Welcome to Post Holdings Fourth Quarter 2014 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Financial Officer; and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12 p.m. Eastern Time. The dial-in number is (800) 585-8367, and the passcode is 25920667. At this time all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Brad Harper, Investor Relations of Post Holdings, for introductions. Sir, you may begin.

Thank you, and good morning. Welcome to the Post Holdings conference call where we will discuss results for the fourth quarter of fiscal 2014 and the fiscal year. With me today are Rob Vitale, our President CEO; and Jeff Zadoks, our CFO. Rob and Jeff will in the call with prepared remarks. And afterwards, we will be available for a brief question-and-answer session. The press release that supports these remarks is posted on our Web site at www.postholdings.com. Before we continue, I would like to remind you that this call will contain forward-looking statements. These forward-looking statements are subject to risks and uncertainties, which should be carefully considered by investors, as actual results could differ materially from these forward-looking statements. For more information, please visit the SEC Filings page in the Investor Relations section of our Web site. These statements speak only as of the date of this call, and management undertakes no obligation to update or revise these statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. As a reminder, this call is being recorded for audio replay. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our Web site. With that, I will turn the call over to Rob.

Thanks Brad. Good morning and thank you for joining us. Before we begin, on behalf Jim Dwyer, Jim Holbrook, Jeff Zadoks and myself, I would like to thank Bill Stiritz and our Board of Directors for the confidence they have shown in this team. I had the great fortune to start working with Bill nearly 20 years ago, and I look forward to continue working closely with him as the Post story continues to develop. I would like to start by talking about the reorganization we announced last month and then give you an update on the state of our business. As you know, last month we announced the restructuring of our business in the three groups. Consumer brands, Michael Foods and Private Label. Our reorganization was driven by four objectives. To maximize business unit autonomy with respect to customer and consumer facing activities; to leverage scale across the organization without comprising decision-making effectiveness; to share valuable assets across the business whether they be brands, plans, human capital or knowledge resources; and to overlay a reporting, forecasting and governance model that provides the ability to maintain an effective control environment and to allocate capital to its best use. With this in mind, I will briefly provide an overview of each segment. Consumer Brands is led by Jim Holbrook and it includes our Post Foods, Cereal and Active Nutrition brands. While brand autonomy is maintained, the coordination under common leadership greatly enhances the sharing of resources, systems and information across the businesses. We believe this structure will optimize the use of the Post sales force, marketing team, inside function, IT platform and logistics network. Our Michael Foods Group is led by Jim Dwyer, and it includes the Michael Foods' egg, potato and cheese businesses and the Dakota Growers Pasta business. This…

Thanks Rob. Good morning. I will start with our consolidated results, provide detail around the segments and then turn to our 2015 outlook. As with previous quarters, our financials include acquisitions from the respective closing dates forward without adjustments to prior periods except for Post Foods each segment includes a partial period in 2013 or 2014 or both. All segments reflect a full three month of results in the fourth quarter of 2014. For the fourth quarter, consolidated net sales were $1.043 billion; gross profit was $228.7 million including a $127 million from acquisitions. SG&A expense was $137.9 million and is running at 13.2% of net sales. SG&A from acquired businesses accounted for $64.9 million. Adjusted EBITDA was $137.3 million including $87.7 million from acquisitions. Non-cash impairment charges were $295.6 million related to Post Foods and Active Nutrition. As Rob mentioned, this amount is subject to final review and potential adjustment. We had a non-cash loss of $28.7 million in the fourth quarter primarily resulting from unrealized losses on the interest rate swaps that Rob discussed. These interest rates swaps will result in a cash settlement in July 2018 based on the forward interest rate curve at that time. Consolidated net interest expense was $60.4 million for the quarter compared to the prior year interest expense of $25.5 million. Pre-tax loss was $329.7 million and resulted in an income tax benefit of $42.3 million. The effective income tax rate was 12.8% principally from the impact of non-deductible goodwill charges. The net loss attributable to common stockholders was $291.7 million or $5.86 per share. Adjusted net earnings available for common stockholders and adjusted diluted earnings per common share for the quarter were $6.9 million and $0.13 respectively. For the year, net sales were approximately $2.4 billion with gross profit of $621.2…

[Operator Instructions] Your first question comes from the line of Andrew Lazar of Barclays.

Good morning everyone.

Good morning.

I just have a two or three questions here. I guess first off Rob, if we take the run rate EBITDA guidance that you provided for each of the acquisitions and kind of embed no underlying growth, I guess what seem as though the pro forma EBITDA for the business would be I guess would be very least towards the higher end of the fiscal 2015 guidance range? And that's true if we even adjust Dymatize lower and use a pretty cautious assumption for the legacy Post Foods business. I guess the question is, outside of Dymatize, as anything I guess changed the difference maybe Michael expected to track below the pre-synergy $255 million to $270 million range that you have once discussed. And maybe giving us a sense of what your best estimate of – sort of the pro forma 2014 EBITDA adjusted range number might have been, give us a sense of what year-over-year change looks like?

Okay. So first of all, I think a better way to look at the earnings power of the business as we have articulated as to really divide it up into first quarter and last three quarters. If you take the expected average of the last three quarters, I think you reach a conclusion much more inline with Street expectations. We have a one quarter problem resulting from in part the way we have treated the severance cost, the issue that we highlighted at Michael and then some weakness in RTE which we think can be remediated in the last three quarters of the year and we are happy to talk about. So I think that when you bifurcate it in that manner, you reach a conclusion much more consistent with Street expectations. With respect to reconciling some of the prior build up to the current, I would say two things, one, because some of the limitations about the ability to reconcile to a GAAP number or to a non-GAAP number. We can't give the adjusted EBITDA for the nine month period ended – for the 12 month period ended $930 million specifically. But, what I can comment on is, if you go back to the $570 million estimate in March some of the changes between that period would be Dymatize which is the most significant of the two that's roughly a $15 million impact between the two periods. And then some increase in corporate cost, which drives really relate from consistent level of corporate cost in the March quarter but were not fully reflected in the 331 build up because that covered a period going back to a time in which the only operating business was Post Foods. So from an operational perspective the only real change is Dymatize. Your question about Michael Foods, the answer is no. We feel very comfortable with the expectations of Michael for the year. We are not giving specific business unit segment guidance, but we are very comfortable with our underwriting case and the performance of Michael to-date.

Okay. That's helpful perspective thank you for that. And then I guess two questions on cereal, one is first, what is that impacting cereal sales so significantly in the first quarter, was it the case of just overshipping in the fourth maybe and kind of stealing a bit from the first and you have got a work down that inventory or trying to get a better sense for that? And then you mentioned trying to take some actions to offset some of the profitability pressure in the back half of the year where the back three quarters of the year. What exactly do you do there?

So two parts. First, I think there is probably some pull forward inventory from October to September. Our consumption in October was very high and we are seeing some softness in the shipment. So it does appear that there was some reductions in inventory at retail that should bode well for shipments going forward whether that's immediate or longer term is hard to tell right now. We continue to echo the same story that we have had for several quarters in which trade efficiencies are not reaching historical norms that the amount invested in EDLP is not allowing for the same level of trade ROI as it has been achieving and that's a key focus of our sales force to try to work with our retail partners to fix that and drive volumes. In terms of longer term and why we believe that we can maintain EBITDA for the balance of the year. First of all, I think its important to highlight that Post Foods is a critical – plays a critical role in our overall portfolio strategy which is to generate free cash flow that allows us to do one of two things either participate in consolidation of RTE which has cost and capacity implications or to diversify a way into more rapidly growing categories. We believe that we can maintain that level of cash flow throughout the year in part because of the cost programs that we just highlighted the Modesto program and packaging program. The packaging program specifically won't hit until the later half of the year. But also in our planning we took a much more cautious approach, a much more data driven approach rather than a judgment on what the category could do. We looked at the category growth rate or decline rate in 2014 and extrapolated that into 2015. We have ASC budget that is aimed at a higher growth rate or a higher – lesser rate of decline. So we have some flexibility in ASC budget as it goes throughout the year that will allow us to decelerate or accelerate the spending depending on how that year develops. So we have some levers to pull. We have some cost already taken to the plant that gives us reason to believe that on an EBITDA level even with some volume declines we can maintain a constant position throughout the year.

Thanks for that. And one last quick one on cereal. Your comment around challenges for the category mid-to-longer term, I guess what seem to realize this means potentially Post and really the category will have to take a much more severe look I guess at the cost structure to preserve profitability longer term. And I wanted to get your perspective on that and I guess you have four plants at the time of the spend, you closed the smallest one, volumes in general and the category are quite a bit lower than they were even then when you think you have mentioned you probably had some excess capacity. So I guess I'm just trying to get a sense of longer term, if the category continues to decline at this sort of a pace, I'm assuming your belief would be – some other things are going to have to cap in from a category perspective whether it's cost work or consolidation activity just seems like it can't go on if that rate without some additional actions to your perspective. It would be helpful.

No. I think you are characterization is quite fair that if the category rate of decline is in the 2% to 4% range that will create additional excess capacity and require a reaction to that. We are not prepared to say today exactly what that reaction maybe because we want to left some of that time develop and see where that rate of decline and hopefully the rate of decline changes. We obviously has a 11 share, don't have the ability to drive category volumes, we compete for share more than trying to impact the category. But, if the category continues to decline at that rate, it will require a reassessment of the cost structure some of which may occur through consolidation and some of which may be self-directed.

Thanks very much.

The next question comes from the line of Jason English of Goldman Sachs.

Hey, good morning folks. Thanks for the question. And Jeff, Rob congratulations on the new roles.

Thank you,

Thank you.

All right. Into corporate quite a bit, let me start with some high level question, you mentioned M&A still in your D&A and something you are going to pursue in the go forward. From the outside looking in – there seems to have been a bit of lack of strategic cohesion with some of your past deals with a lot of surprising as to, there is really just going into highly new spaces, new categories as we think about the trajectory on a go forward, could the acquisitions be as desperate on a go-forward or should we think about these three platforms you have established as more of the defined sand box where you are going to play in?

So I think there – I would take exception to the lack of strategic cohesion in that. We were setting out to create a portfolio that essentially pursued the consumer in terms of venues and price points and forms and which it was migrating away from the traditional bag in a box cereal and the center store. So I think while this kind of transformation is at some times cumbersome and bulky after it's done. I think you will see more cohesion around what is the ultimate strategy, which is to chase the consumer. So I'm going to answer the question with a caveat, the first part is going to be that yes, now, we have three scale size attractive platforms that we firmly believe will embed growth within our overall portfolio, again, with 75% of our revenue now coming from growing categories. The caveat is that you use a term at our D&A level, we do tend to be opportunistic if something comes along that makes a lot of sense and is attractive from an economic basis recognizing all the realities of our capital structure equity price and everything else. It doesn't mean we wouldn't explore and try to be creative in pursuing it. But, our first mission is to make sure the portfolio operational integrity is intact. Then overlay opportunities on it. And the last piece of opportunity is reaction.

Okay. That's helpful. Thank you. Stepping down a little more into Dymatize, the issues you described some pretty fixable, it sounds like its all supply chain oriented and you are working fast and furiously to get the fixes in place. You have taken a pretty sizable impairment charge presumably related to your long-term outlook for that business. So is there something a little more deeper ceded here that you are looking at and saying this isn't really fixable, the underlying earning stream for this business is going to be perpetually impaired versus what your initial incoming expectations where?

No. At the risk of Jeff kicking me under the table a little bit of a diatribe on the impairment process. It's a highly esoteric process based on theoretical buyers and theoretical sellers that in my opinion bears a very little resemblance to the economic reality of the situation at Dymatize. It's much easier to negotiate and agree on an outcome rather than to spend the time and effort to on audit fees to disagree with it. So I think in my opinion the impairment as no bearing on the long-term prospects of Dymatize. I think that we have asset that we had some diligence issues; we have some operational issues that are being fixed, we have an outstanding executive in charge now, who has a supply chain background from Nestle, so as he got – he got the right people and the right job. And I think that we will find that becomes a very attractive asset for us. So I wouldn't read anything into the impairment.

Rob, you mentioned diligence issues on this one. How are you addressing the diligence process on a go forward to make sure that with the next run of M&A, we don't stumble like we have here?

Well, I think the stumble on Dymatize related to the way we assess the operational execution. We have a long history in looking at brands and I think our analysis of the brands was spot on. The businesses that we have acquired in which the essential operation is converting an agricultural commodity to an ambient food product we are very good at. Where we fell short is in trying to apply those same skills to what is essentially more of a nutriceutical product in Dymatize. So the key learning from that was making sure we had a very good alignment between the internal resources we had and the external resources we need. So for instance on Michael, our operational diligence was entirely outsourced with very little internal HR utilization. So the key learning is recognizing our own limitations on internal knowledge on the type of product we are diligencing. From a branding perspective, from a general management perspective, the diligence was the same as the others and quite fine.

That's helpful. Last question I will pass it on, another area of disappointment last year was Dakota Growers and your ability to capture new customers at the pace that was expected. Can you give us an update on where you stand there?

Sure. And again, I'm going to be hesitant to give business unit guidance because one of the things that we think is value of the portfolio is the diversification it provides. So we don't want to necessarily look at each business unit going forward. We want to be held to the total but speaking specifically to Dakota, the customer contracts that we referenced previously have come online. The capital improvement that improved the yield from durum into semolina has been implemented and is working nicely. And it is actually on a ROI basis, a far more attractive project than it was previously because there has been a significant run up in the price of durum in the last three to four months. So if there is a headwind in Dakota now, its not about volume or yield, its about ability to make sure we are able to pass through the pricing on the durum run up at retail. If you recall about 70% of the durum – of the Dakota business is on a pass-through basis. So we have less at risk than you would have normally expect, but we do have 30% of our businesses on a traditional retail basis and requires us to negotiate pricing.

Thanks a lot guys. I will pass it on.

Your next question comes from the line of Bill Chappell of SunTrust.

Hi, good morning.

Hi, Bill.

Just a follow-up on Andrews question on guidance just to make sure this maybe simplistic, but if I annualize fourth quarter adjusted EBITDA and add power bar American Blanching and then the Modesto savings, you get to maybe 580, 600 in EBITDA. Is it just simple to say that's the way to look at it? But then the – kind of first quarter issues of 2015 and the continue kind of slowdown in the cereal business offset that to get us to where we are in guidance?

I'm going to answer it a little bit differently and kind of repeat what I said before is that, we believe the longer term earnings power of the company is more reflective of the last three quarters of the year than the first. Incorporating everything and you incorporated into the question. I don't want to deviate too far from that and get interpreted that our real guidance is something different than we have provided.

I would never imply, I'm just trying to make sure I'm doing the math right?

Yes. I think your math is right.

Okay. If I look at the cereal business just I think you said you are expecting 4% decline in the category, so are you expecting to be inline with that, I mean I say that because you have consistently seen market share gains have been outperforming the market over the – at least through the Nielsen's over the past three, four months. Is there – are you expecting more aggressive promotions from competitors or you need any change to that as we look into 2015?

Bill that's more of a change in the way we are looking at forecasting methodology. Last year, we gained share and we expect to gain share this year. But, we also had assumption about the category that deviated from the recent history of the category. So what we have done from a forecasting methodology perspective is to be very data driven and say that our most recent evidence is that the category is declining 4% and let's continue that assumption to the extent it doesn't creates a tailwind. We think what we can control. We are controlling very well. Jim and his team have done an exceptional job in driving share and revitalizing Post Foods extraordinarily difficult category in the last two years. So no, we are not surrendering the progress that the team Post Foods has made. We are looking at the category at a more cautious basis.

Okay. And then I don't fully understand the swaps commentary, what is that imply in terms of future acquisitions or amount of debt you are planning to take out of – I guess the next 12 months?

Well, really nothing over the next 12 months. So the way the swaps work is that they have a forward starting date – the forward starting date is July of 2018. And what the swaps effectively do is via cash settlement mechanism, lock-in a base rate of 4% on debt issuances of up to $750 million. So our worst case scenario, if we have no future M&A is that becomes part of our refinancing activity as we start to have call dates on our existing bonds. And our best case scenario is that that becomes the underlying capital base or rate base for additional M&A sometime before July of 2018.

So in the near term its just – like higher carrying costs but it doesn't imply there is an acquisition around the corner, you are still in digestion mood?

No. It does not imply anything about acquisitions in other corner. But its no higher carrying cost in the near term what it is volatility around mark-to-market as the swap rates move in the near term. But we are – there is no cash transferring, it's entirely mark-to-market. And we don't use hedge accounting, we just flow that through the P&L. But it is not, there is no cash impact for four years.

Got it. And then sorry last one for me is, Dymatize, did you see what international sales were that's where the pressure had been – I think they were down double-digit last quarter, so I didn't know that it improved at all with the things you have been doing?

Sequentially from the third quarter to the fourth quarter it improved 30%. So it began to recover substantially as we were reshipping into the EU. It's hard to see in an aggregate because the fourth quarter is seasonally a low quarter. So while our quarter-over-quarter U.S. business is significantly up at nearly 17% on a sequential basis it's actually down a little bit 6% from seasonality. And then we did lose some Coleman business in the short-term. But the international business was extremely strong as we brought the Coleman back in. Again, our optimism is based on how well the brand seems to be received, the individual that we put in-charge is doing – now he has been there short time, but the early read is quite exceptional.

All right. Thanks so much for the color.

Sure.

Your next question comes from the line of Cornell Burnette of Citi Research.

Good morning.

Good morning.

Okay. Well, great. Just wanted to probe more – a bit more about cereal, looking at your F2014 results, cereal sales down too and on the first quarter you are expecting just a massive shift in sales implied to be down 6% to 8%. I know that you said some of that could be due to just timing and inventory shipments and so forth. But, when I look at your F4Q results, your sales decline of 2% closely matched what you did in terms of Nielsen takeaway. So kind of squaring that up, I was wondering if there may be a bit more to what's happening to the cereal business in the first quarter?

The best we can tell, the first quarter is largely timing issue. Our consumption data remain strong, you probably seen October. We do think that there is a retail inventory impact very difficult to quantify. But there is no fundamental change in the dynamics in RTE either quarter-over-quarter or year-over-year; it remains a category that is in low single digit decline or mid-single digit decline. And a category in which we are competing quite effectively.

So then going forward is there a possibility that you will have kind of a reversal of this maybe in the future quarter where the shipments bounce back and you might have potentially a much better quarter in terms of top line in cereal?

Certainly that possibility exists. We are not planning on that possibility. I think one of the things you hopefully are hearing is a more cautious approach. And we are – I would say more hopeful than optimistic right now in that. We think what we can control we are controlling very well; our brands are performing or outperforming each of their direct competitors. But that – the category remains under a pressure.

And then I know it seems like you are saying that your forward outlook for cereal next year on a category level being down 4%, you are just saying look we are taking the current trends and which is projecting them forward. So I guess within that there is really no kind of consideration for maybe some of the things that were lapping such as the reduction and snap-in benefits. And if you made, do you have somewhat of an estimate for maybe what that meant to the category in fiscal 2014?

Well, that's not quite true. We think we did factor snap-in. We think it was about 8 to 9 10s of a point for a big part of the year. So we have gone from 4.6 to 4.0. So we captured a portion of it.

Okay. And then lastly, just getting back to the range, one, it seems obviously pretty wide $540 million to $580 million, so can you talk a bit about some of the puts and takes between the bottom end of the range, how do you get there and how do you get to the top end of the range? And then lastly, just going back to the fact that the guidance doesn't really seem to embed much growth in the base business kind of on a year-over-year basis. So when you had everything in play for last year, can you just talk about kind of what's driving that, I know you have certain issues in cereal but the rest of the portfolio was it an issue where maybe on some of your product lines just not getting enough pricing coming through maybe to offset some of the headwinds that you see in terms of cost?

So couple of things, first, we are attempting to provide you the real data and limit the amount of add backs to adjusted EBITDA. So things like restructuring charges which maybe qualifying for add backs we are trying to get away from adding to any list of add backs and get as close as we can to a peer number. So one of the reasons for some gapping of the guidance is to allow for restructuring activities where we think it makes sense and the cost related to that. Secondly, we still have a considerable amount of our portfolio that is new to the company. So while we are confident in the long-term prospects of each of the businesses. One of the things we are trying to factor in is some of the known unknowns that may occur and again there are known unknowns we don't have any particular reason to be concerned right now. But having missed last year, we want to be more cautious in communicating our expectations for this year. So that's the second piece. In terms of commodity pricing, there is – the only area that commodity pricing is a meaningful issue right now is on Michael, where we have very strong demand in eggs putting some pressure on the egg base supply, the green base supply at Michael and that will remedy itself throughout the balance of the year.

Okay. Thanks very much. End of Q&A

Thank you. That does conclude the Q&A portion of today's call. I will now return the call to management for any additional or closing remarks.

Well, again, thank you very much for your participation today. We look forward to next quarter and hopefully everyone has a happy Thanksgiving.

Thank you for participating in the Post Holdings Fourth Quarter 2014 Earnings Conference Call. You may now disconnect.