Welcome to Post Holdings’ First Quarter 2016 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer; and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12 O'clock PM. Eastern Time. The dial-in number is 800-585-8367 and the passcode is 26176230. 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 introduction. Sir, you may begin.

Thank you, and good morning. Welcome to the Post Holdings conference call where we will discuss results for the first quarter fiscal 2016. With me today are Rob Vitale, our President and CEO; and Jeff Zadoks, our CFO. Rob and Jeff will begin the call with prepared remarks, and afterwards, will be available for a brief question-and-answer session. The press release that supports these remarks is posted on our website at www.postholdings.com in the Investor Relations section and in the SEC filing section. In addition, the release is available in our SEC filings on the SEC's website. Before I 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 website. 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 website. With that I will turn the call over to Rob.

Thanks, Brad and thank you all for joining us. We are pleased to share with you our first quarter results, we had a terrific quarter. Our adjusted EBITDA performance was strong for each of our segments. On the consolidated basis, revenue was $1.2 billion and adjusted EBITDA was $235.6 million. This performance combined with our expectations for the remainder of the year has prompted us to raise our annual guidance. Our guidance also reflects incremental investments across the organization brand building and cost reduction that will drive growth in 2017. This morning I’m going to discuss some of the segment highlights and our strategic outlook. We are making great progress at Post Consumer Brands consumer brands. We continue to meet each milestones in our plan. Our ERP conversion this spring continues on track and when completed will enable us to identify and execute incremental synergy across logistics, warehousing and distribution. Our synergy plan is also on track and we expect to meet or exceed our synergy goal for fiscal 2016. In fact we now expect to deliver the previously announced $50 million in run rate annualized synergies by the end of fiscal 2016. We remain cautiously optimistic on the cereal category. The category continue to modestly improve this quarter showing dollar growth of 0.2% while pounds declined 0.5%, notably exceeding the quarter December saw both dollar and pound growth of 0.9% and 0.3% respectively. This is the first measured monthly increase in both pounds and dollars in more than four years. Category based sales improved behind consistent performance in FDM and distribution growth in the Club and Dollar channels. However, incremental sales remain soft across the category. Specific to Post our consumption was flat on a dollar basis and pound declined 0.6%. Our largest brand Honey Bunches of Oats grew…

Thanks, Rob. Good morning. Starting with Post Consumer Brands, first quarter sales were $411.6 million. On a comparable basis, sales decreased approximately 0.9%, with volumes flat. Volume increases for Pebbles, HBO and co-manufacturing were offset by reduced volumes for MOM branded products, as we wrap the highly promoted quarter in the prior year. Net pricing decline 1.1% on a comparable basis resulting from unfavorable mix associated with larger package sizes on Post branded products and higher private label and co-manufacturing volumes. Post Consumer Brands adjusted EBITDA was $97.2 million for the quarter. Adjusted EBITDA benefited from the increased Post branded product volumes, synergy savings and decreases in raw material and freight expenses. This was partially offset by increased advertising and consumer spending. Moving to the Michael Foods Group, net sales were $586.4 million for the first quarter. On a comparable basis, net sales decreased 6.2% while volumes declined the decline were in lower margin products and produce an attractive combination of price and mix resulting in improved profitability and margins for the segment. On a comparable basis, Egg volumes were down approximately 24% in line with our estimate of AI supply losses. While, Egg revenues declined 7.5% behind AI related price increases and favorable product mix. Potato volumes declined 9%. This was primarily driven by lower food service sales resulting from exiting low margin business. Potato sales declined only 1.7% however, with better product mix. Pasta volumes and sales were both up approximately 6%, primarily from increases in the private label and food ingredient channels. Cheese volumes declined 6.7% resulting from discontinued low margin product lines and declines in private label. Cheese sales declined to 10.6% and were pressured by reduced pricing resulted from lower Cheese and diary input cost compared to the prior year. Michael Foods Group adjusted EBITDA…

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

Good morning, everybody.

Hey, good morning Andres.

Two questions if I could. First would be regarding Michael, as we know the business goes through various cycles, over earnings, under earnings cycles of course. The discreet factors around pricing and such has certainly generated much higher EBITDA this quarter and obviously we know the margin percentage can move around quite a bit as well, but I guess the question on getting most on this is what you think represents a more reasonable center line for this business with respect to EBITDA? And maybe what a more normalized assumptions for the balance of the year and into fiscal 2017 at Michael?

So for the balance of the year we provide a guidance that we enforces our comment last quarter that EBITDA would be front loaded and that was based on the expectation that as repopulation efforts went underway, pricing would be a headwind and volumes would be a tailwind. But I think it's more important, one of the more important enquiry is less about the sustainability of Michael, but rather about the sustainability of Post EBITDA which is one of the values of the portfolio. And in that regard, looking a bit longer into 2017 we have a lot of confidence that the potential pricing headwinds will be more than offset with volume increases, better mix and cost reduction. Some of that comes from Michael where the business is now levered more to higher margin segments, some of that comes from expectations, we will drive incremental cost synergy at Consumer Brands and some comes from organic growth across the portfolio. But by no means are we guiding the cash flow that we do not expect to sustain.

Got it, and then in Consumer Brands piece, you mentioned some of that comes from synergy and you have obviously pulled forward $50 million in run rate savings from MOM Brands by the end of fiscal 2016 versus I guess 2017 previously and 2018 before that. So just curious did something specific there changed and then with respect to perhaps where the up side that you have talked about could be on the $50 million? Are we still waiting for the ERP integration in the spring to share that or at what point do we have a sense of the magnitude of what that can be?

Nothing has really changed, to I answer your first question what has given us more confidence to pull forward, the estimate is simply our line of sight now having been in it six months and greater and we have the confidence to pull that forward having seen no red flags that would cause us to hedge our estimates. So it's more about probability and achievement than any change in what has happened. With respect to the ERP, we continue to be on pace to complete the transition mid-spring and we expect to be in a position to revise synergy estimates shortly thereafter.

Okay, thanks for that. One last quick one, just the motivation behind the change, Bill Stiritz moving to Non-Executive Chairman most curious on those things, maybe it's just with the wind now or what was the timing involved and anything you can share on that would be helpful.

You know Andrew this is more reflection of the reality is how we've been interacting rather than a change. We don’t view it as much of the change, Bill has been extraordinarily gracious in this ongoing succession over the last nearly two years. And I think he just felt it was time to recognize and title the reality of the interaction. Bill has been a mentor of mine for 20-years and I would be crazy to stop seeking that council now and I wouldn’t expect anything to change from the way we've been operating historically.

Great, thanks very much.

Sure.

Your next question comes from the line of John Baumgartner of Wells Fargo.

Good morning. Thank you.

Hey John.

Rob, I think Nutrition saw some pretty increasable margin expansion in the quarter, can you discuss the benefits to derived there in terms of promotional shift that premier versus cost deflation versus maybe anything larger or structural saving that Dymatize coming through.

Well sure, but let me point out that. One of the drivers of margin expansion at Active Nutrition is the fact that we shrunk on profitable volume at Dymatize. So Dymatize broke even in both quarters, but it broke even on the much lower sales base this quarter. So naturally, the aggregate portfolio margin would increase. Having said that we had exceptional performance within the premier business and it coincided with a relatively low level of promotional activity. So we did see significant margin expansion. We do expect margins in this category to continue to be in that low-teens level though, particularly with recovery at Dymatize.

Okay. And then in Cereal, as you get more deeply into the MOM business. Wondering if you can maybe discuss some of the SKU management between legacy Post and MOM to the extent that you have an ability to cut low returning SKUs at MOM or may be go the other way and build distribution in other parts of the country for MOM?

Well we have both of those opportunities, somewhat in reverse order. One of the virtues of the combination is that the legacy Post and legacy MOM business is over and under index in the mirror image of each other, so we do believe there are some distribution expansion possible as we lever stronger sales relationships for each of those companies were on a legacy base is stronger. With respect to SKU rationalization that continues to be dependent upon achieving single ERP system to allow that effort to get underway. We do believe there are some opportunity to rationalize SKUs, but we would not expect to comment on it in much detail until after we get through the ERP conversion.

Great. Thanks Rob.

Thank you John.

Your next question comes from the line of Chris Growe of Stifel.

Hi Chris.

Hi, good morning. Just had a question for you if I could first on to understand on the EBITDA guidance, you had a great first quarter, you have more synergies coming through from MOM. I'm sure you can’t give us a number, but I'm just trying to get a sense of the investments you are going to make that may temper some of this good news we had on the first quarter and the upside from the synergies. And I guess just to go little further, you are planning to reinvest that sounds link that's mostly behind Post I'm guessing, but I wanted to be clear on that and then the investment - and I mean on marketing, but also around achieving greater synergies, again is that mostly related to Post or is that across the enterprise?

Well we can give you a number. We have increased some spending about $25 million for the balance of the year and that is in Active Nutrition, Michael and Consumer Brands. The bulk of the cost reduction is in Consumer Brands as we brought forward some cost reduction programs at the factory level that required some pre-spending and the bulk of the brand building is that both Consumer Brands and Active Nutrition.

Okay, thank you for that. And then just to understand on the rebuilding of supply at Michael Foods from the Egg business. I have two questions, one, your supply was being rebuilt throughout the quarter yet volumes were above what they were in this fourth quarter of 2015. So I did expect some sequential progress there, should I have not expected that and it sounds like we are going to see that kind of snap back in volume in Q2. And then also related to that the profitability in Eggs, I'm just curious how much of that is being driven by lower input prices maybe in relation to even the higher prices in general in relation to supply. So if you can give us some color around the profit growth in the Egg business?

So Chris with regards to the repopulation, we did definitely start repopulation in our fiscal first quarter, but not much in the way of supply, because the hands need to get to egg producing age. So we should begin to see volume coming back more significantly in our second fiscal quarter. As we've largely brought back online our owned farms, but we still not expecting them to reach their pre-AI production levels until sometime in our third quarter. And then the third-party contracted farms are slower to repopulate largely because they are much bigger and the efforts to do the repopulation following the longer cleanup takes a little bit longer. So the ramp up is still as what we had communicated before. We won't be back to full pre-AI levels until the end of calendar 2016.

Okay and then profitability then just you can handle that one around in terms of your lower input prices certainly have to be an aid along with just the price level in general for eggs, is that one that you would favor over the other in terms of explaining the strong first quarter?

Well in this quarter the larger factor was that the Urner Barry market for eggs peaked in August and then declined somewhat sharply during our fiscal first quarter and that had the benefit with our cost price relationship.

Okay. Thank you for the time.

Your next question comes from the line of Tim Ramey of Pivotal Research Group.

Thanks so much, good morning.

Hey Tim.

A couple more questions on Michael, if you think about the profitability here in the first quarter and then just the guidance, it's very hard to get there without EBITDA margin declining kind of back to historic levels or even lower in the remainder of the year. So I guess I wanted to get a sense of the big drivers in the first quarter, I mean I know that mix shift between not doing as much we dehydrated business or any versus lots of liquid business would have been a factor. Is that the biggest factor, is it margins on existing QSR customers, can you speak to that at all?

As volumes comes back we will revert to a more normalized mix, although coming out of the AI event we expected, as I commented on to be more levered to higher margin segments, but while supply has been constrained, we have then extremely levered to the higher margin segments. So we expect volume benefits, but margin degradation as the business expands back to normative distribution by segment, but then we also are as we talked about trying to drive some growth beyond 2016 by making some P&L investments in the current year so that we can sustain the dollar profit even if we don’t sustain the percentage profit.

Okay. And I know you lead the market in the cage free business and that is a bigger growth. How should we think about as an impact on margin, is that something that will have a cost on as you ramp up that business that ultimately contributes better margins?

We expect that long-term conversion to the margin neutral to positive and we expect that to be over a up to a decade long process of partnering with customers to make that transition.

Good, okay and just one more on Michael, sorry to over emphasis that but when are we likely to the kind of back to regular contract relationships with customers and are we right to think that there is a round of contract negotiations that occur where the risk premium for AI gets built into long-term contract for customers/

So the answer to that question is really the contracts stayed enforce and what we did is we added a cost premium during this period of time. So what we've talked about before is starting to happen and that is the as the supply dynamic rebalances, we’re rolling back those cost status. So the core contract has remained in place, it’s simply the pricing mechanism has changed. We wouldn’t expect that to get back to the pre-AI levels until all the pre-AI supply comes back. So that’s an activity that goes through our fiscal 2016. In terms of the second part of the question, we certainly expect that there will be dynamics around contract negotiations that will revolve around AI and protections around AI. We expect that there will be a long-term investment in the bio security and other measures that will add cost that will ultimately be built into those contracts, but at this point we haven't done a lot of renegotiating of new contracts yet, so it's difficult to say exactly what form those modification will take.

Sure. Thank you.

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

Good morning, thanks.

Hey Bill.

A quick one on Michael's, with spot prices dropping inter quarter, was there any kind of artificial or I guess - short-term lift in the quarter that reverses itself that says you are buying on spot but then have the price pass through takes 90-days.

Well I think the entirety of our expectations around market dynamic is baked into our guidance, so as you see that the first quarter over performs the averages of the balance of the three quarters that reflects our expectations around market dynamics and Eggs as well as the balance of the portfolio.

But I guess does it reverse this next quarter or does it take a longer than that?

It's more of the glide path than a cliff.

Got you, and then second just looking at two parts of the business, not to pick on, but PowerBar kind of declining now so a year after you bought it. Can you give us kind of some color, are there signs of stabilizing that in the U.S. or plans or is it really more focused on cost cutting at this point. And then you also mentioned that tree nut butters were down, I mean that seems to be a category that has been growing for the past few years and probably why you bought it, so giving more color on that would be great?

Our PowerBar has had some cost cutting with the closure of the Boyce facility, but we are actually investing in PowerBar. We continue to believe that's a brand with significant opportunity and the declines are not terribly expected. Given the duration of the time in which they have been neglected and the hand off from [Nestle] (Ph) and Post. So nothing terribly surprising about the challenges in PowerBar, we've had some distribution losses, where we continue to have distribution strength, we continue to also have decent velocities, but that brand is a brand in turnaround as we would have expected and we’re putting money behind it. The nut butter category continues to perform nicely, our specific situation was that we had gotten meaningfully ahead of the category and we’re so sorry to several retailers who have given the growth in the category, decide they needed to add some second sourcing. So we didn’t lose any customer, but we lost dedicated relationships as they brought in some secondary sourcing. So we had a temporary setback in the tree nut segment as we had some competition that came in on secondary sourcing.

Got it. So both PowerBar and nut butters that should try to continue at least for another quarter or two.

Yes that's correct.

Perfect. Thanks so much.

Thank you.

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

Hey good morning, everyone.

Good morning.

Okay, so I think you mention that there is $25 million of incremental brand investment over the remainder of the year. Just curious what was the incremental brand investment in the first quarter?

Relative and modest, I think was about $3 million, it wasn’t that much.

On a year-over-year basis.

On a year-over-year basis.

Okay, great. And then I think someone asked this question earlier, but when you think about cereal and some of the brand investments that you are putting on there, it seems like MOM is probably going to get some of that monies as well, I believe by even so a MOM commercial this quarter for the first time. So just wondered what is the dynamic with MOM historically, has this brand received a lot of brand investments and kind of how can it view now that you have it and maybe you have given it some more money towards the brand than what we see before.

So the MOM brand taps very high with customer loyalty, but very low with brand awareness. So we have earmarked some consumer spending behind that brand and as a result you saw the commercial, so that's a positive sign. I think the other aspect of that is with post and the scale that we now have are media buys are much more efficient. So do we expect to see some improvement on the cost side of our overall advertising spend.

Okay, so then I mean a big picture on the cereal category you know we witnessed about six straight quarters now of sequential volume and sales improvement than what the trends were and we actually got flattish sales in the December quarter. So was Post reinvesting back in the categories as well as your major competitors, do you believe the category can actually get back to growth in 2016?

We have in all of our long range plan assumed a zero category growth, so we view the actions that were taking as well as the actions that our competition is taking as upside if the category were to grow, but we are not banking on growth.

Okay. And then lastly just going back to Active Nutrition, it seem like a positive surprise to us in the quarter with EBITDA $16 million or $17 million and then EBITDA margin of 14%, these are the strongest numbers that we've seen since that Active Nutrition segment has been with Post. So I was wondering, was there something specially in the quarter that drove that because it would seem to me that as you go forward with the December quarter being kind of the seasonally weak quarter for that business. That as you move into the summer months you have the possibility to see profits trends as good if not better than what we saw at this quarter or was there something special about the quarter that we need to consider going forward?

No the Premier business has performed just exceptionally well. We with our expectations for the year more than triple about since the acquisition. The business is growing within its existing channels and expanding channels. And the incremental volume is driving higher converted EBITDA margins, so it's based organic growth in the business at the same time as I mentioned having strong business that was either zero or negative EBITDA at Dymatize that has a significant impact on margin mix.

So I mean essentially that 14% EBITDA figure in the quarter is good going forward and overtime as may be you start to turn around that PowerBar and leverage more at Active Nutrition that low-teen kind of target is we are not very far from there and it's quite achievable?

That’s right. We have said virtually from the inception of our investment in the category that we think it's a low-teen margin business. And I'll leave open to debate whether 14 is lower mid-teens, I don’t want to put that fine a point on it. That 14 is specifically is the right number, but we are sticking with our position that we've had for some time that we can sustain at growing low-teens margin in this business, I would say low-teen margin in a growing business.

Okay. Thanks a lot.

Your next question comes from the line of Heather Jones of BB&T Capital Markets.

Good morning.

Good morning.

Good morning.

I have a couple of questions, first on what we are seeing in MOM Brands volumes recently on consumption data. I was wondering is that simply some of the data that we've seen is looks like mid-teens volume decline and I was wondering is that more a factor of tougher comparisons or are you seeing some impacts from some changes at Walmart that we have heard other companies talk about, if I may know.

No its entirely a function of lapping a very heavily promoted period to prior quarter.

Okay. And moving back to Michael Foods, I was wondering what you are seeing on the food service side as far as all day breakfast demand and related to that given that you guys were able to fulfill your food service customers needs during this period, but some of your competitors were not. As volume normalizes, do you anticipate being able to appreciably shift the percentage of your portfolio that goes to food service?

So to take your first question, with the all day breakfast, it's hard to pinpoint that effect in isolation given all the noise in the category, but what we can share is that there has been no demand destruction in food service whereas there has been demand destruction at retail for instance. With respect to the second part, we certainly believe that coming out of AI, we have strengthened our relationship with our channel partners. What that means with respect to shifting the business between the various segment is yet to be observed, but we certainly think we come out of this in an enhanced position from a reputational support, supply chain, bio security from a variety of perspectives. We feel like this has been a positive result as we went through this crisis together.

So can you help me understand, you mentioned in nut butters that some of your customers are want to diversify their sourcing. Big food service customers on the processed egg products. Do they typically had diversified sourcing and if so do you think you can gain more share and more importantly do you think you can actually win large new customers that may not have been able to be fully supplied by their former suppliers?

Well, I think I would repeat what I said before that we feel very good about our competitive position in coming out of this and trying to necessarily predict that it will come from dual sourcing moving soul source or the flip side of that someone else is soul source going to a dual source. I think we would be overly speculating right now, but I think it is fair to say that we come out of this in a enhanced position.

Okay good and finally given the market turmoil that we've seen over the last couple of months, have you guys seen any change in acquisition availability M&A targets?

The market turmoil, you mean the equity market or high yield market?

Yes.

Well the natural process in environment like this seems to be first to decline in volume or frequency of transactions and I would say there has been a modest increasing the frequency of transactions. And as I mentioned in our prepared comments, we believe we are quite well position with the considerable amount of cash on hand approaching $900 million. We've got considerable secured debt capacity, we have got a very rich pipeline of opportunities, so speaking solely proposed and not so much to market. I think we are going to have plenty of opportunities on the M&A front to execute against.

Okay perfect thank you.

Thank you.

Your next question comes from the line of Bryan Hunt of Wells Fargo.

Thanks for your time. I was wondering if there was any change you could normalize the MOM sales for the effect of promotion and do you see the lack of promotion in Q1, a shift in timing or is this sort of elimination of that promotion.

More of the shift in timing, the trade budgeting process for Post and MOM remains separate until we bring the ERP together. So very well has changed from an execution perspective on that front because it's IT depended.

Okay. The next question is, if I look to this increase in support of $25 million that you mentioned is embedded in your EBITDA guidance, is this a permanent increase in your opinion or is this a temporary increase on marketing support and investment?

Well I think it depends how well it pays off, if it pays off and we feel good about it, it will be a permanent increase, but I don’t think we in that area make permanent decisions. It’s a constant revaluation of the efficacy of the spend versus the impact on the P&L.

Okay. And then my last question is, when I look at the Active Nutrition business you are all launching new products in PowerBar and you mentioned you are rationalizing Dymatize. Can you talk about one the markets reactions introduction of I think some low carb introduction on the PowerBar fronts as well as a Protein Drink and then give us the timing of when you anniversary the product lines at Dymatize and that's it for me. Thank you.

So the introduction of the new product lines on PowerBar is very early so what probably done thus far is gain distribution it would be premature to talk about success or failure of both launches. With respect to anniversary if I understand the questions. The rollover the Dymatize number is such is they are comparable until Q1 2017. I forgot part of the question.

No that was it. The role over or when you had anniversary to product line reductions and can you give us an idea of those product line reductions, are those product line though just not profitable in the scheme of things or were they undesirable channels, were there duplicates. Again just give us an idea of what is going on there.

So approximately third of the business was private label at negligible margins. So we walked away from that obviously with the closure of the facility. Of the balance of the business the vast majority of the volume came from three product categories and the profit follows that in fact the profit allocation was higher than the revenue. So we felt and need to simplify the business in order to eliminate some of the supply chain complexities that had really caused you problems for a better part of the years. So by eliminating those lower margin businesses in our product categories and the lower margin private label business, we shrunk business by about 40%.

Great, thank you for the additional color. Best of luck next quarter.

Thank you.

Ladies and gentlemen we have reached the allotted time for questions-and-answers. I'll now return the call to Rob Vitale for any additional or closing remarks.

Thank you. Again, we were quite pleased with both the result of this quarter, the outlook for the balance of the year and I want to stress this again, the outlook for continued potential M&A. So again, we appreciate the support and look forward to talking to you next quarter.

Thank you. That does conclude the Post Holdings’ first quarter 2016 earnings call and webcast. You may now disconnect.