%, or $5.3 million, on a comparable basis, with volume up 9.9%. Cheese and other dairy case products sales were $94.7 million, up 19.6%, or $15.5 million, on a comparable basis, with volume up 4.3%.

Segment profit and segment Adjusted EBITDA for the fourth quarter were $29.9 million and $64.9 million, respectively. Segment profit for the fourth quarter was negatively impacted by an inventory adjustment of $1.1 million resulting from acquisition accounting.

Net sales (including intersegment sales) were $684.8 million for the fiscal year. Segment profit and segment Adjusted EBITDA for the fiscal year were $17.4 million and $79.5 million, respectively. Segment profit for the fiscal year was negatively impacted by an inventory adjustment of $16.9 million resulting from acquisition accounting.

Active Nutrition markets and distributes high protein shakes, bars and powders as well as nutrition supplements through the Premier Protein, Joint Juice, Dymatize and Supreme Protein brands.

Net sales were $98.8 million for fourth quarter 2014, up $84.9 million compared to reported prior year net sales of $13.9 million. On a comparable basis, net sales for the fourth quarter of 2014 were up 8.5%, or $7.7 million, over the same period in 2013. Segment (loss) profit was ($3.7) million and $1.0 million for fourth quarter 2014 and 2013, respectively. Segment Adjusted EBITDA was $2.4 million and $1.5 million for fourth quarter 2014 and 2013, respectively. Fourth quarter 2014 was negatively impacted by elevated expenses at Dymatize including supply chain disruption remediation expenses and higher expenses resulting from temporary co-manufactured production. Expenses at Dymatize are expected to continue to be elevated in the first half of fiscal 2015 and Dymatize is anticipated to underperform until the end of fiscal 2015.

For fiscal year 2014, net sales were $293.3 million, up $279.4 million compared to reported fiscal year 2013 net sales of $13.9 million. Segment (loss) profit was ($1.8) million and $1.0 million for fiscal year 2014 and 2013, respectively. Segment profit for fiscal year 2014 was negatively impacted by an inventory adjustment of $3.9 million resulting from acquisition accounting. Segment Adjusted EBITDA was $19.9 million and $1.5 million for fiscal year 2014 and 2013, respectively. Fiscal year 2014 was negatively impacted by supply chain disruptions at Dymatize, including disruption remediation expenses, lost profits on missed shipments and higher expenses resulting from temporary co-manufactured production.

Private Brands manufactures dry pasta, peanut butter and other nut butters, dried fruits and baking and snacking nuts, servicing the private label retail, foodservice and ingredient channels.

Net sales were $137.5 million for the fourth quarter. On a comparable basis, net sales for the fourth quarter of 2014 were up 7.0%, or $9.0 million, over the same period in 2013. Segment profit and segment Adjusted EBITDA for fourth quarter 2014 were $8.1 million and $16.5 million, respectively.

For the fiscal year, net sales were $377.4 million. Segment profit and segment Adjusted EBITDA for the fiscal year were $14.8 million and $44.3 million, respectively. Segment profit for the fiscal year was negatively impacted by an inventory adjustment of $5.3 million resulting from acquisition accounting.

Attune Foods manufactures and distributes branded and private label premium natural and organic cereals, snacks and granola through the Attune, Uncle Sam, Erewhon, Golden Temple, Peace Cereal, Sweet Home Farm and Willamette Valley Granola Company brands.

Net sales (including intersegment sales) were $24.8 million for fourth quarter 2014, an increase of $0.6 million, or 2.5%, compared to prior year. Segment profit was $2.2 million and $2.9 million for fourth quarter 2014 and 2013, respectively. Segment Adjusted EBITDA was $3.9 million and $4.8 million for fourth quarter 2014 and 2013, respectively.

For fiscal year 2014, net sales (including intersegment sales) were $93.9 million, up $56.1 million compared to reported fiscal year 2013 net sales of $37.8 million. Segment profit was $8.7 million and $2.5 million for fiscal year 2014 and 2013, respectively. Segment profit for fiscal year 2013 was negatively impacted by an inventory adjustment of $1.4 million resulting from acquisition accounting. Segment Adjusted EBITDA was $15.7 million and $6.5 million for fiscal year 2014 and 2013, respectively.