UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2014
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission File Number: 1-35305
Post Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri | 45-3355106 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2503 S. Hanley Road
St. Louis, Missouri 63144
(Address of principal executive offices) (Zip Code)
(314) 644-7600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common stock, $0.01 Par Value – 38,456,241 shares as of May 6, 2014
POST HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | Page |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. | ||
Item 1. | ||
Item 1A. | ||
Item 6. | ||
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net Sales | $ | 438.0 | $ | 248.2 | $ | 735.0 | $ | 485.1 | |||||||
Cost of goods sold | 308.6 | 145.7 | 491.1 | 276.9 | |||||||||||
Gross Profit | 129.4 | 102.5 | 243.9 | 208.2 | |||||||||||
Selling, general and administrative expenses | 104.8 | 69.9 | 186.2 | 142.1 | |||||||||||
Amortization of intangible assets | 12.7 | 3.2 | 18.4 | 6.4 | |||||||||||
Loss on foreign currency | 11.9 | 0.2 | 13.5 | 0.1 | |||||||||||
Restructuring expenses | 0.2 | — | 0.7 | — | |||||||||||
Other operating expenses, net | 0.1 | 0.3 | 0.2 | 0.4 | |||||||||||
Operating (Loss) Profit | (0.3 | ) | 28.9 | 24.9 | 59.2 | ||||||||||
Interest expense | 37.3 | 21.6 | 66.3 | 40.8 | |||||||||||
(Loss) Earnings before Income Taxes | (37.6 | ) | 7.3 | (41.4 | ) | 18.4 | |||||||||
Income tax (benefit) provision | (19.3 | ) | 2.2 | (20.7 | ) | 5.7 | |||||||||
Net (Loss) Earnings | (18.3 | ) | 5.1 | (20.7 | ) | 12.7 | |||||||||
Preferred stock dividends | (4.3 | ) | (0.8 | ) | (6.9 | ) | (0.8 | ) | |||||||
Net (Loss) Earnings Available to Common Stockholders | $ | (22.6 | ) | $ | 4.3 | $ | (27.6 | ) | $ | 11.9 | |||||
(Loss) Earnings per Common Share: | |||||||||||||||
Basic | $ | (0.67 | ) | $ | 0.13 | $ | (0.83 | ) | $ | 0.36 | |||||
Diluted | $ | (0.67 | ) | $ | 0.13 | $ | (0.83 | ) | $ | 0.36 | |||||
Weighted-Average Common Shares Outstanding: | |||||||||||||||
Basic | 33.6 | 32.7 | 33.1 | 32.6 | |||||||||||
Diluted | 33.6 | 32.9 | 33.1 | 32.8 | |||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
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POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
(in millions)
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net (Loss) Earnings | $ | (18.3 | ) | $ | 5.1 | $ | (20.7 | ) | $ | 12.7 | |||||
Amortization of actuarial (benefit) loss and prior service cost for pension and postretirement benefits, net of tax benefit (expense) of $0.1, $(0.1), $0.2 and $(0.3), respectively | (0.2 | ) | 0.3 | (0.3 | ) | 0.6 | |||||||||
Foreign currency translation adjustments | 0.7 | (1.3 | ) | (1.5 | ) | (2.1 | ) | ||||||||
Total Comprehensive (Loss) Income | $ | (17.8 | ) | $ | 4.1 | $ | (22.5 | ) | $ | 11.2 | |||||
See accompanying Notes to Condensed Consolidated Financial Statements.
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POST HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
March 31, 2014 | September 30, 2013 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 825.9 | $ | 402.0 | |||
Restricted cash | 1.8 | 38.1 | |||||
Receivables, net | 185.5 | 83.2 | |||||
Inventories | 224.5 | 121.9 | |||||
Deferred income taxes | 24.7 | 11.9 | |||||
Prepaid expenses and other current assets | 53.2 | 11.0 | |||||
Total Current Assets | 1,315.6 | 668.1 | |||||
Property, net | 491.1 | 388.5 | |||||
Goodwill | 1,910.8 | 1,489.7 | |||||
Other intangible assets, net | 1,420.7 | 898.4 | |||||
Deferred income taxes | 2.1 | 2.4 | |||||
Other assets | 43.8 | 26.7 | |||||
Total Assets | $ | 5,184.1 | $ | 3,473.8 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 112.6 | $ | 77.1 | |||
Other current liabilities | 117.1 | 68.9 | |||||
Total Current Liabilities | 229.7 | 146.0 | |||||
Long-term debt | 2,302.1 | 1,408.6 | |||||
Deferred income taxes | 440.2 | 304.3 | |||||
Other liabilities | 120.7 | 116.3 | |||||
Total Liabilities | 3,092.7 | 1,975.2 | |||||
Stockholders’ Equity | |||||||
Preferred stock | 0.1 | — | |||||
Common stock | 0.4 | 0.3 | |||||
Additional paid-in capital | 2,138.2 | 1,517.2 | |||||
Retained earnings | 21.0 | 47.6 | |||||
Accumulated other comprehensive loss | (14.9 | ) | (13.1 | ) | |||
Treasury stock, at cost | (53.4 | ) | (53.4 | ) | |||
Total Stockholders’ Equity | 2,091.4 | 1,498.6 | |||||
Total Liabilities and Stockholders’ Equity | $ | 5,184.1 | $ | 3,473.8 | |||
See accompanying Notes to Condensed Consolidated Financial Statements.
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POST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Six Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash Flows from Operating Activities | |||||||
Net (Loss) Earnings | $ | (20.7 | ) | $ | 12.7 | ||
Adjustments to reconcile net (loss) earnings to net cash flow provided by operating activities: | |||||||
Depreciation and amortization | 51.2 | 32.4 | |||||
Premium from issuance of long-term debt | 20.1 | 15.0 | |||||
Loss on foreign currency | 6.7 | — | |||||
Stock-based compensation expense | 7.4 | 5.4 | |||||
Deferred income taxes | (17.3 | ) | (9.1 | ) | |||
Other, net | (0.5 | ) | (2.3 | ) | |||
Other changes in current assets and liabilities, net of business acquisitions: | |||||||
Increase in receivables, net | (34.6 | ) | (13.5 | ) | |||
Increase in receivable from Ralcorp | — | (4.0 | ) | ||||
Decrease (increase) in inventories | 10.0 | (16.4 | ) | ||||
Increase in prepaid expenses and other current assets | (12.9 | ) | (3.2 | ) | |||
Increase in accounts payable and other current and non-current liabilities | 9.1 | 1.6 | |||||
Net Cash Provided by Operating Activities | 18.5 | 18.6 | |||||
Cash Flows from Investing Activities | |||||||
Business acquisitions | (1,035.2 | ) | (9.2 | ) | |||
Cash advance for asset purchase | (25.0 | ) | — | ||||
Additions to property | (26.7 | ) | (11.0 | ) | |||
Restricted cash | 36.3 | — | |||||
Net Cash Used by Investing Activities | (1,050.6 | ) | (20.2 | ) | |||
Cash Flows from Financing Activities | |||||||
Proceeds from issuance of long term debt | 875.0 | 250.0 | |||||
Proceeds from issuance of preferred stock, net of issuance costs | 310.2 | 234.1 | |||||
Proceeds from issuance of common stock, net of issuance costs | 303.5 | — | |||||
Repayments of long-term debt | — | (170.6 | ) | ||||
Payment of preferred stock dividend | (5.9 | ) | — | ||||
Payments of debt issuance costs | (19.8 | ) | (4.6 | ) | |||
Other, net | 0.2 | 0.2 | |||||
Net Cash Provided by Financing Activities | 1,463.2 | 309.1 | |||||
Effect of Exchange Rate Changes on Cash | (7.2 | ) | (0.3 | ) | |||
Net Increase in Cash and Cash Equivalents | 423.9 | 307.2 | |||||
Cash and Cash Equivalents, Beginning of Year | 402.0 | 58.2 | |||||
Cash and Cash Equivalents, End of Period | $ | 825.9 | $ | 365.4 | |||
See accompanying Notes to Condensed Consolidated Financial Statements.
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POST HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in millions, except per share information and where indicated otherwise)
NOTE 1 — BACKGROUND
Post Holdings, Inc. (“Post” or the “Company”) is a consumer packaged goods holding company operating in the center-of-the-store, active nutrition and private label food categories. The Company’s products are sold through a variety of channels such as grocery, club and drug stores, mass merchandisers, foodservice, ingredient and via the Internet. Post operates in four reportable segments: Post Foods, Attune Foods, Active Nutrition and Private Brands. The Post Foods segment predominately includes the Post branded ready-to-eat cereal business. The Attune Foods segment manufactures and distributes premium natural and organic cereals and snacks and is comprised of the businesses of Attune Foods, Inc., which we acquired substantially all of the assets of in December 2012, and certain assets of the Hearthside Food Solutions private label and branded businesses, which we acquired in May 2013. The Active Nutrition segment includes the business of Premier Nutrition Corporation (“PNC”), which was acquired in September 2013, as well as Dymatize Enterprises, LLC, which was acquired on February 1, 2014. The Active Nutrition segment markets and distributes high protein shakes, bars and powders as well as nutritional supplements. The Private Brands segment consists of our acquisition of Dakota Growers Pasta Company, Inc. and Golden Boy Foods Ltd., acquired January 1, 2014 and February 1, 2014, respectively. The Private Brands segment 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. Post’s portfolio of brands includes diverse offerings such as Honey Bunches of Oats®, Pebbles™, Post Selects®, Great Grains®, Spoon Size® Shredded Wheat, Post® Raisin Bran, Grape-Nuts®, Honeycomb®, Attune®, Uncle Sam®, Erewhon®, Golden Temple™, Peace Cereal®, Sweet Home Farm®, Willamette Valley Granola Company™, Premier Protein®, Dymatize®, Supreme Protein® and Joint Juice®.
Unless otherwise stated or the context otherwise indicates, all references in this Form 10-Q to “Post,” “the Company,” “us,” “our” or “we” mean Post Holdings, Inc. and its consolidated subsidiaries.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), under the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended September 30, 2013. These unaudited condensed consolidated financial statements should be read in conjunction with such audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on November 27, 2013.
These unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair statement of its financial position, results of operations, comprehensive income and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results for any other interim period or for the entire fiscal year.
The financial position and operating results of foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included in the condensed consolidated balance sheet as a component of accumulated other comprehensive loss.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes thereto. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the condensed consolidated financial statements include accounting for reserves established for doubtful accounts, stock-based compensation, impairment analyses, depreciation and amortization, income taxes, litigation matters and contingencies.
Recently Adopted Accounting Standards
In the first quarter of fiscal 2014, Post adopted Accounting Standards Update 2013-02, “Reporting Amounts Reclassified out of Accumulated Other Comprehensive Income.” The only reclassification out of accumulated other comprehensive income for the reported periods is amortization of actuarial (benefit) loss and prior service cost for pension and postretirement benefits totaling $(0.3) and $0.4 for the three month periods ended March 31, 2014 and 2013, $(0.5) and $0.9 for the six month periods), respectively. Amounts are classified as “Selling, general and administrative expenses” on the condensed consolidated statements of operations.
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NOTE 2 — RESTRUCTURING
In April 2013, the Company announced management’s decision to close its plant located in Modesto, California as part of a cost savings and capacity rationalization effort. The transfer of production capabilities and closure of the plant is expected to be completed by September 2014.
Amounts related to the plant closure are shown in the following table. Costs are recognized in “Restructuring expense” in the condensed consolidated statements of operations with the exception of accelerated depreciation expense which is included in “Cost of Goods Sold.” These expenses are not included in the measure of segment performance for any segment.
Three Months Ended March 31, 2014 | Six Months Ended March 31, 2014 | Cumulative Incurred to Date | Remaining Expense Expected to be Incurred | ||||||||||||
Employee severance | $ | 0.2 | $ | 0.7 | $ | 2.8 | $ | 0.7 | |||||||
Pension curtailment | — | — | 1.7 | — | |||||||||||
Accelerated depreciation | 2.0 | 4.7 | 14.3 | 3.8 | |||||||||||
$ | 2.2 | $ | 5.4 | $ | 18.8 | $ | 4.5 | ||||||||
Liabilities recorded related to restructuring activities and changes therein are as follows:
September 30, 2013 | Costs Incurred and Charged to Expense | Cash Paid | March 31, 2014 | ||||||||||||
Employee severance | $ | 2.1 | $ | 0.7 | $ | (0.9 | ) | $ | 1.9 | ||||||
NOTE 3 — BUSINESS COMBINATIONS
On December 31, 2012, Post Foods, LLC, a subsidiary of the Company, purchased substantially all of the assets of Attune Foods, Inc. (“Attune”) for approximately $9.2 of cash. On October 1, 2013, these assets were contributed to Post Holdings, Inc. in a non-cash tax-free transaction.
On May 28, 2013, the Company completed its acquisition of certain assets of the branded and private label cereal, granola and snacks business of Hearthside Food Solutions (“Hearthside”) for approximately $159.9 of cash. The Company combined this business with the Attune business to form the Attune Foods reporting segment (see Note 15).
On September 3, 2013, the Company completed its acquisition of Premier Nutrition Corporation (“PNC”), which was effective September 1, 2013, for approximately $186.0 of cash. PNC is reported in Post’s Active Nutrition segment (see Note 15). Net sales and operating profit included in the consolidated statement of operations related to this acquisition were $42.4 and $2.7, respectively, for the three months ended March 31, 2014 and $79.6 and $6.9, respectively, for the six months ended March 31, 2014. During the first quarter of fiscal 2014, a final settlement of net working capital, as defined in the PNC purchase agreement, was reached resulting in an increase in total consideration of approximately $0.1 and a corresponding increase in goodwill. In addition, during the second quarter, $1.2 of pre-acquisition net operating losses (“NOLs”) were identified and a deferred tax asset was recorded as well as a corresponding decrease to goodwill. As these adjustments did not have a significant impact on the condensed consolidated statements of income, balance sheets or cash flows, the financial statements have not been retrospectively adjusted.
On January 1, 2014, Post completed its acquisition from Viterra Inc. of all the stock of Agricore United Holdings Inc. (“Agricore”). Agricore is the parent company of Dakota Growers Pasta Company, Inc. (“Dakota Growers”), a manufacturer of dry pasta for the private label, foodservice and ingredient markets. The purchase price for the transaction was $370.0 in cash, subject to a working capital adjustment, which resulted in a payment at closing of $366.2. The parties have not yet agreed on the final net working capital adjustment. The Company currently estimates the final net working capital settlement, and other adjustments per the terms of the purchase agreement, will result in an amount due back to the Company of approximately $6.6. Dakota Growers is reported in Post’s Private Brands segment (see Note 15). Based upon the preliminary purchase price allocation, the Company has recorded $127.2 of customer relationships to be amortized over a weighted-average period of 12.5 years and $22.8 to trademarks/brands to be amortized over a weighted-average period of 18.9 years. Net sales and operating loss included in the condensed consolidated statements of operations related to this acquisition were $66.7 and $(1.1), for the three and six months ended March 31, 2014, respectively.
On February 1, 2014, Post completed its acquisition of Dymatize Enterprises, LLC (“Dymatize”), a manufacturer and marketer of premium protein powders, bars and nutritional supplements. The purchase price for the transaction was $380.0 in cash, subject to a working capital adjustment, which resulted in a payment at closing of $392.5. The parties have not yet agreed on a final net working capital adjustment. The Company currently estimates the final net working capital adjustment will result
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in an amount due back to the Company of approximately $6.0. In accordance with the terms of the purchase agreement, the sellers are eligible for an earn-out payment of up to $17.5 based on Dymatize’s level of performance against certain financial performance targets, as defined in the purchase agreement, during calendar year 2014. Using an option pricing model, the Company estimated the acquisition date fair value of the earn-out to be approximately $5.4. Dymatize is reported in Post’s Active Nutrition segment (see Note 15). Based upon the preliminary purchase price allocation, the Company has recorded $136.8 of customer relationships to be amortized over a weighted-average period of 18 years and $121.1 to trademarks/brands to be amortized over a weighted-average period of 20 years. Net sales and operating loss included in the condensed consolidated statements of operations related to this acquisition were $28.2 and $(2.5), for the three and six months ended March 31, 2014, respectively.
On February 1, 2014, Post completed its acquisition of Golden Boy Foods Ltd. (“Golden Boy”), a manufacturer of private label peanut and other nut butters, as well as dried fruits and baking and snacking nuts. The purchase price for the transaction was CAD$320.0 in cash, subject to a working capital adjustment, which resulted in a payment at closing of approximately CAD$321.1. The parties have not yet agreed on the final net working capital adjustment. The Company currently estimates the final net working capital settlement will result in an amount due to the sellers of approximately CAD$1.0. Golden Boy is reported in Post’s Private Brands segment (see Note 15). Based upon the preliminary purchase price allocation, the Company has recorded $82.6 of customer relationships to be amortized over a weighted-average period of 11 years, $28.9 to trademarks/brands to be amortized over a weighted-average period of 20 years, and $20.0 to other intangible assets to be amortized over a weighted-average period of 11 years. Net sales and operating profit included in the condensed consolidated statements of operations related to this acquisition were $39.0 and $1.9, for the three and six months ended March 31, 2014, respectively.
Each of the acquisitions was accounted for using the acquisition method of accounting, whereby their results of operations are included in the financial statements from the date of acquisition. The respective purchase prices were allocated to acquired assets and liabilities based on their estimated fair values at the date of acquisition, and any excess was allocated to goodwill, as shown in the following table. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies and the expansion of the business into new growing segments of the industry. The Company does not expect the final fair value of goodwill related to the current year acquisitions of Dakota Growers and Golden Boy to be deductible for U.S. income tax purposes. The Company estimates approximately $107.1 of tax deductible goodwill will result from the Dymatize acquisition pending final resolution of net working capital amounts and the earn-out.
Certain estimated values for the Dakota Growers, Dymatize and Golden Boy acquisitions, including goodwill, intangible assets and deferred taxes, are not yet finalized pending the final settlement of the purchase price and preliminary purchase price allocations and are subject to change once additional information is obtained.
The following table provides the allocation of the purchase price based upon the fair value of assets and liabilities assumed for each acquisition completed in fiscal 2014.
Dakota Growers | Dymatize | Golden Boy | |||||||||
Cash and cash equivalents | $ | 2.9 | $ | 1.8 | $ | — | |||||
Receivables | 25.3 | 24.4 | 18.6 | ||||||||
Inventories | 43.4 | 41.1 | 28.1 | ||||||||
Deferred income taxes | 0.3 | 2.9 | — | ||||||||
Prepaid expenses and other current assets | 0.4 | 0.7 | 0.7 | ||||||||
Property | 86.0 | 15.6 | 10.5 | ||||||||
Goodwill | 162.7 | 102.3 | 156.1 | ||||||||
Other intangible assets | 150.0 | 257.9 | 131.5 | ||||||||
Other assets | 1.0 | 0.1 | — | ||||||||
Accounts payable | (5.6 | ) | (17.8 | ) | (10.3 | ) | |||||
Other current liabilities | (25.7 | ) | (7.1 | ) | (10.9 | ) | |||||
Deferred income taxes | (80.9 | ) | (30.0 | ) | (33.8 | ) | |||||
Other liabilities | (0.2 | ) | — | (2.1 | ) | ||||||
Total acquisition cost | $ | 359.6 | $ | 391.9 | $ | 288.4 | |||||
The following unaudited pro forma information presents a summary of the combined results of operations of the Company and the aggregate results of Attune, Hearthside, PNC, Dakota Growers, Dymatize and Golden Boy for the periods presented as if the fiscal 2014 acquisitions had occurred on October 1, 2012 and the fiscal 2013 acquisitions had occurred on October 1, 2011, along with certain pro forma adjustments. These pro forma adjustments give effect to the amortization of certain definite-lived
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intangible assets, adjusted depreciation based upon fair value of assets acquired, interest expense related to the financing of the business combinations, and related income taxes. The following unaudited pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Pro forma net sales | $ | 465.2 | $ | 465.2 | $ | 946.3 | $ | 935.3 | |||||||
Pro forma net earnings available to common stockholders | $ | (18.9 | ) | $ | (8.1 | ) | $ | (28.7 | ) | $ | (6.2 | ) | |||
Pro forma basic earnings per share | $ | (0.56 | ) | $ | (0.25 | ) | $ | (0.87 | ) | $ | (0.19 | ) | |||
Pro forma diluted earnings per share | $ | (0.56 | ) | $ | (0.25 | ) | $ | (0.87 | ) | $ | (0.19 | ) | |||
NOTE 4 — GOODWILL
The changes in the carrying amount of goodwill by segment are noted in the following table.
Post Foods | Attune Foods | Active Nutrition | Private Brands | Total | |||||||||||||||
Balance, September 30, 2013 | |||||||||||||||||||
Goodwill (gross) | $ | 1,794.1 | $ | 75.1 | $ | 48.3 | $ | — | $ | 1,917.5 | |||||||||
Accumulated impairment losses | (427.8 | ) | — | — | — | (427.8 | ) | ||||||||||||
Goodwill (net) | $ | 1,366.3 | $ | 75.1 | $ | 48.3 | $ | — | $ | 1,489.7 | |||||||||
Goodwill acquired | — | — | 102.3 | 318.8 | 421.1 | ||||||||||||||
Purchase price true-up adjustment | — | — | (1.1 | ) | — | (1.1 | ) | ||||||||||||
Currency translation adjustment | (0.4 | ) | — | — | 1.5 | 1.1 | |||||||||||||
Balance, March 31, 2014 | |||||||||||||||||||
Goodwill (gross) | $ | 1,793.7 | $ | 75.1 | $ | 149.5 | $ | 320.3 | $ | 2,338.6 | |||||||||
Accumulated impairment losses | (427.8 | ) | — | — | — | (427.8 | ) | ||||||||||||
Goodwill (net) | $ | 1,365.9 | $ | 75.1 | $ | 149.5 | $ | 320.3 | $ | 1,910.8 | |||||||||
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NOTE 5 — INTANGIBLE ASSETS, NET
Total intangible assets are as follows:
March 31, 2014 | September 30, 2013 | |||||||||||||||||||||||
Carrying Amount | Accumulated Amortization | Net Amount | Carrying Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||
Subject to amortization: | ||||||||||||||||||||||||
Customer relationships | $ | 606.0 | $ | (52.7 | ) | $ | 553.3 | $ | 258.6 | $ | (41.0 | ) | $ | 217.6 | ||||||||||
Trademarks/brands | 334.6 | (31.4 | ) | 303.2 | 161.5 | (25.8 | ) | 135.7 | ||||||||||||||||
Other intangible assets | 24.9 | (1.4 | ) | 23.5 | 4.7 | (0.3 | ) | 4.4 | ||||||||||||||||
$ | 965.5 | $ | (85.5 | ) | $ | 880.0 | $ | 424.8 | $ | (67.1 | ) | $ | 357.7 | |||||||||||
Not subject to amortization: | ||||||||||||||||||||||||
Trademarks/brands | 540.7 | — | 540.7 | 540.7 | — | 540.7 | ||||||||||||||||||
$ | 1,506.2 | $ | (85.5 | ) | $ | 1,420.7 | $ | 965.5 | $ | (67.1 | ) | $ | 898.4 | |||||||||||
NOTE 6 — EARNINGS PER SHARE
Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, stock appreciation rights and restricted stock equivalents using the “treasury stock” method. The impact of potentially dilutive convertible preferred stock is calculated using the “if-converted” method.
The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended March 31, 2014 and 2013, respectively.
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net (loss) earnings | $ | (18.3 | ) | $ | 5.1 | $ | (20.7 | ) | $ | 12.7 | |||||
Preferred stock dividends | (4.3 | ) | (0.8 | ) | (6.9 | ) | (0.8 | ) | |||||||
Net (loss) earnings available to common stockholders | $ | (22.6 | ) | $ | 4.3 | $ | (27.6 | ) | $ | 11.9 | |||||
Weighted-average shares for basic earnings per share | 33.6 | 32.7 | 33.1 | 32.6 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options | — | — | — | — | |||||||||||
Stock appreciation rights | — | 0.1 | — | 0.1 | |||||||||||
Restricted stock units | — | 0.1 | — | 0.1 | |||||||||||
Total dilutive securities | — | 0.2 | — | 0.2 | |||||||||||
Weighted-average shares for diluted earnings per share | 33.6 | 32.9 | 33.1 | 32.8 | |||||||||||
Basic (loss) earnings per common share | $ | (0.67 | ) | $ | 0.13 | $ | (0.83 | ) | $ | 0.36 | |||||
Diluted (loss) earnings per common share | $ | (0.67 | ) | $ | 0.13 | $ | (0.83 | ) | $ | 0.36 | |||||
For the three and six months ended March 31, 2014 and 2013, weighted-average shares for diluted (loss) earnings per common share excludes 3.8 million, 0.6 million, 3.8 million and 2.2 million equity awards, respectively, and for both the three and six months ended March 31, 2014 and 2013, excludes 11.0 million and 5.1 million shares, respectively, related to the potential conversion of the Company’s convertible preferred stock (see Note 11) as they were anti-dilutive.
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NOTE 7 — INVENTORIES
March 31, 2014 | September 30, 2013 | ||||||
Raw materials and supplies | $ | 83.5 | $ | 30.3 | |||
Finished products | 141.0 | 91.6 | |||||
$ | 224.5 | $ | 121.9 | ||||
NOTE 8 — PROPERTY, NET
March 31, 2014 | September 30, 2013 | ||||||
Property, at cost | $ | 773.5 | $ | 640.5 | |||
Accumulated depreciation | (282.4 | ) | (252.0 | ) | |||
$ | 491.1 | $ | 388.5 | ||||
NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
In the ordinary course of business, the Company is exposed to commodity price risks relating to the acquisition of raw materials and supplies, interest rate risks relating to debt, and foreign currency exchange rate risks relating to its foreign subsidiaries. The Company utilizes derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The Company does not hold or issue financial instruments for speculative or trading purposes.
The Company maintains options and futures contracts which have been designated as economic hedges of raw materials, fuel and energy purchases. The following tables present the balance sheet location and fair value of the Company’s derivative instruments on a gross and net basis as of March 31, 2014 and September 30, 2013.
Fair Value of Assets as of March 31, 2014 | ||||||||||||||
Balance Sheet Location | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet | |||||||||||
Commodity contracts | Prepaid expenses and other current assets | $ | 0.6 | $ | — | $ | 0.6 | |||||||
Natural gas and heating oil futures | Prepaid expenses and other current assets | 0.3 | — | 0.3 | ||||||||||
$ | 0.9 | $ | — | $ | 0.9 | |||||||||
Fair Value of Liabilities as of September 30, 2013 | ||||||||||||||
Balance Sheet Location | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheet | |||||||||||
Commodity contracts | Other current liabilities | $ | 0.1 | $ | — | $ | 0.1 | |||||||
Natural gas and heating oil futures | Other current liabilities | 0.1 | — | 0.1 | ||||||||||
$ | 0.2 | $ | — | $ | 0.2 | |||||||||
The following table presents the loss from derivative instruments that were not designated as hedging instruments which were recorded on the Company’s condensed consolidated statements of operations.
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Amount of Gain (Loss) Recognized in Earnings | ||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
Derivative Instrument | Location of Gain (Loss) Recognized in Earnings | 2014 | 2013 | 2014 | 2013 | |||||||||||
Commodity contracts | Cost of goods sold | $ | 0.8 | $ | (0.3 | ) | 1.0 | (0.8 | ) | |||||||
Natural gas and heating oil futures | Cost of goods sold | (0.2 | ) | 0.2 | 0.5 | — | ||||||||||
Foreign exchange contracts | Selling, general and administrative expenses | (5.6 | ) | — | (6.3 | ) | — | |||||||||
NOTE 10 — FAIR VALUE MEASUREMENTS
The following table represents Post’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820:
March 31, 2014 | September 30, 2013 | ||||||||||||||||||||||
Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Deferred compensation investment | $ | 10.4 | $ | 10.4 | $ | — | $ | 8.5 | $ | 8.5 | $ | — | |||||||||||
Derivative assets | 0.9 | — | 0.9 | — | — | — | |||||||||||||||||
$ | 11.3 | $ | 10.4 | $ | 0.9 | $ | 8.5 | $ | 8.5 | $ | — | ||||||||||||
Liabilities: | |||||||||||||||||||||||
Deferred compensation liabilities | $ | 13.4 | $ | — | $ | 13.4 | $ | 13.4 | $ | — | $ | 13.4 | |||||||||||
Derivative liabilities | — | — | — | 0.2 | — | 0.2 | |||||||||||||||||
$ | 13.4 | $ | — | $ | 13.4 | $ | 13.6 | $ | — | $ | 13.6 | ||||||||||||
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of three levels:
Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs are quoted prices of similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3 — Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
The deferred compensation investment is invested primarily in mutual funds and its fair value is measured using the market approach. This investment is in the same funds and purchased in substantially the same amounts as the participants’ selected investment options (excluding Post common stock equivalents), which represent the underlying liabilities to participants in the Company’s deferred compensation plans. Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants’ selected investment options (excluding certain Post common stock equivalents to be distributed in shares) using the market approach. The Company utilizes the income approach to measure fair value for its derivative assets, which include commodity options and futures contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves and forward prices.
Changes in the fair value of assets and liabilities measured at fair value on a recurring basis are recorded as a component of selling, general and administrative expense, except for derivative instruments which are recorded in cost of goods sold.
The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, receivables and accounts payable approximate fair value because of the short maturities of these financial instruments. The fair value of long-term debt as of March 31, 2014 and September 30, 2013 (see Note 12) is approximately $2,414.7 and $1,450.6, respectively, based on quoted market prices for the Company’s senior notes.
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NOTE 11 — COMMON AND PREFERRED STOCK
In February 2013, the Company authorized and issued approximately 2.4 million shares of its 3.75% Series B Cumulative Perpetual Convertible Preferred Stock. The Company received net proceeds of $234.0 after paying offering related fees and expenses of approximately $7.5. The preferred stock has a $0.01 par value per share and a $100.00 liquidation value per share. The preferred stock earns cumulative dividends at a rate of 3.75% per annum payable quarterly on February 15, May 15, August 15 and November 15, beginning on May 15, 2013. The preferred stock is non-voting and ranks senior to our outstanding common stock upon the Company’s dissolution or liquidation. The preferred stock has no maturity date; however, holders of the preferred stock may convert their preferred stock at an initial conversion rate of 2.1192 shares of the Company’s common stock per share of convertible preferred stock, which is equivalent to a conversion price of $47.19 per share of common stock. Additionally, on or after February 15, 2018, the Company will have the option to redeem some or all the preferred stock at a redemption price equal to 100% of the liquidation preference per share, plus accrued and unpaid dividends if the closing sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.
In December 2013, the Company authorized and issued approximately 3.0 million shares of its 2.5% Series C Cumulative Perpetual Convertible Preferred Stock. The Company also granted the initial purchasers of the preferred stock a 30-day option to purchase additional shares of preferred stock. On January 14, 2014, the initial purchasers exercised their option and purchased an additional 0.2 million shares. The Company received net proceeds of $310.2 after paying offering related fees and expenses of approximately $9.8. The preferred stock has a $0.01 par value per share and a $100.00 liquidation value per share. The preferred stock earns cumulative dividends at a rate of 2.5% per annum payable quarterly on February 15, May 15, August 15 and November 15, beginning on February 15, 2014. The preferred stock is non-voting and ranks senior to our outstanding common stock upon the Company’s dissolution or liquidation. The preferred stock has no maturity date; however, holders of the preferred stock may convert their preferred stock at an initial conversion rate of 1.8477 shares of the Company’s common stock per share of convertible preferred stock, which is equivalent to a conversion price of $54.12 per share of common stock. Additionally, on or after February 15, 2019, the Company will have the option to redeem some or all the preferred stock at a redemption price equal to 100% of the liquidation preference per share, plus accrued and unpaid dividends if the closing sale price of the Company’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.
In March 2014, the Company issued 5.75 million shares of common stock, par value $0.01 per share, at a price to the public of $55.00 per share. The Company received net proceeds of $303.5 after paying offering related fees and expenses of approximately $12.8.
NOTE 12 — LONG TERM DEBT
Long-term debt as of the dates indicated consists of the following:
March 31, 2014 | September 30, 2013 | ||||||
7.375% Senior Notes maturing February 2022 | $ | 1,375.0 | $ | 1,375.0 | |||
6.75% Senior Notes maturing December 2021 | 875.0 | — | |||||
$ | 2,250.0 | $ | 1,375.0 | ||||
Plus: Unamortized premium | 52.1 | 33.6 | |||||
Total long-term debt | $ | 2,302.1 | $ | 1,408.6 | |||
On November 18, 2013, the Company issued $525.0 principal value of 6.75% senior notes due in December 2021. The 6.75% senior notes were issued at par and the Company received $516.2 after paying investment banking and other fees of $8.8 which will be deferred and amortized to interest expense over the term of the notes. On March 19, 2014, the Company issued an additional $350.0 principal value of 6.75% senior notes due in December 2021. The additional 6.75% senior notes were issued at 105.75% of par value and the Company received $364.0 after paying investment banking and other fees of $6.1 which will be deferred and amortized to interest expense over the term of the notes.
The 7.375% senior notes and the 6.75% senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing and future material domestic subsidiaries (other than immaterial subsidiaries or receivables finance subsidiaries). Our foreign subsidiaries do not guarantee the senior notes. These guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions).
On January 29, 2014, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the institutions from time to time party thereto as Lenders (the “Lenders”), Barclays Bank PLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners, Barclays Bank PLC,
12
as Syndication Agent, Credit Suisse AG, Cayman Islands Branch and Goldman Sachs Bank USA, as Documentation Agents, and Wells Fargo Bank, National Association, as Administrative Agent for the Lenders (in such capacity, the “Agent”). The Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $300.0 (the “Revolving Credit Facility”) and potential incremental revolving and term facilities at the request of the Company and at the discretion of the Lenders, on terms to be determined and in a maximum aggregate amount not to exceed the greater of $300.0 and an amount such that the Company’s pro forma senior secured leverage ratio would not exceed 2.50 to1.00. The Company intends to use the proceeds of loans under the Credit Agreement for general corporate purposes, which may include, among other things, financing acquisitions, working capital and capital expenditures. The outstanding amounts under the Revolving Credit Facility must be repaid on or before January 29, 2019. The Company incurred $2.4 of issuance costs in connection with the Credit Agreement.
Borrowings under the Revolving Credit Facility bear interest at the Eurodollar Rate or the Base Rate (as such terms are defined in the Credit Agreement) plus an applicable margin ranging from 2.00% to 2.50% for Eurodollar Rate-based loans and from 1.00% to 1.50% for Base Rate-based loans, depending upon the Company’s senior secured leverage ratio.
The Credit Agreement contains customary affirmative and negative covenants for agreements of this type, including delivery of financial and other information, compliance with laws, maintenance of property, existence, insurance and books and records, inspection rights, obligation to provide collateral and guarantees by new subsidiaries, preparation of environmental reports, participation in an annual meeting with the Agent and the Lenders, further assurances, satisfaction of post-closing obligations, limitations with respect to indebtedness, liens, fundamental changes, restrictive agreements, use of proceeds, amendments of organization documents, accounting changes, prepayments and amendments of indebtedness, dispositions of assets, acquisitions and other investments, sale leaseback transactions, conduct of business, transactions with affiliates, dividends and redemptions or repurchases of stock, capital expenditures, and granting liens on real property.
The Credit Agreement also contains customary financial covenants including (a) a quarterly maximum senior secured leverage ratio of 2.75 to 1.00, and (b) a quarterly minimum interest coverage ratio of 1.75 to 1.00.
The Credit Agreement provides for customary events of default, including material breach of representations and warranties, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay, or default under, certain other material indebtedness, certain events of bankruptcy and insolvency, inability to pay debts, the occurrence of one or more unstayed or undischarged judgments in excess of $35.0 or attachments issued against a material part of the Company’s property, change in control, the invalidity of any loan document, the failure of the collateral documents to create a valid and perfected first priority lien, and certain ERISA events. Upon the occurrence of an event of default, the Agent will, at the request of, or may, with the consent of, lenders holding more than 50% in principal amount of lender commitments and outstanding loans under the Credit Agreement, cause the maturity of the loans to be accelerated and exercise other rights and remedies available at law or under the loan documents, including with respect to the collateral and guarantees for the Company’s obligations under the Credit Agreement.
The Company’s obligations under the Credit Agreement are unconditionally guaranteed by each of its existing and subsequently acquired or organized material domestic subsidiaries. The Company’s obligations under the Credit Agreement are secured by security interests on substantially all of the assets of the Company and the Guarantors, except for real property, which will be added to the collateral if the Company incurs additional debt in excess of $150.0 under the Credit Agreement.
In February 2014, the Company paid $2.5 of financing fees to the underwriters of a financing commitment the Company entered into in September 2013 to fund our acquisition of Dakota Growers. The commitment was not exercised and the Company has expensed the full amount to interest expense for the three and six months ended March 31, 2014.
Debt Covenants
The terms of the Credit Facility required the Company to comply with certain financial covenants consisting of ratios for maximum consolidated leverage and minimum interest expense coverage. As of March 31, 2014, the Company was in compliance with all such financial covenants.
NOTE 13 — PENSION AND OTHER POSTRETIREMENT BENEFITS
Certain of the Company’s employees are eligible to participate in the Company’s qualified and supplemental noncontributory defined benefit pension plans and other postretirement benefit plans (partially subsidized retiree health and life insurance) or separate plans for Post Foods Canada Inc. Amounts for the Canadian plans are included in these disclosures and are not disclosed separately because they do not constitute a significant portion of the combined amounts.
The following tables provide the components of net periodic benefit cost for the plans.
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Pension Benefits | |||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Components of net periodic benefit cost | |||||||||||||||
Service cost | $ | 0.9 | $ | 1.0 | $ | 1.8 | $ | 2.1 | |||||||
Interest cost | 0.6 | 0.4 | 1.1 | 0.8 | |||||||||||
Expected return on plan assets | (0.6 | ) | (0.4 | ) | (1.1 | ) | (0.8 | ) | |||||||
Recognized net actuarial loss | 0.2 | 0.3 | 0.4 | 0.5 | |||||||||||
Recognized prior service cost | 0.1 | 0.1 | 0.2 | 0.2 | |||||||||||
Net periodic benefit cost | $ | 1.2 | $ | 1.4 | $ | 2.4 | $ | 2.8 | |||||||
Other Benefits | |||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Components of net periodic benefit cost | |||||||||||||||
Service cost | $ | 0.5 | $ | 0.6 | $ | 1.0 | $ | 1.2 | |||||||
Interest cost | 1.2 | 1.0 | 2.3 | 2.0 | |||||||||||
Recognized net actuarial loss | 0.1 | 0.5 | 0.2 | 0.9 | |||||||||||
Recognized prior service credit | (0.6 | ) | (0.3 | ) | (1.2 | ) | (0.6 | ) | |||||||
Net periodic benefit cost | $ | 1.2 | $ | 1.8 | $ | 2.3 | $ | 3.5 | |||||||
NOTE 14 — TRANSACTIONS WITH FORMER OWNER
Prior to Post’s legal separation from Ralcorp Holdings, Inc. (“Ralcorp”) on February 3, 2012 (the “Spin-Off”), Post operated under Ralcorp’s centralized cash management system, Post’s cash requirements were provided directly by Ralcorp, and cash generated by Post was generally remitted directly to Ralcorp. Transaction systems (e.g. payroll, employee benefits and accounts payable) used to record and account for cash disbursements were generally provided by Ralcorp. Ralcorp also provided centralized demand planning, order management, billing, credit and collection services to Post. Transaction systems (e.g. revenues, accounts receivable and cash application) used to record and account for cash receipts were generally provided by centralized Ralcorp organizations. These Ralcorp systems were generally designed to track assets/liabilities and receipts/payments on a business specific basis. After the Spin-Off, Ralcorp continues to provide certain of these services to Post under a transition services agreement (“TSA”) between the companies. TSA charges were $0.1, $1.5, $0.5 and $3.1 for the three and six months ended March 31, 2014 and 2013, respectively, and were reported in “Selling, general and administrative expenses.”
Post produces certain products for sale to Ralcorp. For periods subsequent to the Spin-Off, these transactions were based upon pricing governed by the TSA. Net sales related to those transactions were $2.5, $3.5, $6.2 and $7.5 in the three and six months ended March 31, 2014 and 2013, respectively.
In connection with the Spin-Off, the Company entered into a series of agreements with Ralcorp which are intended to govern the relationship between the Company and Ralcorp and to facilitate an orderly separation of the Company from Ralcorp. These agreements include a Separation and Distribution Agreement, Tax Allocation Agreement and the TSA, among others. Additionally, the Company has agreed to indemnify Ralcorp for income taxes incurred if the Company violates certain provisions of the IRS private letter ruling obtained by Ralcorp. Under certain of these agreements, the Company will incur expenses payable to Ralcorp in connection with certain administrative services provided for varying lengths of time. The Company incurred separation related costs of $0.1, $2.4, $0.3 and $5.2 during the three and six months ended March 31, 2014 and 2013, respectively. These separation related costs incurred were primarily related to third party professional service fees to effect the Spin-Off and professional service fees and duplicative costs incurred by Post to establish stand-alone processes and systems for activities performed by Ralcorp under the TSA. These costs were reported as a component of “Selling, general and administrative expenses.”
NOTE 15 — SEGMENTS
Management evaluates each segment’s performance based on its segment profit, which is its operating profit before impairment of intangible assets, accelerated depreciation on plant closures, restructuring expenses, and other unallocated corporate income and expenses. During the first quarter of fiscal 2014, the Company changed its methodology for allocating certain corporate costs to segment profit. Accordingly, segment profit for the three and six months ended March 31, 2013 has been adjusted to align with current year presentation. The following tables present information about the Company’s operating segments, which are also its
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reportable segments, including corresponding amounts for the prior year. For a definition of the Company’s reportable segments, see Note 1.
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Net Sales | |||||||||||||||||
Post Foods | $ | 239.5 | $ | 245.4 | $ | 476.4 | $ | 482.3 | |||||||||
Attune Foods | 22.2 | 2.8 | 45.4 | 2.8 | |||||||||||||
Active Nutrition | 70.6 | — | 107.8 | — | |||||||||||||
Private Brands | 105.7 | — | 105.7 | — | |||||||||||||
Eliminations | — | — | (0.3 | ) | — | ||||||||||||
Total | $ | 438.0 | $ | 248.2 | $ | 735.0 | $ | 485.1 | |||||||||
Segment Profit (Loss) | |||||||||||||||||
Post Foods | $ | 41.7 | $ | 45.3 | $ | 88.2 | $ | 92.3 | |||||||||
Attune Foods | 1.9 | (0.6 | ) | 4.5 | (0.6 | ) | |||||||||||
Active Nutrition | 0.2 | — | 4.4 | — | |||||||||||||
Private Brands | 0.8 | — | 0.8 | — | |||||||||||||
Total segment profit | 44.6 | 44.7 | 97.9 | 91.7 | |||||||||||||
General corporate expenses and other | 30.9 | 15.8 | 54.5 | 32.5 | |||||||||||||
Accelerated depreciation on plant closure | 2.0 | — | 4.7 | — | |||||||||||||
Losses on hedge of purchase price of foreign currency denominated acquisition | 11.8 | — | 13.1 | — | |||||||||||||
Restructuring expenses | 0.2 | — | 0.7 | — | |||||||||||||
Interest expense | 37.3 | 21.6 | 66.3 | 40.8 | |||||||||||||
(Loss) earnings before income taxes | $ | (37.6 | ) | $ | 7.3 | $ | (41.4 | ) | $ | 18.4 | |||||||
Depreciation and amortization | |||||||||||||||||
Post Foods | $ | 12.7 | $ | 14.9 | $ | 25.9 | $ | 30.0 | |||||||||
Attune Foods | 1.7 | 0.1 | 3.5 | 0.1 | |||||||||||||
Active Nutrition | 4.3 | — | 5.9 | — | |||||||||||||
Private Brands | 7.3 | — | 7.3 | — | |||||||||||||
Total segment depreciation and amortization | 26.0 | 15.0 | 42.6 | 30.1 | |||||||||||||
Accelerated depreciation on plant closure | 2.0 | — | 4.7 | — | |||||||||||||
Corporate | 2.1 | 1.2 | 3.9 | 2.3 | |||||||||||||
Total | $ | 30.1 | $ | 16.2 | $ | 51.2 | $ | 32.4 | |||||||||
March 31, 2014 | September 30, 2013 | ||||||||||||||||
Assets | |||||||||||||||||
Post Foods | $ | 2,592.0 | $ | 2,614.9 | |||||||||||||
Attune Foods | 171.2 | 172.0 | |||||||||||||||
Active Nutrition | 646.3 | 198.0 | |||||||||||||||
Private Brands | 819.9 | — | |||||||||||||||
Corporate | 954.7 | 488.9 | |||||||||||||||
Total | $ | 5,184.1 | $ | 3,473.8 | |||||||||||||
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NOTE 16 — CONDENSED FINANCIAL STATEMENTS OF GUARANTORS
On February 3, 2012, the Company issued the 7.375% senior notes due February 2022 in an aggregate principal amount of $775.0 to Ralcorp pursuant to a contribution agreement in connection with the internal reorganization. The aggregate principal amount of the 7.375% senior notes was increased to a total of $1,375.0 by subsequent issuances completed on October 25, 2012 and July 18, 2013.
On November 18, 2013, the Company issued 6.75% senior notes due December 2021 in an aggregate principal amount of $525.0 to certain qualified institutional buyers. The aggregate principal amount of the 6.75% senior notes was increased to a total of $875.0 by a subsequent issuance completed on March 19, 2014.
The 7.375% senior notes and the 6.75% senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing and future domestic subsidiaries, the “Guarantors.” Our foreign subsidiaries, the “Non-Guarantors,” do not guarantee the senior notes. These guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions).
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POST HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2014 | |||||||||||||||||||
Parent | Non- | ||||||||||||||||||
Company | Guarantors | Guarantors | Eliminations | Total | |||||||||||||||
Net Sales | $ | — | $ | 390.1 | $ | 51.2 | $ | (3.3 | ) | $ | 438.0 | ||||||||
Cost of goods sold | — | 267.8 | 44.1 | (3.3 | ) | 308.6 | |||||||||||||
Gross Profit | — | 122.3 | 7.1 | — | 129.4 | ||||||||||||||
Selling, general and administrative expenses | 3.7 | 96.4 | 4.7 | — | 104.8 | ||||||||||||||
Amortization of intangible assets | — | 10.9 | 1.8 | — | 12.7 | ||||||||||||||
Loss on foreign currency | 11.8 | 0.1 | — | — | 11.9 | ||||||||||||||
Restructuring expense | — | 0.2 | — | — | 0.2 | ||||||||||||||
Other operating expenses, net | — | 0.1 | — | — | 0.1 | ||||||||||||||
Operating (Loss) Profit | (15.5 | ) | 14.6 | 0.6 | — | (0.3 | ) | ||||||||||||
Interest expense | 35.4 | — | 1.9 | — | 37.3 | ||||||||||||||
(Loss) Earnings before Income Taxes | (50.9 | ) | 14.6 | (1.3 | ) | — | (37.6 | ) | |||||||||||
Income tax (benefit) expense | (30.1 | ) | 11.1 | (0.3 | ) | — | (19.3 | ) | |||||||||||
Net (Loss) Earnings before Equity in Subsidiaries | (20.8 | ) | 3.5 | (1.0 | ) | — | (18.3 | ) | |||||||||||
Equity earnings in subsidiaries | 2.5 | — | — | (2.5 | ) | — | |||||||||||||
Net (Loss) Earnings | $ | (18.3 | ) | $ | 3.5 | $ | (1.0 | ) | $ | (2.5 | ) | $ | (18.3 | ) | |||||
Total Comprehensive (Loss) Income | $ | (17.8 | ) | $ | 3.3 | $ | (0.3 | ) | $ | (3.0 | ) | $ | (17.8 | ) | |||||
Three Months Ended March 31, 2013 | |||||||||||||||||||
Parent | Non- | ||||||||||||||||||
Company | Guarantors | Guarantors | Eliminations | Total | |||||||||||||||
Net Sales | $ | — | $ | 236.7 | $ | 16.1 | $ | (4.6 | ) | $ | 248.2 | ||||||||
Cost of goods sold | — | 137.2 | 13.1 | (4.6 | ) | 145.7 | |||||||||||||
Gross Profit | — | 99.5 | 3.0 | — | 102.5 | ||||||||||||||
Selling, general and administrative expenses | 2.7 | 63.1 | 4.1 | — | 69.9 | ||||||||||||||
Amortization of intangible assets | — | 3.2 | — | — | 3.2 | ||||||||||||||
Loss on foreign currency | — | — | 0.2 | — | 0.2 | ||||||||||||||
Other operating expenses, net | — | 0.3 | — | — | 0.3 | ||||||||||||||
Operating (Loss) Profit | (2.7 | ) | 32.9 | (1.3 | ) | — | 28.9 | ||||||||||||
Interest expense | 21.6 | — | — | — | 21.6 | ||||||||||||||
(Loss) Earnings before Income Taxes | (24.3 | ) | 32.9 | (1.3 | ) | — | 7.3 | ||||||||||||
Income tax (benefit) expense | (7.7 | ) | 10.3 | (0.4 | ) | — | 2.2 | ||||||||||||
Net (Loss) Earnings before Equity in Subsidiaries | (16.6 | ) | 22.6 | (0.9 | ) | — | 5.1 | ||||||||||||
Equity earnings in subsidiaries | 21.7 | — | — | (21.7 | ) | — | |||||||||||||
Net Earnings (Loss) | $ | 5.1 | $ | 22.6 | $ | (0.9 | ) | $ | (21.7 | ) | $ | 5.1 | |||||||
Total Comprehensive Income (Loss) | $ | 4.1 | $ | 22.9 | $ | (2.2 | ) | $ | (20.7 | ) | $ | 4.1 | |||||||
17
Six Months Ended March 31, 2014 | |||||||||||||||||||
Parent | Non- | ||||||||||||||||||
Company | Guarantors | Guarantors | Eliminations | Total | |||||||||||||||
Net Sales | $ | — | $ | 674.9 | $ | 70.8 | $ | (10.7 | ) | $ | 735.0 | ||||||||
Cost of goods sold | — | 441.9 | 59.9 | (10.7 | ) | 491.1 | |||||||||||||
Gross Profit | — | 233.0 | 10.9 | — | 243.9 | ||||||||||||||
Selling, general and administrative expenses | 6.9 | 170.7 | 8.6 | — | 186.2 | ||||||||||||||
Amortization of intangible assets | — | 16.6 | 1.8 | — | 18.4 | ||||||||||||||
Loss on foreign currency | 13.1 | 0.4 | — | — | 13.5 | ||||||||||||||
Restructuring expense | — | 0.7 | — | — | 0.7 | ||||||||||||||
Other operating expenses, net | — | 0.2 | — | — | 0.2 | ||||||||||||||
Operating (Loss) Profit | (20.0 | ) | 44.4 | 0.5 | — | 24.9 | |||||||||||||
Interest expense | 64.4 | — | 1.9 | — | 66.3 | ||||||||||||||
(Loss) Earnings before Income Taxes | (84.4 | ) | 44.4 | (1.4 | ) | — | (41.4 | ) | |||||||||||
Income tax (benefit) expense | (42.0 | ) | 21.6 | (0.3 | ) | — | (20.7 | ) | |||||||||||
Net (Loss) Earnings before Equity in Subsidiaries | (42.4 | ) | 22.8 | (1.1 | ) | — | (20.7 | ) | |||||||||||
Equity earnings in subsidiaries | 21.7 | — | — | (21.7 | ) | — | |||||||||||||
Net (Loss) Earnings | $ | (20.7 | ) | $ | 22.8 | $ | (1.1 | ) | $ | (21.7 | ) | $ | (20.7 | ) | |||||
Total Comprehensive (Loss) Income | $ | (22.5 | ) | $ | 22.5 | $ | (2.6 | ) | $ | (19.9 | ) | $ | (22.5 | ) | |||||
Six Months Ended March 31, 2013 | |||||||||||||||||||
Parent | Non- | ||||||||||||||||||
Company | Guarantors | Guarantors | Eliminations | Total | |||||||||||||||
Net Sales | $ | — | $ | 460.0 | $ | 37.0 | $ | (11.9 | ) | $ | 485.1 | ||||||||
Cost of goods sold | — | 259.4 | 29.4 | (11.9 | ) | 276.9 | |||||||||||||
Gross Profit | — | 200.6 | 7.6 | — | 208.2 | ||||||||||||||
Selling, general and administrative expenses | 5.2 | 128.5 | 8.4 | — | 142.1 | ||||||||||||||
Amortization of intangible assets | — | 6.4 | — | — | 6.4 | ||||||||||||||
Loss on foreign currency | — | — | 0.1 | — | 0.1 | ||||||||||||||
Other operating expenses, net | — | 0.4 | — | — | 0.4 | ||||||||||||||
Operating (Loss) Profit | (5.2 | ) | 65.3 | (0.9 | ) | — | 59.2 | ||||||||||||
Interest expense | 40.8 | — | — | — | 40.8 | ||||||||||||||
(Loss) Earnings before Income Taxes | (46.0 | ) | 65.3 | (0.9 | ) | — | 18.4 | ||||||||||||
Income tax (benefit) expense | (14.7 | ) | 20.7 | (0.3 | ) | — | 5.7 | ||||||||||||
Net (Loss) Earnings before Equity in Subsidiaries | (31.3 | ) | 44.6 | (0.6 | ) | — | 12.7 | ||||||||||||