POST - Earnings call transcript Q1 2018

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Operator

Welcome to Post Holdings' First Quarter 2018 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 12:00 PM Eastern Time. The dial-in number is 800-585-8367 and the passcode is 2992278. At this time, all participants have been placed in a listen-only mode. pleasure Relations the introduction. of my Brad over now Investor Harper, Post is to floor turn to It Holdings for you may Sir, begin.

Brad Harper

us session. our are remarks, have Rob good thanks our with President quarter and prepared everyone, and Vitale, and call. today Jeff a Jeff CEO; joining begin Zadoks, earnings today you we'll first Rob for brief and me Thank With afterwards, and question-and-answer Post's CFO. morning for and will

posted is filings on Web press release remarks Our Relations SEC these both in the Investor section our the supporting site postholdings.com. and at

the the is addition, In release available SEC's Web on site.

by I'd continue, as differ could from subject we call, will risks the actual contain these you statements, materially forward-looking undertakes statements this these of statements. like of Before and considered statements. that obligation as to this management should call are no investors to remind update date that current and results are which uncertainties These forward-looking carefully to be

is discuss As will will site. call a this reminder, this And, finally, our being recorded available on be an non-GAAP Web measures. replay certain audio and call

yesterday a site. posted Rob. these reconciliation to issued measures nearest on measure, call For see will release press our non-GAAP GAAP Web turn I With our to that, the the of and over

Robert V. Vitale

of morning business. fiscal billion are Brad. includes you a to prior adjusted going adding this Evans legacy we proceed our Last I’m move we billion EBITDA. This reverse I end in to ground guidance. the incorporates and to want our us provided X.XX we outlook differently for outlook to joining our through in you discuss as $X.XX the little updated normal and increase Thanks, low our for Bob outlook for of business. the evening Thank starting XXXX modest Bob outlook each in guidance. and with results our first order quarter a Because by Evans, bit

our in freight with we're netting exception Evans approximately largely in pricing in prior the Across absorbing that our Our some to Bob softness of volume fiscal XX, modest U.K. are prior the into inflation low-end of the excess guidance on we're which and consistent assumptions our bringing closed estimates with the a business and months change January XXXX. side. high of We ownership leaves guidance, all no X.X during uptick the to

with fiscal to approximate XX% XX% adjusted generated EBITDA guidance realization, an reflects Post's to the Last with Note track increased for historically in Evans. the EBITDA last in timeframe Weetabix expectation business. of our significant seasonality trajectory quarter Evans and have first synergy guidance Evans on Bob its with XX% have weeks. the similar X that respect Our to excludes quarter. consistent versus business peak Bob the increase we're year, Therefore with which the growth is plus this Bob

American cereal However, context, transactions recall business. realization the consumer third-year brands, of lapping synergies modest soft results result a with of tale. the a me in that Tier quarter performance let North start first a year. Starting have and on trade comment peak two as With promotion for have X Post's last both were quick as year

cereal. pressure intensity competitive Bunches put Oats greater highlighted last on Malt-O-Meal and quarter Honey we of the bag Additionally,

expect perspective. We the the promotional from balance more calendar of a to be year favorable

commodity incremental inflation brand this and that we're expect investments. making more year recall However, we from impact

it of synergy our our guidance. high. was realization ownership in and of a as North U.K cumulative is The assessing relevant, both quarter. performance the into our seasonal a year modest first this and of remain expect but months consumption market. XXXX. nonetheless also in the updated consumer Weetabix is low guidance fiscal with in XXXX is late competitive all to This line In cereal as We America smoothly, integration reflected into initial proceeding weak Weetabix Post's brands six intensity our well is until business, is is Weetabix quarter more the

price Promotions sales. incremental and in diminished grown frequently promoted. we have However, the their value was over too as realization unfavorable driving

and more chosen promotions. near-term to continuous back just aimed incremental. and have volume we proposition consumer largely the between have reestablish base trading in waste. order reducing need order improvement an ongoing like We pull program in to less at we to some in of incur frequency promotion some manufacturing the our dollars avoid loss Ultimately Meanwhile, U.S., and depth

we against and achieved were of improvement to We’ve objectives not targets fiscal progress chain the see the in and expect measurable continuous half year. in both supply these Our this quarter. leadership added strong second

foodservice structures we strategic within including with public be significant volumes pursuing platform. an in private We that now positions one solid eggs and opportunities full This value is with these expected, private are the nutrition into that have brands in successfully to and in a the improved nut same and partnership range and opportunities me consolidation excited refrigerated the include exploring nut, and appear avian at our initial of We're which that combination. trajectory Active about steady alternative refrigerated increasing structure the sales and the outside business. sale a foodservice brands fruit so There equity pasta, January. to back from butter, growth granola has Bob we Michael have proposition year-over-year. for growth net rate margins offering, is Evans to business As private The believe eggs, we We've value-added combined expect to another private and had Michael for that quarter brands businesses conversion preceded XX% ownership. brings potatoes bringing or firm, sold accelerate. influenza. a our on announcement fresh on potatoes. Foods and We're Michael to leadership conversion our

accordingly in venture. this developments We update you will on further

As I Evans we in mentioned, acquisition Bob closed the January.

enthusiasm quite high. Our remains

to $XX million estimates our to increase synergy to work has $XX million. integration Our led us

incremental to estimate prior our to million from fiscal $XX synergy increased increase estimate Bob costs Evans. the of $XX million. the approximately also include at Weetabix, of also one-time our costs We is one-time These XXXX for integration related but

pendency of the from its revenue double-digit last Evans Bob achieved year. targets growth During transaction, with the

However, variance causing to it had volume greater than planned bottlenecks. manufacturing relating unexpected COGS

You an last move revised potential integrated announced supply may our this the have seen the We towards over will suffered Bob chain that above cost just believe week. will target. we the provide move for synergies eliminate and

to our target close estimates. refine will I on a We update repurchases. with want share we comment quick as the

shares $XX million. we XXX,XXX During total the of at for quarter, a an price purchased $XX.XX approximately of average

up shares Our repurchase remaining to authorization is $XXX million.

reduction. to thank again and support, to turn have let leverage will to for me expect now approach the With We that, share to repurchases Jeff. continue balanced you your over I a call and

Jeff A. Zadoks

Adjusted everyone. first in with the $XXX.X Thanks, our EBITDA Rob, for line quarter expectations. and million good was morning,

Malt-O-Meal brands private not with the Before sales presented of adjusted sales consumer Post million. net XXXX a with X% are year. government by detailing licensed unit a $XXX our and were declined promotional organizational a $XXX activity the On presentation, million. compared shifts were fourth other branded with volumes business changes was of results, consistent prior and the our Furthermore, our year compared prior Volumes announced Beginning brands, we net declined by segments label ago. to products sales and quarter the basis, when business weeks declines as to Post are pro aligned reminder, few and consumer bid EBITDA bags negatively timing products. impacted growth was X.X%. a and volume in from offset forma

pro mix favorable unfavorable prior and product decline dollar spending compared forma savings the reduced was lower year. Continued offset higher were the trade integration Weetabix was expenses. The volumes, by prior and to sales million, year. cost X% a U.K compared rate to translation pound to sterling of net foreign-exchange $XX.X freight

favorability million. this Segment EBITDA was product more mix, branded sales private-label by favoring versus unfavorable However, $XX.X than adjusted was offset sales.

$XXX sequential quarter, potato nearly pricing, year-over-year strength was offset both continued was Turning million. Net sequential of Michael as Adjusted benefited expenses. X%. and Foods volumes Group million the egg net were a -- net revenues by Egg volumes X%. respectively. Foods and $XX increased improvement channel. $XX which and a Egg to EBITDA and Group. partially XX% higher Potato from million, again freight improved Michael volumes in EBITDA X% grew this increasing with were foodservice up revenues pricing higher and million, improved adjusted year $XXX sales

protein in specialty to losses. a adjusted also partially distribution Higher ongoing offset international continued sales sales Moving $XX million, to $XXX prior net to and once again as Nutrition input volumes in XX% sales quarter compared strong weakness we inflation Dymatize premier the increase PowerBar and growth sales as Active EBITDA growth was to by were by protein expenses. branded Active shake offset freight in lap higher costs were fueled This soft million. channel. online improved this growth year, the Nutrition, driven products. performance

butter net to of private growth in and peanut compared margin fruit declines to butter Turning nearly pricing tree and tree certain was Private dried sales peanut organic $XX.X volumes. adjusted mix X%, butter brands, of prior to X% organic increase $XXX by related an offset were the EBITDA for driven primarily year. nut increased million, lower brands mix products. pass-through higher nut Volume Net product and by butter with costs. million, nut and was input favorable

and Before to cash capital for on make flow, the like open-up call few transactions. comments I'd a Q&A, we taxes, markets

of $XXX.X and Tax U.S of the on tax million Reform, in of an the unrepatriated This first we deferred result our benefit recognized to resulted related expense transition the remeasurement a in million $X liabilities, the As and estimated tax foreign estimated one-time earnings. enacted million one-time an net recently benefit from $XXX quarter. assets

Tax we fiscal between cash and a of $XX XXXX ahead, million reduction in million. Looking to expect to Reform taxes $XX U.S result

rate forward. of for certain expect modest XX% deductions. and rate deductibility of XXXX the will XXXX, temporary for the elimination XX.X% of a fiscal amount and then In of a federal loss permanent Our be income interest corporate and U.S blended approximately fiscal we XXXX tax also

of from possible. and payable from and the of at tax change operations would vast our and now quarters. that a for are significant to not is effect estimates timing second expect majority we ongoing quarter million as we’re was payments. structured cash Cash interest our benefit to expect and be opportunities you are for to fiscal as reform While in the interest benefited tax tax actively quantify first future years, efficiently fourth of flow ready The $XXX the we ensure we reviewing

will Evans. our to cost our changes by of total debt flow cost will hedges capital ample nature debt. to first fixed-rate first Regarding long-term maturity proceeds the ladder The that cash extended -- of X.XXX% the in of Xx. we rate Evans used mix that were the time not is The measured intermediate-term full With and reduce this of acquisition, reduce swap affords was capital first markets transactions, This free Giving with acquisition notes in manner Bob senior issued the for and senior pro remainder of of are X% at including credit fluctuates facility our net our the of us end our our and a XXXX weighted deleverage redeem principal our the a consideration our Bob debt LIBOR. as cost our leverage credit been and value ladder maturities approximately in -- rate portion average the of structure. to X The to of amortization million our insulates the our comprises the quarter X quarter, forma from notes. until has transaction during billion debt X.X% XXXX. XX% interest pay

We X.Xx the for back that, by call to reduce year. I'd end questions. to to the of the With net over leverage operator fiscal the turn expect approximately Operator? to like

Operator

Chappell the William comes of question [Operator first Instructions] from of Your line SunTrust.

William Chappell

Thanks. morning. Good

Robert V. Vitale

Hey, Bill.

William Chappell

the acquired to much a I business? that. you Is how was promotions I had there's said much was guess, you that the question months really -- put lag trying barely on X surprise softness. to we, Weetabix everything of right the the guess, was it? I on place a just the to first chance at to look in of softness before X way and assume a but most affect haven't versus Can how business And, -- understand you

Robert V. Vitale

more It's of latter. the

and unconsciously order put on been to has -- versus planning give point a has in need grow shift participate as mix, on think we in we're to promoted incremental pricing. things modestly to the one just creep in are up that planning. promoted dollars. aggressive context, a private-label. leader But some percentage prior just the So little some in -- to determined I the that operating pressure creep some when itself But degree there you we promotion to biscuit time you some in coming volumes branded think promotions know still segment we continues promotions average pronounced And that more and channel calendar through maintain we’ve private-label the rightly more to allowed take of the that address out and now of work on of trading I we is the under even there's you as efficiency to

of now on make take at the of setting better to also, periods and XXXX. efficiency is So some through will involve into necessary the fiscal couple volume a balance corrections 'XX it promotional promotions will think aimed the calendar it near-term what we really

William Chappell

then talked -- the just is is foodservice previously brands then decision on this which more I the And of on like maybe seems business it year longer? it business, also about private given could And Growers different Okay. is you'd timing, there businesses. fiscal there, the or any maybe of think you’ve update private pulling thought some I -- brands and Dakota but the they’re kind a out segment, thought behind go

I’m behind this? that then to cobbling more timing decision together when hear So we'd also about and trying understand

Robert V. Vitale

we'd is context the category that rationale. year brands a give respect meaningful. there's is some be that -- next With real of so again end our because consolidator target for critical than in fiscal the on likely are earlier that. would timing We The We something year well-established. towards secular of the the think that opportunity think beginning Sure. is you opportunity having all something me let fiscal a be announce of the trends selection to the private done,

allocation up smaller fewer We and face disconnect a transactions do engagement opportunity there's opportunity the now towards to I is transactions. Post set the we to that more pursue we larger order whereas reality other the think our in in that oriented capital to between frequent is that exists. need think be

Dakota highly are inclusion we direct opportunity. capital had and way. in The go this it engaged leader we really really Michael one, about to allows access, of a So Dakota aimed driven half try Group company foodservice, that we’ve excited and the is about want a executing who great Dwyer to at, half benefits either structure got a some specifics the so in could is The private-label Foods team foodservice Jim really volumes. as question the about has

gives brands scale including be do to is However, markets, additional optionality that by options otherwise what it we wanted to us it really capital with needed existing create in it because market. private wouldn't because the of enter

of to some about financial alternatives more Dakota are the it's we can be participant. a swing So and the create trying that fact

William Chappell

Thanks it. color. the for Got

Robert V. Vitale

Thank you.

Operator

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

John Baumgartner

for Good Thanks Hi. morning. the question.

Robert V. Vitale

Sure. Hi, John.

John Baumgartner

you the that filtering about expected. sequentially think for the I 'XX? walk EBITDA have there, than margins at do fiscal even much you of moving full benefit the through business how Can about price wanted Michael, had guess, we parts I given ask recovery stronger through, egg haven't to the yet you the

Robert V. Vitale

to it mark. Well, be high the the tends fiscal first quarter

penny because focus on as and penny basis, penny percentage be we a high on But not per the it mechanism. watermark. the likely grain-based with margin as again of pound per will a pricing basis on much to pound So pound tend per

XX% look it's quarter. seasonality seasonal, first EBITDA at contributed you but not there's XX%, in the Michael's average the about of If hugely

flows it through as benefits absorption some have that So fixed cost.

reasonably success a attractive in on cost success driving We real had an real grain quarter. market margin and between volume So basis. incremental attractive a control,

fixed as through from think we just is offset the modest seasonal the Bob that it synergy come flow year the volumes Michael cost the the very both of start that by one further fiscal reduction in perspective on side, and the to end more towards a some significant drive in absorption much will things see some 'XX, fiscal I of could down of 'XX.

John Baumgartner

going? of terms customers how contracts In indications the longer-term of some that’s any egg of the to initial the business, migrating and in Michael

Robert V. Vitale

We've well with at that point. of going it’s the But Michael and had Yes, pattern at for large in it's think very cycled to who now this talking have largely say have cadence transition made ability expected. is customers grain-based expectations the gone now been two about the it's has we’ve years we we these the that and and that years fully finally got with part we pretty the ago I reemerging better two and occurring anticipated the and profile backwards two good momentum. look anecdotal

John Baumgartner

the so bump on the target process. in in you of Okay. up And BOBE, call nice changed a through Can soon walk What’s on of synergy the [ph] just there side? pretty that? drivers kind the

Robert V. Vitale

But from, do one pre-closing competitive to generally that supply increment reasons the were we speaking, for comes analysis. of any unable to chain. procurement do The was biggest things real

that integrator the nice combination we the made. end them have we're quite money get chain some into so was them as but push than involve of and to some So us in they larger fully bigger look this and were expected. frankly an of at near and opportunities the estimate have with opportunity driven we've an identifying that spend work towards and and those in a some the potential those very synergies, which bit year integrated think procurement decisions year the to of supply more opportunities and allocation an we a 'XX. quickly, to to you had for spend we've little need integrated tried in money did as chain, to conservative yet not now have unlocks If decision you with I look go to towards both opportunities two not may to to going forward because the we not supply transparent. a when that synergies get as We quantify at be helping assumptions we And the the potential well early not lift pulled our resulted larger us order on capital and job fact

John Baumgartner

to then business. inefficiencies And up, promo between last in Okay. over some Post the MOM cereal you wrap the through few just years work past and

Now it sounds that like Weetabix. addressing at you’re

For BOBE And are -- promo at that weaker in there How years. Thank BOBE? the the the dollars and that your the guide? channels XX% last measured on of already the has list of the trade promo synergy sausage in achieving business about you. receives of become thinking what is about, couple you list improvement promo part

Robert V. Vitale

Evans trade our in for to of different strategy being swings the Yes, balance attempt fundamentally consider commodity incrementality. a so Bob goods a balance the underlying valve portfolio the in commodity, on adjustment packaged the of would with in underlying be drive our such means to I volatile of that’s a than the within that versus business

way it's trade change would about I thinking expect So fundamentally think a and that different one of to I not materially.

John Baumgartner

for Thanks time. your Okay.

Robert V. Vitale

Thank you, John.

Operator

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

Christopher Growe

morning. Hi. Good

Robert V. Vitale

Hi, Chris.

Christopher Growe

currency If know to may Hi. and the quarter benefit? the the trying forma of but question gave to just better down -- understand pro underlying look illuminate then of what the ex you sales release, it I in on out kind I just if -- it business. help could currency follow-up a the take just Was Weetabix in in organic were happened at I’m kind ask sales, to you

Robert V. Vitale

Yes.

was So in X were But the very -- the points, at impact latter don’t the or part the my tips. have quarter. largely currency volumes it percentage finger X I down of

and was momentum a of the the rate $X.XX, recent currency there December our of quarter all largely lift its really we're was thinking I benefit, but gain fourth conversion largely been run-up has big January. prior XXX, intact. So guidance late a into XXX for currency a about a the year in predicated that from phenomenon quarter while upon There impact and the was is think

and I XXX, guidance -- should upon conversion So predicated be our XXX rate. add continues to a

So inherently there's some cushion there.

overstate the the So currency in we ended. we just I can think quarter of impact

Christopher Growe

a run Weetabix? quarter that factor at for out, to And seasonality is there you. just into all got it played Okay, then this

Robert V. Vitale

so and factor, repeat. forward seasonality I a been last year we also of prior not modest there a was year There's impact didn’t a last year pressure being that there's end a the that this more but from last year December owner year end, think pull to having into

little bit there's December difference a last December qualitative a of and So, their year. our between

Christopher Growe

on of a mentioned you conversions then contract? That Okay. versus occurred at volume egg How spot based curious that on some sense. on agreement of business, broadly much a makes is a kind you the contract have that And there. I’m of your sold made couple --

Robert V. Vitale

In that mean -- general, of spot I less year selling This we on it a basis. we're historically spot sell we XX% on basis. than sell a

more XX% We are like a on selling spot.

Christopher Growe

then, Okay. -- And are is have that those that those already correct? that includes -- converted that

Robert V. Vitale

Correct.

Christopher Growe

on market bags particularly like cereal Okay. curious in MOM, better if get a like, share just thought from can on final category? you one this into gain see question a the seen about guess, here, comps question think your Mills category. And to then I then the what you from year And I things and pressure, of on wanted General just cereal QX that? but broad in you’ve I'm more coming it with sounds the

Robert V. Vitale

this as So, promotional prepared my calendar in last mentioned was loaded remarks year year. back I to contrast our in

the quarter competitors the would the has a General the but So that the losses -- back regained we matters the and balance Mills outlook first some impact. in certainly optimistic be to have effective share of of us an as category from an entering year,

the box think with of format enter I in be think category by we I’ve in no historically for has brands I advertising frankly But short-term some it behavior positive viewed on more that as pipeline, a category bag commented implications validates that the in vigorous long-term aggregate means the the it you the above us. bag helpful as and vigorous some impact see category, riding bag a into value more more coattails. more will innovation certainly and is less we're there some quality. of some carryover creating the It of bag, past is the We validates But excitement section. packaging that mixed. obvious from when some these the long-term potentially think kind leaders. been think this vigorous a have

Christopher Growe

Sure.

lot. Thanks Okay. a

Operator

comes question Andrew from Lazar Barclays. the next line of Your of

Andrew Lazar

Good everybody. morning,

Robert V. Vitale

Hi, Andrew.

Andrew Lazar

Hi. think rate quick to a growth the expected obviously line go last a you’ve on top against or you comp, active very But the along quarter One, is clip of continued things. sales nutrition rate at Is but to that performed fiscal well would pretty said growth decelerate think expect at quarter have continue tough higher something potentially sales specific pace. in sales the high Couple of that year? again nice to you first the the I you dollars a and pretty to was that to the through pace just still the rate year.

Robert V. Vitale

to to just continue by as extend rate you of don't indicated, anticipated pleasantly the growth. growth rate We just perpetuity. but growth of we Well, and that the well quarter surprised is, at dollar comfortable In feel we the be is with pleasantly brand get dollar this doing. implication are but we by shortly. more how every case, And again perpetuity looking I’m defining what the we surprised to fairly

of this put an stick a that the the fine very attractive too gains means. continue the and I'm it's rate to given of the around to category. without attractive very trying we’re a But brand. optimistic a we lifecycle point hard year in on sustain Whether will growth this -- feel rate for can that saying what more growth kind or two, product will So we optimistic dancing say for than hyperbolic

Andrew Lazar

it. Got

U.K., Weetabix if margins potentially is the that for to off we I’m understanding you potentially for promotions, as fair you could sounds but then like quarters in a right, some, where next be expect just on And Thanks that. weaken little first saw the the over volume bit effective volume in couple a bit of quarter it a we shift above them more assessment? Okay. sequentially

Robert V. Vitale

add assessment be line that’s our CI program would assessment. But of our plan. that in more fair part getting margin story with Well, a that that to I will

So of the CI quarter. first weak we expectation had delivery our in a

is but equally cost of significant flow we combination and CI that a pricing, it's that just So think through. have better will reduction identified driving

Andrew Lazar

it. Got

major cereal you're last some from just as in cash a will the on have and well Obviously, benefit of benefit leaders cash the flow tax then, And getting Okay. on cereal. on reform, branded perhaps some in P&L. players, large

into Again, much reform? guess, of your takes this be branded activity. -- branded some pricing sort that sense brands. account budgeting don’t what could near-term by interim I the piece promotional we being versus tax thinking Do feel the get thinking how in trying you’re of flexibility like So, do and to will just of the through way some players you these you’re I the of will potentially year in consumer through from additional with prudent reinvested conservative how consumer I’m innovation the on a know and promotion or against some players how, guess, business? and it

Robert V. Vitale

on multiple different Yes. Well, scenario got predicates. we’ve planning based we as so various do can anticipate you analysis,

we be and we we're to on I to continuing conservative be. think tended we’ve have -- think guidance

will incorporated aggressive in we terms most the realistic think of I how think group be we’ve respond, competitors pudding but in the scenarios.

Andrew Lazar

Okay. Thank you.

Operator

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

Jason English

Hey, morning, folks. good

Robert V. Vitale

Jason. morning, Good

Jason English

pick space. cereal a those in planned faring the you in. Have terms how of -- U.S bit off resets? overall? up dynamics you in begun to guess, category see space will the so, And I any understanding for Thank left Andrew in are if shrinking where I squeezing U.S shelf for you me resets the

Robert V. Vitale

probably one period, if I decline. it's years five, XX% you a think the any period over but look pretty yes, in is six shrink over small, last about the multiyear

well. pretty fared have We

in from has real timeframe expanded net Our that predominantly bag? estate

Jeff A. Zadoks

How year? I'm the anything on now. of this Any about sort less recently? the forward, more implications on on dramatic the more focused you’re past and focused more seeing

Robert V. Vitale

that know and whole, our it as as a don't in short-term I the I footprint. seen affects us, yet affects tell we’ve category that anything shrinking None can not but you

Jason English

to promotional to back the a heavy, we've in the more so aggression, with category. seen heavy mills to investment posture And Andrew's question specifically clearly

reasonable I kind to Kellogg, be year? around imagine seeing do You’re is year to assumptions behave? what any more think can of you assume pressure to as the I'm that based And the and going aggressive they -- the expect business well. going context your that about we deflationary on not for specifics it's signaling more of of to ramp just of become us you cadence How from are planning seems the but sort sure as what your you're some it rest if that category the give progresses. posture as

Robert V. Vitale

Yes. this. we in that assure it you I the is as and don't don't the details just you category of individual like you’ve move about say the other want the an but responses named, we than year. to assumptions variables both planning want are the a But have is balance And array consistent don't for what in reactions those, of of that some not participants that this seen thesis to have I into that anticipated assumptions to to around quarter I general to two get your form I think can as get want other assume what into competitive because our with expectation we well. from the talk around price but I deflation,

Jason English

for is it Michael's that figure Thank that spot two interrelated. XX% eggs, quarter? And on where the That running your the quick for expectation for then, you’re year you. or Understood. questions on

Robert V. Vitale

more. It's That’s The bit year the more little a year shrink not terribly -- for far were could quarter. either. off probably

Jason English

a over period. you slide spot egg may right watermark, Okay. an That’s be that into given may to concerned the it of be you that And because volume it -- grain between concern that the for and it's actually shouldn't about spread and right earning to suggest to back bit with prices that this you encouraging a high that of contracts now convert back little will point, spot there's fair Is clearly that data grow into of lower XX% so EBITDA say sort that. we only be to once customers overly wait and now? have an that

Robert V. Vitale

a as I high there's I it over year. have don't Yes. situation as think We the we watermark -- for fundamental is we have don't a XXXX. -- think mentioned, in earning

But and that's of first you not comparable get is our extrapolate in the and fiscal pretty quarter business because you XXXX. of fiscal trajectory times -- earnings the high for number our a to seasonality. it X, If

to like do XXXX. we're a similar So feel in we not situation

Jason English

it helpful. I guys. Super pass Thanks, will on.

Robert V. Vitale

you. Thank

Operator

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

Cornell Burnette

lot a guys. Thanks Great.

price I kind the question perhaps, cereal of and of are seeing of industry. some in the costs type your of of, else just, higher in can than are in if expectations kind some in had everyone hitting deflation with you your was kind coming category fact marry freight that the terms probably First comments of

more what’s higher the I to keeping is kind in year cost the on a the seeing bit as perhaps wanted competitors know thoughts of of some cereal? honest progresses people just So

Robert V. Vitale

aggressive as that. on be and can in cost and to relative category much more in margin non-commodity we position our at we’re take our to input given Well, look to your -- the will see costs around our trying and approach to maintain question take structure. as wait continuing We're don't so going is that. But encouraged anticipated see more drive higher of not we'd some inflation I deflation, that. be certainly versus we But plan a

Cornell Burnette

how And comments number then year compare how across new the this you the just at seeing pricing does out and of years kind just give it retail past? within you’re can two categories perhaps space of on least environment generally play generally a

Robert V. Vitale

a aggressive isn't we’ve our and strong than some has we’ve as mean, label it's as the not encroached but been label. I We’ve got Well, because not seen private intensity. Nielsen very some got private report competitive you’ve -- in broader cereal, this got environment. cereal,

a So it is difficult environment. pricing

Cornell Burnette

you’re of get and terms on of perhaps a that the hit kind think quarter be of of year-over-year was in the I mention one is is, from driven was of in Michael's one in by kind expectation worst. a is Is there would the is quarter growth? not you I fiscal second call, Michael's -- delta comparisons the last Michael's it a EBITDA last said earnings And which quarter still year on of everything it lot year-over-year big then But clear. total XQ kind biggest that and of when kind Foods previous coming in terms EBITDA where XQ it's of the is pretty growth, that, like the fiscal

Robert V. Vitale

as year. growth latter talked some the shift we cadence the be quarter there if from quarter -- has the there throughout the of the at of quarter, half about expect look year. still sequential The second to We slight you last this been to

the quarter, we growth would last at we say rate going then QX I have from a modest than but continues from is expected QX to So more rate had greater a to QX QX.

a a So shift. of there's bit little been timing

Cornell Burnette

you’ve higher the year. marketing making last And past just the this investments some cereal. one more thanks. about -- talked consumer then know on I in Okay,

perhaps, base know the over marketing a delta your bit quarter? changed has little of spending? past of consumer -- the shifted on the the of in Just what’s kind wanted as the to what's And the and terms that in has view category year-over-year kind maybe

Robert V. Vitale

year-over-year increase We’ve $XX then the million to in cereal portfolio was closer just it and across $XX million.

-- have cereal. on in some made of very remains evaluate basis. intact that constant outside We a we that modest reductions and a Cereal

Cornell Burnette

Okay. will I lot. Thanks it a pass on.

Robert V. Vitale

Thank you.

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

Timothy Ramey

Jeff much, so Rob. and Thanks

Robert V. Vitale

Good morning, Tim.

Timothy Ramey

free quick -- as ones be a about just conversion? Michael, of addition? we conversion, of a more that we egg On be Michael's volume cage capacity Couple should that should the about or thinking is also How thinking here.

Robert V. Vitale

did was took No, because wouldn’t I what converted of we and conversion. farm that’s about that, down think a the more it. we

Timothy Ramey

Okay.

Robert V. Vitale

and modest farm that about farm more a There productivity in -- capacity. the is the the But versus replacing preexisted. the of we're capabilities it's increase that

Timothy Ramey

in quarter that a volume watermark performance high Would argue business the well? first egg as Okay. you the was

Robert V. Vitale

to compared basis percentage a prior periods. on Not

intra year. Just

Timothy Ramey

on I the update -- that’s there. as Evans, Okay. thinking number a $XXX I in head what that you’re actually And then as Is of if don’t base know base, the number? a had on my there for so EBITDA an Bob million

Robert V. Vitale

through through they’re that. -- you that flows specifically but they on the on basis that. very facility the in basis Lima roughly balance looked But cost it with So not to line some but basis the have if perspective would on of the related gotten overruns a of year, a because historical

Timothy Ramey

at by was initiative I And the intrigued probiotic Okay. Kellogg in adult RTEs.

the You cause supplement specifically, on probiotic that business, in relative RTE? although any innovation guys have to some did thinking not go maybe to caps expertise with

Robert V. Vitale

It certainly does.

the area we the on heath microbiome about is impact and think things generally efforts more to a and that I well. think on that they're as I how the talk the we think time encouraging work spent they gut lot I address doing that of in and laud

Timothy Ramey

Good.

so Thanks much. Okay.

Robert V. Vitale

Thank you.

Operator

Your next question comes from the line of Ken Montreal. Zaslow of Bank of

Kenneth Zaslow

Hey, good morning, everyone.

Robert V. Vitale

Hi, Ken.

Kenneth Zaslow

just start me off. Let

costs, outlook bottom predicated the with at cereal least end in the category, that raising logistic guys range. was with What even of obviously the the So intensity comfortable all you the on? by felt more that, the

Robert V. Vitale

in performance and think General to from business, which I release know beginning go to we we the year try the as the that of degree in handicap hedges. our -- through the we you year the broadly behavior past more

in comfort some some of puts So in assumptions as out, obviously and to came the the line. and some quarter hedges. and had takes, of the There's take passed generally we some

Kenneth Zaslow

can hey, an both you and Okay. seems both think shortfalls, And businesses, the differently like lack opportunity previous then in synergies is then potentially how some by of just you that owners? guys, these run of word of owners a but businesses of is the it guys or businesses kind incremental as kind integrate of come the the seems these the better you not than little these miscues, of, rectify was businesses by there like of management you of in let's some somewhat included that previous

Robert V. Vitale

is we understand that you the synergies to baseline. to consistent correction to something top a underwriting extent to be so need of the our case, that's much are as think the not tell So -- synergy if we a would synergies not as remediate we way the try I on intellectually question that I about

expanding and peak the extend year not a With based growing of pains. are growing just pricing base, I those off it's is fixable of a one So bottlenecks Weetabix on to change the But incremental think they synergy it's a the change strategy. in early is the became base. a the about off season, were synergy in that less or reduced in it manufacturing obvious obvious at original as in

Kenneth Zaslow

Is not that of to power about it? not these the that would expectations? change businesses your how both relative earnings But to think

Robert V. Vitale

occur, are which are of program, drive CI of Weetabix, that over through some so. Well, the will in baseline. the the to Bob Evans is performance occur on and case and think synergies we flowing going certainly can back it it it's with incremental not history 'XX. of that obtainable improvements but will the believe think We until In the will the line the then will I do it question -- get case will in

Kenneth Zaslow

strategy much, distribution, a the I extensive that like where gains just more distribution Okay. was that previous it Bob have and seemed after that. network. quick talk Your Evans? And question lead you get are opportunities Where then don’t in Thanks. about does one for their to but guys

Robert V. Vitale

to in the part where of country Yes, be the broadly the less answer is the tends penetrated. western brand

Kenneth Zaslow

on And that? what’s the timing

Robert V. Vitale

ACV to is have continue fairly handful doing been accelerate. ongoing. and the gaining expect it that their consistent been Its They for a -- it's -- of we has and years to last job growth and nice pre-acquisition

Kenneth Zaslow

stock? And do then the often. don’t last you back You question, what buy to that prompted guys

and this a on is to? that where up us going give Just little heads

Robert V. Vitale

attractive more Well, than act the was to price that. we thought that Not complicated and on and think chose that.

Kenneth Zaslow

Okay. Thank you very much.

Robert V. Vitale

you. Thank

Operator

Hundley comes line Brett Group. of question next of the from Your Vertical

Brett Hundley

guys. Hey, good morning,

Robert V. Vitale

Brett. Hi,

Brett Hundley

about ask to I BOBE synergy you wanted your target. updated

You fiscal on thinking lion this modest good should of just in this gave being the benefits for a then just available at about direction I -- some be 'XX? in 'XX. more fiscal that into point synergy mean and us still we that targets to some share year potential be meaningful vacuum

Robert V. Vitale

Yes.

Brett Hundley

you out then And separate to and if NPE maybe I comments could. two Okay. your business about I wanted ask

was well? come was synergy little synergy might built egg year, a as much, you there I market to impact mistaken? guys all? maybe can And think on do target number think you just then with how of if that bulk supposed too not view deliver that So, at still the I’m NPE one, has your I curious the out this specialty that that the if related

Robert V. Vitale

Yes, and it has.

generated about in $X generating a business the was it, when had $X bought So that -- and million million we year. it quarter we about

targets our on ahead NPE. well we're So for synergy

Brett Hundley

Okay.

It you? have doesn’t like affected the changes market in do you Okay. like specialty sound it. any feel And

Robert V. Vitale

been with our specialty No. I mean, Willamette. NPE successful with and in we’ve acquisition very

So acquisitions for been us. nice have those accretive

Brett Hundley

think multiple you? change being versus years it out, on to And reform a hear. be related this, about new think a may -- Just does just to asset general, I And a is all get just mainly stance that different Okay. I just my does probably at Rob buyer question, at there. your potential before? be tax from I That leverage to curious change was ask but comment shift to mean, the Maybe all? reform of I and strategy seller tax answer to when know the then more policy differently, changes or I last but good its some in on company's views

Robert V. Vitale

Yes.

irrespective the optimal So not has accumulated of structure to I our reform. of over our -- businesses implications that last start when historically, have is but asked six business. about we answer reality the five The strategic changes this having natural the in tactical time tax this variety question on where now take law group been what is ways, the tax or years is thinking a in

we're of the of doing a and that decision reform of corporate some tax just evidence to of the of one brands. private So organization entry our layer work is adds

XX% that, that the and than think allows the from work There at regime tax conviction reform have first that much I all, full to -- a under in to XX% planning the think I of -- operate we creativity are some us but are tax So and through win tax stop. we that we manner mitigants think reform. I would ability rather to a

Brett Hundley

Thank you.

Operator

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

Bryan Hunt

kind guidance, for of got your you given change your I’ve working couple ingredients if what left. composite asked. inflation been and have for could packaging in -- Thanks I is outlook transportation? One, on the time. just was of questions my A two

Robert V. Vitale

an $XX are million $XX about we're million. another our have percentages -- $XX $XX at fingertips, ingredient at don’t aggregate looking So year-over-year and freight. so we inflation The the about million numbers of and was million, but cereal the

big of are now. we’re [indiscernible] facing looking and buckets million between those two two, were the cost We So at absorption. right the

Bryan Hunt

at go maybe Can to when a what you price levels is, talk you your my Okay. price And basis? well packaging second maybe delivery, look as collect bringing transparency and question on of different in and pressures it's the overall. for and the competitors level then as evolution about forward from a product means of new click tactics that innovation, marketing industry change of

Robert V. Vitale

ones. since hit the Well, think question of you’re asking I on the big you kind

We about to the have basis think price the think size omni-channel the an and to in everything from form point, to deliverability. package package

it is who requires and level the a to what wants behavior. consumer So fit shopping to form product I going think of -- the to back LIBOR to reconstructing a kind move that

point well cereal well-positioned are in at for form. of point point, quarters, where Now price product the price a important nutrition more and vehicle in consumer. portion business very it substantial works by we this our in but in fourth quarter. very the the of the online is fairly two has really last Where the particularly virtue high to fact, us is at modest been in It's pretty growth the very it's short-term a us, least the and

requires different business from profile, also customer temperature on So it addressing the things price nuance requires all a based raised all think behavior, and I it you points, of that.

Bryan Hunt

your you I hand Thank off. time. if for will Thanks.

Operator

now time additional any have for turn will call We for or to allotted I the remarks. questions-and-answers. reached the Robert Vitale closing

Robert V. Vitale

size. is way face any despite you of shaping the about May. good feel portfolio again forward We challenges we’re some up, this us. joining to going we for all you And to look thank Again, the that talking in in to year

a spring. have good So you all

Operator

Thank call and for earnings webcast. XXXX first quarter conference Holdings' Post the in participating you

have your line day. You wonderful may now a disconnect and

Post (POST) 2 Feb 182018 Q1 Earnings call transcript