Post Holdings Inc (POST) 2015 Q1 法說會逐字稿

Welcome to Post Holdings first quarter 2015 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 a replay beginning at 12.00 PM Eastern time.

The dial-in number is 800-585-8367 and the passcode is 75750155. 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 first quarter of FY15. 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 Filings section. In addition, the release is available on our SEC Filings, on the SEC's website.

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 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. 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. Good morning and thank you for joining us. We had spoken with you not quite two weeks ago to share with you the details of our acquisition of MOM Brands. We appreciate your support for the transaction.

Our optimism about this transaction is quite high. We will provide more information as it becomes available.

While we already previewed the headlines, we are pleased to share with you today our first quarter results. First quarter performance came in higher than anticipated as Post Foods and Michael Foods outperformed our EBITDA expectations. Consolidated revenue was approximately $1.1 billion and adjusted EBITDA was $127.6 million. Jeff will go into more detail later in the call.

Moving to operational highlights, I will begin with Consumer Brands. Despite a decline in shipments, Post Foods outperformed our expectations in the first quarter as a result of incremental cost management.

Our shipment weakness stands in contrast to strong Nielsen data, which shows a 2.1% dollar consumption increase over last year. We believe the divergence between shipments and consumption results from a retail inventory decline. Our retail customers built inventory in our prior-year fourth quarter, with less immediate consumption.

This pressured shipments this quarter but we believe has now sold through, as shipments strengthened in December. Our cost management initiatives at Post Foods continue to track to plan, with additional opportunities being sought and implemented.

As we all know, the RTE cereal category has declined in volumes and dollars in recent years. This quarter was no exception, but there are signs that the rate of decline is slowing.

Each month shows sequential improvement with respect to category dollars and packages. Household were a bit more volatile as package size mix fluctuated throughout the quarter.

We see improvements in the rate of decline in the category buy rate and in total dollars as encouraging indicators. Contributing factors include, lapping SNAP cuts from last year, leadership reinvesting in the category and deeper, less frequent, promoted prices.

Turning to the active nutrition portion of Consumer Brands, Premier Nutrition continues to grow rapidly with sales up 30%, over the prior-year quarter. We expect low-priced milk protein concentrated inventory to be realized in the P&L beginning in the second quarter. However in the second quarter, we expect to invest most of this benefit in increased marketing and promotional support.

The Dymatize general manager and his team are doing a terrific job remediating the problems we have previously discussed. It is clear the turnaround efforts are taking hold. As we have discussed, we have had problems with the Dymatize supply chain and manufacturing processes.

The best indicator of progress is fill rate, the ratio of shipments to orders. Fill rates improved significantly over the course of the quarter and we anticipate them to continue to increase throughout the second quarter.

Production output and packaging productivity also increased dramatically in the quarter. We continue to expect to move the co-manufactured international production back in-house in mid-FY15. And we expect meaningful improvement in EBITDA in the second half of the year.

We closed the PowerBar acquisition on October 1. PowerBar is a great brand but it has been neglected. It requires product investment and a restart of its overall marketing strategies. We are planning and implementing the required changes. FY15 will be an investment year for this brand, with our efforts benefiting financial results in FY16 and beyond.

It has now been six months since we acquired Michael Foods and we are quite pleased with the performance of this business. As mentioned, the results for the Michael Food Group came in ahead of our expectations, driven by new food service customer wins.

Compared to the prior-year quarter, sales and volumes were up across all product categories. Market egg prices, while high, were lower than our forecast and have since come off their peak levels as additional supply has become available.

An imbalance between grain-based supply and grain-based demand still exists. Our contracts for new grain-based supply remain on track to impact supply in late FY15.

Dakota Growers performed as expected this quarter, with sales up approximately 2% and volume up approximately 1%. We mentioned last quarter that durum wheat costs increased significantly. We implemented pricing actions to offset the higher costs. These pricing actions are in alignment with the timing of the higher commodity costs, impacting operating results.

Our Private Label business has performed nicely this quarter, with Golden Boy net sales up 13.2%, on a comparable basis, and Attune net sales up 9.1%. The increase at Golden Boy was driven by higher volume to the fruit and nut business, increased sales of tree nut butters and new business that recently required American Blanching. The growth at Attune resulted from the addition of new Private Label customers as well as growth at various existing customers.

Before turning the call over to Jeff, I want to make some closing remarks. Once again, it was an active quarter. We successfully delivered on our financial projections. We closed on the PowerBar and American Blanching acquisitions.

Also last week, we announced the MOM Brands acquisition, which will be transformative to our RTE cereal business and solidify our presence in the key RTE cereal value segment. We have already requested a regulatory review of the transaction. And we look forward to working with our new colleagues at MOM Brands to prepare for closing and develop the growth strategies.

For the time being, Post is focused on executing against our 2015 plan, and starting the combination of the MOM and Post businesses. Near-term priorities for free cash flow are deleveraged. We continue to view M&A opportunistically. And to the extent we pursue it, we would do so in a manner, that like MOM, would modestly be leveraged. I will now turn the call over to Jeff.

Thanks, Rob. Good morning. I will start with our consolidated results, provide detail around the segments and then turn to our 2015 outlook. For the first quarter, consolidated net sales were approximately $1.1 billion and gross profit was $249.1 million.

SG&A expense was $166 million, or 15.5% of net sales. We incurred one-time SG&A expenses of $3.9 million in the first quarter related to our previously announced business reorganization.

Additionally, SG&A expenses included $5 million of acquisition-related transaction expenses. Adjusted EBITDA was $127.6 million, up $71.7 million, compared to the prior year.

As a result of continuing declines and long-term interest rates, we recognize a non-cash mark-to-market loss on our forward-starting interest rate swaps of $54.6 million in the quarter. We do not elect hedge accounting, and as a result, changes in market value are reflected in our results.

Recall that we have two series of forward-starting swaps. We have $869.5 million notional amount of swaps with a June 2016 forward start. which hedged our floating-rate term debt incurred in connection with the Michael acquisition.

We also have $750 million notional amount of swaps, which primarily hedge the debt we anticipate incurring in connection with the MOM Brands transaction. These swaps have a July 2018 forward start.

We seek to finance long-term assets with long-term capital. The forward-starting swaps allow us to benefit in the near-term from lower short-term interest rates while fixing our interest rates for the long term.

Pre-tax loss was $73.8 million, and income expense was $23.5 million. Importantly our cash taxes will differ meaningfully from our GAAP income tax expense, primarily because of non-deductible depreciation and amortization expense. And in the current year, from non-cash mark-to-market losses on interest-rate swaps.

On the consolidated basis, we currently estimate that nearly 60% of our GAAP depreciation and amortization expense is not tax-deductible. In contrast, once completed, the MOM acquisition is structured in a manner that will result in full deductibility of the related depreciation and amortization expense.

Net loss attributable to common shareholders was $101.6 million, or $2.04 per share. Adjusted net loss attributable to common shareholders was $57.2 million, or $1.15 per share.

Before reviewing the segments, I want to remind you that we have changed our segment reporting structure to align with our previously announced business reorganization. Our first quarter results were reported in three segments: Consumer Brands, Michael Foods Group and Private Label.

Additionally, we changed our methodology for allocating certain corporate costs in segments, primarily to Consumer Brands. Please refer to the historical segment tables in our earnings release, defined FY2014 Information, aligned with this reporting structure.

Starting with Consumer Brands, sales were $347.9 million for the first quarter, up 27% on a reported basis. On a comparable basis, sales declined approximately 5%, Primarily resulting from an anticipated weaker, RTE cereal sales.

Compared to the prior year quarter, RTE cereal sales volume declined approximately 5%, and net pricing declined 3.5%. Recall the volume decline is in contrast to our consumption results, which increased 2.1% for the quarter, indicating a temporary inventory correction at retail.

Active Nutrition brand sales were up slightly on a comparable basis. This reflects strong growth at Premiere and a very modest decline at Dymatize. It also reflects a decline at Power Bar, which, while significant year over year, is in line with our expectations.

Consumer Brands' adjusted EBITDA was $54.5 million. Adjusted EBITDA benefited from a 2.5% decline in cost of sales per hundredweight and from incremental cost management initiatives at Post Foods.

This was partially offset by lower RTE cereal net pricing, which resulted from increased trade spending and unfavorable sales mix associated with a shift to larger packing sizes. Additionally, adjusted EBITDA was negatively impacted by reorganization expenses of $2.8 million and continued elevated operating expenses at Dymatize.

For the Michael Foods Group, net sales were $599.3 million for the first quarter. On a comparable basis, sales were up 4% for the prior year, with volume up nearly 1%. Volume increases were primarily driven by new business, growth for egg and potato products in the Food Service Channel, the rate of egg volume growth decreased sequentially as a result of pricing actions and capacity mixed management.

Adjusted EBITDA was $72.4 million, and as anticipated, was negatively impacted by $5.1 million in cost and loss volumes at Michael Foods. This resulted from corrective actions undertaken in connection with isolated fourth quarter 2014 product quality issues. This compares with our previous estimate of approximately $6 million.

Moving to Private Label, net sales were $127.8 million for the quarter, up 12.4% over the prior year on a comparable basis. Adjusted EBITDA was $14.3 million.

Turning to our outlook, for FY15, we continue to expect adjusted EBITDA of between $540 million and $580 million, excluding any contribution from MOM Brands. As I mentioned last week, we expect progressive improvement in quarterly adjusted EBITDA throughout FY15.

The expected sequential improvements are primarily driven by recovery of Dymatize, seasonality and cost management initiatives at Post Foods, and the timing of commodity cost decreases impacting operating results. We will update our guidance to include MOM brands after the closing of the transaction.

Regarding our capital expenditure outlook for FY15, which excludes expenditures related to MOM brands, we continue to expect to invest between $115 million and $125 million, including $40 million related to growth activities. Capital expenditures during the first quarter were $23.7 million.

Finally, we want to share with you the results of our common stock offering that closed earlier this week. We issued nearly 7.5 million shares, at a price of $47.50 per share, resulting in net proceeds of approximately $342 million after commissions.

The proceeds of this offering, together with cash on hand, and our committed debt financing, will be used to fund the cash portion of the MOM Brands purchase price. With that, I would like to turn the call back over to the operator for questions.

(Operator Instructions)

Andrew Lazar, Barclays.

Good morning, everybody.

Good morning, Andrew.

Rob, I wanted to explore your comments a bit more regarding the Ready-To-Eat cereal category rate of decline that you talked about slowing a bit, meaning the rate of decline is slowing a bit. I understand the lapping of the SNAP funding and spending by some of the leadership brands in this space. I wanted to hear a bit more about your comment on the commercial environment.

I think you mentioned the depth and frequency of promotional spend. I just want to make sure I understand that. Then I've got a follow-up.

Sure. So we saw some reason to be encouraged in the quarter as each month, the rate of decline in dollars ebbed, as well as packaged purchases. The count of total household were a bit more volatile as it looks like people were moving around pack sizes.

Going into the data a bit deeper, it looks like between the two layers, there was some diversions in terms of average net pricing movement, as it appeared that Mills took some deeper promotions, less frequently, which actually resulted in an increase in their average pricing on the quarter. And we think had some positive effect on the overall sales in the quarter.

Okay. And then, if you had to estimate where you thought RTE category performance might be for your fiscal year, whether that's growth, or more likely some form of decline, where would you peg that? And do you worry about broader industry, input cost deflation, enabling others to ramp up promotions to drive volume, which has historically has not worked out very well?

Well, in reverse order, certainly is that something we are wary of. I think as you point out, it hasn't worked well. So perhaps some history will be remembered this time around.

Certainly, there hasn't been price movement in quite awhile so, maybe we will be in a more benign environment as we go forward. But it's something that we have to watch quite closely.

In terms of your first question, about predicting the category, as we said on the last call, our plan for the fiscal year is based on -- not an internal prediction, but on the most recent 52-week data, which at the time we did the plan, was down 4%. Everything that we see now suggests that, that was a cautious call and that we will be better then down 4%.

We're not going to try to predict what that is. But rather than be in the business of predicting the category, use the data to extend our planning and build around that. So I think the best thing I can tell you is that, versus our expectation built into our plan, there is some reason to be cautiously optimistic.

Thanks very much.

John Baumgartner, Wells Fargo.

Good morning. Thanks for the question. Rob, just in terms of the nutrition business, you mentioned the reinvestment of some of those cost benefits into additional marketing and promos over at Premiere. Does that include extra funding into the FDM Channel? And I guess how much of a push into FDM is in your plan for FY15?

It's pretty modest in FY15. But there is some. It is a terrific club brand. The product is a great product and it's just been on fire in the club channel. But some of the investment does anticipate extensions into FDM. Very modest impact in FY15. More impact in FY16.

And then just building on Andrew's question. What is the past history here, when you see protein costs come down, as they appear to be declining? Do you tend to see more price competition in the category overall?

With the strength of the category growing as it has been broadly, there's been less history of that than there has been in cereal. So we are optimistic that there will be pretty good discipline in the category as FPC comes down. There is a lot of tailwind to the category right now.

Okay, and then just one last follow-up. In terms of the EBITDA contribution from Power Bar in FY15, do you have a sense where that may go?

It is negligible in-- I'm sorry, did you say 2015 or 2016?

2015.

2015. It is negligible in 2015. It's a brand that needs to be revitalized. We have investments to make in product development. We have investments to make in rebranding. So we, by design, are taking EBITDA down to a negligible amount in FY15in order to put it back on a growth trajectory.

The run rate is still about, what, $10 million or $12 million there normalized?

Exactly. Exactly.

Thanks, Rob.

You're welcome.

Chris Growe, Stifel.

Good morning, guys.

Good morning, Chris.

Hi. Just two questions, if I could. A bit of a follow-on to Andrew's question about the pricing and cereal. I'm just curious, how much -- is there a larger mix factor due to maybe bags growing, for example? First, it's promotional spending for Post? Could you say that or could give us some color on that?

There certainly is for Post. We have continued the trend that we've seen of our -- sales moving more towards larger pack sizes and having a decline in the average price per ounce. There was a bit more variability in the category in the quarter, as it looks like there was more mixed performance in terms of movements within pack sizes, and pricing movements from company to company.

So of that 3.5%, which pricing was down, is that of that coming from, say, a mixed factor and half from promotion? Can you say that?

I'm going to answer that less precisely. A significant portion comes from pack sizes, but also a meaningful portion comes from -- we had [NURP] in the quarter. We had incremental sliding fees that hit the quarter and resulted in a reduction in average pricing. But the biggest contributor to the decline is an ongoing movement to larger pack sizes.

Okay. And then also, just related to that, I'm just -- want to make sure I'm clear on the inventory reductions that happened at retail. Do you think those are complete? Maybe related to that, you also have been holding a higher level of cereal inventory. Is that worked on -- is that at a good level today?

Again, in reverse order, yes. It's at a good level today. We do believe the retail inventory has worked back to a normal level. We have good data for the last eight weeks of shipments. It certainly looks like it's a return to normalization.

Okay, if I can just squeeze in one more just in relation to Dymatize. And how the business in Europe is performing. That is one where you are hoping to get back into -- to selling in that market. Is that traditionally -- that what you have expected?

Yes. It has. It has gone nicely. The sales at Dymatize have held up surprisingly well throughout the whole supply chain issues that we have been encountering. So the European sales have come back nicely. We did have some weakness in Private Label this quarter.

There are a couple of Coman/Private Label customers that had pulled back some SKUs. But the business, in aggregate, had a 2% decline in shipments, quarter over quarter. And again, given the supply chain challenges that we've had, that's a pretty optimistic position, or a pretty encouraging position.

Great. Thanks for your time.

You're welcome.

Bill Chappell, SunTrust.

Good morning.

Hi Bill.

First, I should have asked this a couple of weeks ago. On MOM Brands, if I was looking at the 52-week data, it looked like sales were actually down 3% or 4%. So I just didn't want to -- as we're looking forward, I thought bags were growing -- as value is growing, so just trying to understand if there was some offsets as we look forward.

A couple of comments. First of all, bags are growing. And you really have to look at the Post bags and the multi-meal bags, as interacting with each other quite highly. So if you look at the aggregate, the bag business has grown nicely.

With respect to the aggregate sales at MOM, the Nielsen data does suggest a decline. But they've done a very nice job of taking some of the capacity that was used for bags, until we entered the bag business at Post and moving it into Private Label. They did a very impressive job of cost reduction. So that both our sales and EBITDA increased in 2014, despite the Nielsen data.

Okay, that helps. And then on Dymatize, I think I had heard somewhere that maybe you had talked on -- in your remarks, you have seen a progressive improvement on fill rates. Am I right in thinking that fill rates have doubled from maybe the 40%s to the 90%s? Does that sound right?

That is correct.

Okay, and that is as we're going into this year, we are in the 90% fill rate?

Yes.

Okay, and then Michael's and Dakota Growers, just trying to look at them. I know you're not giving, per se, guidance on top line, but trying to understand with the comps on eggs. And I know you have kind of the pricing movements, and then also the price increases you're taking in pasta. I mean, should that business see growth this year on the top line? I know that's not as much of a focus as it is on the margin.

Sure. Michael, we'll certainly see growth on the top line. In the quarter, we did see some decline in the rate of growth, simply because we took some price action to manage some capacity constraints and move up the margin curve.

So the demand remains very strong for the underlying business. We are dealing with some of the capacity to limitations we have right now, through capital expenditures and bringing on additional grain-based supply. With respect to Dymatize, we will certainly see modest volume growth, and meaningful sales growth as we cycle over the weakness last year, but a good portion of the sales growth is commodity price pass-through. It will be low single-digit volume growth.

For pasta? I'm sorry.

Yes.

Okay, and just last one on Dakota. So are you picking up new customers there? I know that was part of the issue when you first bought it that you --

Yes, we -- the volume -- the customers that we have to referred to previously came back online and we have been successful in adding additional new customers.

Great. Thanks so much.

Jason English, Goldman Sachs.

Morning folks.

Hi Jason.

Thanks for the question. I guess it's encouraging to hear that some of the issues in cereal are like maybe transitory. I'd like to get a better of just how large the magnitude was, and whether or not we should be on the watch out for a bit of an ugly decline in the fourth quarter, as you comp that retail inventory build in cereal?

So I don't want to go on record as having said that the challenges are transitory in cereal. I think that the -- there are some reasons to be cautiously optimistic, but it is -- that's a position we're in. We're not the calling the end of the decline just yet, so I want to caution of getting too optimistic on that right now.

In terms of the fourth quarter, We would have some more challenging comps as we enter the fourth quarter of FY15, simply because there was some timing pull-forward into FY14 in October of this -- in October of calendar 2014, but that's baked into our guidance and all of our forecasts.

Any estimate of the magnitude just so we make sure we bake it into our own models.

It's very modest. I mean, it's really hard to quantify. I wouldn't be comfortable giving a precise number, but it's -- when the aggregate, quite modest.

Okay, and then I want to turn my attention to Michael Foods. You mentioned some volume wins, some contract wins. How much of you would you attribute to your pricing advantage, given that you're primarily a feed-based pricing model versus some of your competitors, who are more of a egg-based pricing model and the massive disconnect we have between feed cost, and the egg markets right now?

I think it's more a holistic competitive dynamic than that. I think that Michael is a terrific service provider. They have terrific R&D capacity. They have a cost advantage. It's an impressive competitive set from top to bottom, so I don't think it's appropriate to limit it to any one variable. I think you have to look at the -- at just all.

I think last quarter, margins were a little bit pressured in Michael, because you had to dip into the spot markets to buy eggs at elevated prices to meet demand. You mentioned efforts to try to normalize and get balance back in place. Have you achieved that yet?

We were much closer to imbalance this quarter than last quarter. There is still an imbalance as we bring on additional supply, but it was much closer than last quarter, and we accessed the spot market less and the spot market was lower.

Okay, that's encouraging. Last question, then I'll pass it on. And this one, a little more strategic in nature. In reading through your annual report, I thought it was interesting how you framed Michael and the combination with Dakota, attest to your thesis that Michaels could be more of a multi-line food service provider, than what it is today as primarily an egg provider. Can you elaborate more on your thought process there, and how that strategic direction may influence your M&A path on a go forward?

Sure. It's a great question. We talked a lot about this in the road show calls. The business at Michael, we look at in two manners, from a horizontal and vertical perspective. Horizontally across the food service and refrigerated retail distribution opportunities that their very muscular sales force and management systems provide.

So there is an opportunity to expand horizontally into multiple products, but there is also a vertical opportunity to shore up each of their product categories. And I would characterize them as not just as a very strong egg provider, which they certainly are, but they also are a very attractive refrigerated potato business, which has its own opportunities ahead of it. So we look at it from both broader food service and deeper product offering in specifically, eggs and potatoes.

Got it. Good stuff. Thanks guys.

Cornell Burnette, Citi.

Good morning.

Good morning.

Thanks for the questions. Just a couple here. I know you recently took down Modesto, California cereal plant. I was wondering, did you see the need for further capacity reductions within the RTE cereal category? If so, maybe how does the recent MOM acquisition play into that?

Well, we think the capacity that there remains excess capacity within the overall RTE category, simply by virtue of the declines that have occurred in recent years. We are looking at all aspects of the MOM-Post combination. We talked in terms of there being four buckets around capacity rationalization, transportation, warehousing, G&A, sales force, so we are looking at capacity in every area, as we develop plans around the combination of these two businesses.

Okay, and when you talk about the full-year outlook and the expected ramps in EBITDA over the course of the year, one of the things that you call out is a decline in commodities. Can you just talk about what areas of the portfolio should benefit the most from this and then in particular, which commodities are standing out?

Well, by virtue of our six-months forward purchase cycle, declines in corn and spring wheat have not hit the P&L yet. So we'll see some of the benefit of that in the latter half of the year. We will start to see some benefit of the energy declines in the latter half of the year.

We'll start to see the benefit of the milk protein concentrates. So all of these are commodities that are already purchased and in inventory or committed to being in inventory, at prices that have not been reflected in our operating results yet. So those are the primary -- and dairy, within the Michael business, are the primary commodities that we see cost reductions in flowing through the second half P&L.

It sounds like given the nature of your hedging and so forth, it is a pretty good line of sight of visibility, for seeing this happen in the back half.

There is. There are commodities that are inflationary as well. The estimates that we have given include the net effect of those.

Okay, and then the last one which is the -- going to PowerBar. In your assessment, what's kind of been the biggest driver of some of the weakness, that's occurred at that brand over the past several years? And once that is in-house, what kind of things do you have in store, maybe to revitalize the brand over time?

The brand hasn't had much attention to the actual product form in recent years, as the whole category has changed. It has stayed mostly a slab product with limited innovation. We need to innovate around the brand. The brand has terrific equities, and we think can be extended beyond the bar into different forms like powders and shakes.

So we think it needs to be proliferated. We think the marketing message needs to be refreshed. Obviously, it was a very small brand within the Nestle ownership, the Nestle portfolio. And we think it simply needs more attention and more focus.

Okay. Thanks a lot for the questions.

You're welcome.

Brian Hunt, Wells Fargo.

Thank you for your time. I was wondering, as your acquisition strategy continues, if you can explore some of the synergies that you've attained so far, between Michaels -- you talked about originally $10 million worth of synergies. It sounds like there were some sales synergies as you put Duncan -- I mean, excuse me. Dakota and Michaels together. Again, I was wondering if you could just touch on some of those so we can get a greater level of confidence on what you are trying to execute on the acquisition strategy.

Sure, but I think you have to frame our acquisition timeline in the context of spending, really 18 months to two years, developing platforms, with a limited focus on synergies. So step one, developing access and exposure to growing categories. And step two, which you've seen recently, which is filling those platforms in with synergistic acquisitions.

So the first acquisition that I would characterize as a highly synergistic opportunity, was the MOM Brands transaction. Directly to your question about Michael, there are, in the context of a $2.5 billion acquisition, $10 million of synergies is obviously very small.

But the source of those synergies was things like combining insurance programs, Combining benefits, combining payroll. So some very soft, non-operating areas that have the chance to benefit from some combined scale across the platform.

The revenue synergies were not anticipated in that $10 million. So we think that they are meaningful as we see opportunities for the Michael sales force, particularly in food service, to impact the Dakota business, but that was not included in the $10 million.

So I think to answer your question specifically, in terms of credibility around delivering synergies, MOM is the first opportunity to really do that. And we feel very optimistic in the ability to deliver what we've announced.

And then going forward, you said you all will continue to be opportunistic. It sounds like -- should we all assume anything that is announced, will be tuck-ins to the current silos and be highly synergistic?

We are an organization that is opportunistic, kind of at our DNA level. So where -- those are the acquisitions that we are most interested in pursuing right now, because we think that from the rapidity of deleveraging, they make the most sense.

I don't want to absolutely and categorically say that there won't be platform opportunities. But the focus, as I mentioned, is first, deleverage, be reactive to opportunities, but prioritize opportunities near in on our platforms over opportunities to create new platforms.

Great. I appreciate you framing all that out. My last question is more particularly around Michael Foods and eggs supply. This California cage legislation kicked in January 1. We've seen egg cost and prices in California go up materially.

Supposedly there's restrictions on the type of eggs, how they were laid, and what type of cages, get into California. I was wondering, one, does the elimination of battery cages and the increased cage size, have you seen an increase in cost or/and restrictions into sales in California? Thank you.

So the answer to that is, that the price increases have been localized to California. And the prices outside of California have declined, because the supply that would have gone to California, is now going elsewhere. The specifics of that law do not impact Michaels because it does not include liquid eggs. And Michael sells an insignificant amount of shelled eggs.

I appreciate you for clarifying that. Best of luck.

Thank you.

Carla Costello, JPMorgan.

I have a PowerBar question. In that bar space, it's gotten -- you see more bars popping up every week. I'm wondering if -- you've gotten -- if you've had conversations with the retailers to get confidence that you will be able to regain any of the space that PowerBar has lost it, or if it's going to cost and a tick up in trade spend or other to get the space back?

Well, certainly, we talk to our retail partners frequently about this topic. The PowerBar acquisition is not predicated upon gaining distribution is -- or regaining distribution might be a better way to say it. It is predicated upon holding and making more profitable the existing bar distribution.

Obviously, distribution gains would be nice, but it's not necessary for this investment to pay off. And then extending in additional forms, where there are more rapid growth opportunities.

Okay. And then, on the MOM Brand acquisition and the -- are you seeing any -- as you talk to the -- your retail partners, are consumer less big brand loyal -- I mean, because MOM has that next tier down of brands. I'm wondering if that's -- part of it is a defensive move, as consumers kind of swap between brands more often now than they used to in the past.

So we think a better way to think about it would be, to think about the value segment of the category as being a very loyal consumer. One of the things that is pretty striking about the MOM data, is that while it certainly doesn't have the recognition of the larger brands that you're referring to, it has higher loyalty.

So we think that in getting MOM, we have an opportunity to gain additional trials through some of the combined muscle of the two businesses. And extend upon the loyalty that the MOM consumer and that value consumer has for its RTE.

Okay, great. Thank you.

Jason English, Goldman Sachs.

Thanks for the question. This is actually Rima Reddy in for Jason English. Thanks for the guidance on CapEx and EBITDA. We wanted to ask if you had any further guidance on cash flow operations for this year?

No. We don't guide. We guide to the specific items that we previously have and wouldn't provide additional guidance around specific line items.

Perfect. Thank you.

I find there are no further questions. I will now turn the call to Rob Vitale for any additional or closing remarks.

Thank you very much. We are very excited about the ongoing progress at Post, the portfolio conditions and particularly, the recent announcement with MOM. So we look forward to speaking with you all soon, around the current quarter.

Thank you for participating the Post Holdings first quarter 2015 earnings conference call and webcast. You may now disconnect.