St. Louis / MO. (pfh) Post Holdings Inc., a consumer packaged goods holding company in the United States, reported results for the fiscal quarter ended June 30, 2016.
Highlights:
- Net sales of 1.2 billion USD
- Operating profit of 142.0 million USD and net earnings of 3.3 million USD
- Adjusted Ebitda of 231.0 million USD
- Reaffirmed Adjusted Ebitda (non-GAAP) guidance range for fiscal year 2016 of 915 to 925 million USD
Third Quarter Consolidated Operating Results
Third quarter net sales were 1’246.1 million USD, an increase of 34.3 million USD, or 2.8 percent, compared to the prior year. The sales increase was driven by the fiscal 2015 acquisition of MOM Brands and the fiscal 2016 acquisition of Willamette Egg Farms. On a comparable basis, net sales declined 4.1 percent when compared to the same period in fiscal 2015 primarily resulting from an anticipated decline in sales within the Michael Foods Group segment.
Gross profit for the third quarter was 398.2 million USD or 32.0 percent of net sales, an increase of 81.7 million USD compared to the prior year gross profit of 316.5 million USD or 26.1 percent of net sales. Selling, general and administrative (SG+A) expenses for the third quarter were 216.0 million USD or 17.3 percent of net sales, an increase of 22.7 million USD compared to the prior year SG+A of 193.3 million USD or 16.0 percent of net sales.
Operating profit was 142.0 million USD for the third quarter, an increase of 60.7 million USD, or 74.7 percent, compared to the prior year. Net earnings were 3.3 million USD for the third quarter, a decline of 20.7 million USD, or 86.3 percent, compared to the prior year. Net earnings available to common shareholders were 0.0 million USD for the third quarter. Adjusted net earnings available to common shareholders were 49.7 million USD, or 0.62 USD per diluted common share.
Adjusted Ebitda was 231.0 million USD for the third quarter, an increase of 43.5 million USD, or 23.2 percent, compared to the prior year.
Nine Month Consolidated Operating Results
Net sales for the nine months ended June 30, 2016 were 3’766.0 million USD, an increase of 427.6 million USD, or 12.8 percent, compared to the prior year. Gross profit for the nine month period was 1’170.0 million USD or 31.1 percent of net sales, an increase of 328.9 million USD compared to the prior year gross profit of 841.1 million USD or 25.2 percent of net sales. SG+A expenses for the nine month period were 608.6 million USD or 16.2 percent of net sales, an increase of 71.7 million USD compared to the prior year SG+A of 536.9 million USD or 16.1 percent of net sales.
Operating profit was 437.4 million USD for the nine month period, an increase of 265.5 million USD, or 154.5 percent, compared to the prior year. Net earnings were 33.7 million USD for the nine month period, an increase of 76.5 million USD, or 178.7 percent, compared to the prior year. For the nine months ended June 30, 2016, net earnings available to common shareholders were 12.0 million USD, or 0.17 USD per diluted common share. Adjusted net earnings available to common shareholders were 156.6 million USD, or 1.98 USD per diluted common share.
Adjusted Ebitda was 714.4 million USD for the nine month period, an increase of 250.1 million USD, or 53.9 percent, compared to the prior year period.
Post Consumer Brands
Post Consumer Brands includes the ready-to-eat (RTE) cereal businesses.
Net sales were 434.5 million USD for the third quarter, an increase of 21.7 percent, or 77.6 million USD, over the reported prior year third quarter. On a comparable basis, net sales increased 1.3 percent, or 5.7 million USD, over the same period in fiscal 2015 with volumes up 2.2 percent. Net sales benefitted from growth in net sales and volume for Malt-O-Meal branded bags and Pebbles, which was partially offset by anticipated reduced distribution for MOM branded boxes and declines in net sales and volume for licensed brands.
Segment profit was 75.2 million USD and 51.6 million USD for third quarter 2016 and 2015, respectively. Third quarter 2016 and 2015 segment profit was negatively impacted by integration expenses of 3.3 million USD and 3.0 million USD, respectively. Third quarter 2015 segment profit was negatively impacted by an inventory adjustment of 17.0 million USD resulting from purchase accounting. Segment Adjusted Ebitda was 104.7 million USD and 90.1 million USD for third quarter 2016 and 2015, respectively.
For the nine months ended June 30, 2016, net sales were 1’286.2 million USD, an increase of 467.9 million USD over the reported prior year period. Segment profit was 212.8 million USD, compared to 140.0 million USD in the prior year period. Segment profit for the nine months ended June 30, 2016 and June 30, 2015 was negatively impacted by integration expenses of 17.0 million USD and 3.0 million USD, respectively. Segment profit for the nine months ended June 30, 2015 was negatively impacted by an inventory adjustment of 17.0 million USD resulting from purchase accounting. Segment Adjusted Ebitda was 308.2 million USD, compared to 202.7 million USD in the prior year period.
Michael Foods Group
Michael Foods Group includes the egg, potato, cheese and pasta businesses.
Net sales were 518.0 million USD for the third quarter, a decline of 8.3 percent, or 46.7 million USD, over the reported prior year third quarter. Net sales included 18.2 million USD from the acquisition of Willamette Egg Farms. On a comparable basis, net sales declined 11.4 percent, or 66.4 million USD, over the same period in fiscal 2015. Egg sales, on a comparable basis, declined 15.5 percent as a result of reduced market-based pricing in the ingredient and retail shell egg channels. Egg volume declines continue to abate with a decline in the current quarter of 12.6 percent compared to a decline of 15.9 percent in the second quarter of fiscal 2016, on a comparable basis. The balance of the Michael Foods Group portfolio sales declined 2.5 percent, with volume up 5.6 percent.
Segment profit was 65.6 million USD and 48.4 million USD for third quarter 2016 and 2015, respectively, with egg, potato, cheese and pasta products all achieving growth. Segment profit for the third quarter of 2016 included 0.5 million USD from the acquisition of Willamette Egg Farms. Segment Adjusted Ebitda was 109.2 million USD and 81.2 million USD for third quarter 2016 and 2015, respectively.
For the nine months ended June 30, 2016, net sales were 1’662.1 million USD, a decline of 3.0 percent, or 52.2 million USD, over the reported prior year period. Net sales included 70.2 million USD from the acquisition of Willamette Egg Farms. Segment profit was 236.0 million USD, compared to 130.3 million USD in the prior year period. Segment profit for the nine months ended June 30, 2016 included 13.1 million USD from the acquisition of Willamette Egg Farms. Segment Adjusted Ebitda was 349.1 million USD, compared to 231.3 million USD in the prior year period.
Active Nutrition
Active Nutrition includes the protein shakes, bars and powders and nutritional supplement products of the PowerBar, Premier Protein and Dymatize brands.
Net sales were 156.1 million USD for the third quarter, an increase of 1.5 percent, or 2.3 million USD, over the reported prior year third quarter. On a comparable basis, net sales increased 4.7 percent, or 7.0 million USD, over the same period in fiscal 2015, with strong growth for Premier Protein branded products partially offset by anticipated declines at Dymatize. Segment profit was 17.7 million USD and 7.9 million USD for third quarter 2016 and 2015, respectively. Segment Adjusted Ebitda was 24.1 million USD and 15.5 million USD for third quarter 2016 and 2015, respectively.
For the nine months ended June 30, 2016, net sales were 415.7 million USD, a decline of 0.7 percent, or 3.1 million USD, over the reported prior year period. Segment profit (loss) was 42.0 million USD, compared to (2.9) million USD in the prior year period. Segment Adjusted Ebitda was 60.8 million USD, compared to 24.3 million USD in the prior year period.
Private Brands
Private Brands primarily includes peanut and other nut butters, dried fruit and nuts, and granola.
Net sales were 137.9 million USD for the third quarter, an increase of 0.9 percent, or 1.2 million USD, over the reported prior year third quarter. Peanut and other nut butters and dried fruit and nut sales declined 0.9 percent, with volume up 5.1 percent. Granola and cereal sales increased 8.1 percent, with volume up 8.0 percent. Segment profit was 9.0 million USD and 10.5 million USD for third quarter 2016 and 2015, respectively. Segment Adjusted Ebitda was 15.2 million USD and 17.5 million USD for third quarter 2016 and 2015, respectively.
For the nine months ended June 30, 2016, net sales were 403.2 million USD, an increase of 3.5 percent, or 13.8 million USD, over the reported prior year period. Segment profit was 29.6 million USD, compared to 27.8 million USD in the prior year period. Segment Adjusted Ebitda was 48.2 million USD, compared to 48.7 million USD in the prior year period.
Interest, Other Expense and Income Tax
Interest expense, net was 77.3 million USD for the third quarter compared to 65.0 million USD for the prior year quarter. For the nine months ended June 30, 2016, interest expense, net was 232.3 million USD, compared to 184.9 million USD for the nine months ended June 30, 2015. The increase for both the quarter and the nine month period was driven by a rise in Post’s debt principal balance outstanding primarily resulting from the May 2015 term loan issuance in connection with financing the MOM Brands acquisition.
Other expense (income) relates to non-cash mark-to-market adjustments on interest rate swaps and was 62.6 million USD for the third quarter of fiscal 2016, compared to income of (41.9) million USD for the third quarter of fiscal 2015, and was 169.4 million USD for the nine month period in fiscal 2016, compared to 41.5 million USD for the nine month period in fiscal 2015.
Income tax (benefit) provision was (1.2) million USD, or an effective income tax rate of negative (57.1 percent), in the third quarter of fiscal 2016, compared to an expense of 34.2 million USD and an effective income tax rate of 58.8 percent in the third quarter of fiscal 2015. For the nine months ended June 30, 2016, income tax expense was 2.0 million USD, or an effective income tax rate of 5.6 percent, compared to a benefit of (11.7) million USD and an effective income tax rate of 21.5 percent for the nine months ended June 30, 2015. The effective income tax rate for the nine months ended June 30, 2016 was favorably impacted by discrete items that occurred in the second quarter of fiscal 2016 which primarily related to Post’s decision to divest certain assets of its Michael Foods Group Canadian egg business.
Update on Financing
On August 3, 2016, Post issued 1’750.0 million USD aggregate principal amount of 5.00 percent senior notes due 2026 at par. Post will use the proceeds to fund its cash tender offer for approximately 1’242.0 million USD of its 7.375 percent senior notes due 2022 and to repay the 374.4 million USD outstanding principal balance on its term loan.
Outlook
Post management reaffirmed its fiscal 2016 Adjusted Ebitda guidance range of 915 to 925 million USD. Of the previously announced incremental 25 million USD investment in brand building and productivity, approximately 9 million USD remains to be incurred in the fourth quarter of fiscal year 2016.
The Company provides 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 mostly 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 non-cash mark-to-market adjustments and settlements on interest rate swaps, transaction and integration costs, restructuring and plant closure costs, losses on assets held for sale and other charges reflected in the Company’s reconciliation of historic numbers, the amounts of which, based on historical experience, could be significant.
Post management has updated its fiscal 2016 capital expenditures expectations to range between 135 to 145 million USD, including approximately 15 million USD related to growth activities and approximately 15 million USD related to integration activities. Maintenance capital expenditures for fiscal 2016 are expected to range between 105 to 115 million USD.
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