Building Momentum Post Holdings, Inc. 2015 Annual Report About the Cover: About the Cover: P represents Active Nutrition and is borrowed from Premier Protein P represents Active Nutrition and is borrowed from Premier Protein O represents Post Consumer Brands and is borrowed from MOM Brands O represents Post Consumer Brands and is borrowed from MOM Brands S represents Michael Foods Group and is borrowed from Better’n Eggs and All Whites S represents Michael Foods Group and is borrowed from Better’n Eggs and All Whites T represents Private Brands and is borrowed from Attune Foods T represents Private Brands and is borrowed from Attune Foods NET SALES BY CATEGORY NET SALES (in millions) $5,000 $4,000 Private Brands $3,000 2,411.1 $2,000 Post Consumer 1,034.1 % 958.9 11 Brands $1,000 Private label $0 4,648.2 peanut butter 2012 2013 2014 2015 5% and granola Pasta % ADJUSTED EBITDA(1) % 34 (in millions) 10 Post Foods and MOM Brands RTE Cereal Branded potatoes $800 and cheese $600 $400 344.5 216.7 214.6 $200 $0 657.4 % 11% 2012 2013 2014 2015 29 Protein bars, Value-added egg products powders and Michael Foods shakes Group OPERATING CASH FLOW Active Nutrition (in millions) $500 $400 Last twelve months ended September 30, 2015; Pro Forma to include all closed acquisitions as $300 of September 30, 2015 including both pre- and post-acquisition periods. $200 183.1 144.0 119.2 $100 $0 451.6 2012 2013 2014 2015 FINANCIAL HIGHLIGHTS (in millions except per share data) 2012 2013 2014 2015 Net Sales $ 958.9 $ 1,034.1 $ 2,411.1 $ 4,648.2 Gross Profit 428.9 424.9 621.2 1,174.4 Operating Profit (Loss) 139.1 107.8 (207.7) 212.7 Net Earnings (Loss) Available to Common Stockholders 49.9 9.8 (358.6) (132.3) Diluted Net Earnings (Loss) per Common Share $ 1.45 $ 0.30 $ (9.03) $ (2.33) Operating Cash Flow 144.0 119.2 183.1 451.6 Adjusted EBITDA(1) 214.6 216.7 344.5 657.4 Adjusted Net Earnings (Loss) Available to Common Stockholders(1) 52.7 31.1 (16.6) 35.7 Adjusted Diluted Net Earnings (Loss) per Common Share(1) $ 1.53 $ 0.94 $ (0.42) $ 0.62 Post Holdings, Inc. 2015 Annual Report 1 Building Momentum TO OUR SHAREHOLDERS third in dollar share and fourth in volume share. Since 2012, we have invested approximately $5.3 billion in 10 acquisitions. The resulting portfolio provides a combination of cash flow diversification, operating efficiencies and growth prospects. Our strategy is to invest capital in a Post had a successful year in manner that recognizes the leveragability of the highly 2015. We met key financial reliable cash flow produced by domestic food companies run by excellent managers. Using this strategy, modest targets and executed a major operating growth produces attractive leveraged returns. Further, our decentralized operating model embeds strategic acquisition as well M&A optionality in each of our business units, enabling as two tactical acquisitions. quantum growth. Our business model requires strong operating leader- ship and we are fortunate to have it in abundance. We seek Highlights of 2015 include: to strike a balance between the efficiency of scale with the effectiveness of focus. Ours will be an ongoing effort to • Delivered Adjusted EBITDA(1) of $657.4 million; appropriately maintain that equilibrium. • Acquired MOM Brands Company (“MOM Brands”) and combined it with Post Foods to form Post Consumer Brands; Post Consumer Brands • Mitigated the most severe outbreak of avian influenza in North American history; and The seminal event for the year was our acquisition of • Added to our Active Nutrition and Private Brands plat- MOM Brands. Until 2012, MOM Brands was known as forms with the acquisitions of PowerBar and American Malt-o-Meal Company. Malt-o-Meal was founded in 1919 by Blanching, respectively. John Campbell. Legend has it that Campbell capitalized the In our short history as an independent company, we new business with $900 – money he had won in a poker have transformed Post. In 2012, Post was a $1 billion rev- game. Over the course of nearly a century, the company enue company entirely dependent on the ready-to-eat grew and Mr. Campbell’s poker winnings turned into (“RTE”) cereal category. In that category, we were a distant the leader in the value segment of RTE cereal. Malt-o-Meal OPERATING SEGMENTS Post Consumer Michael Foods Active Private Brands Group Nutrition Brands Post Foods and MOM Brands Predominately foodservice and Protein shakes, bars and powders Nut butters, nut and dried fruit ready-to-eat cereal food ingredient egg, potato and and nutritional supplements snacks and granola pasta as well as retail cheese 2 Post Holdings, Inc. 2015 Annual Report POST CONSUMER BRANDS Post Foods and MOM Brands 18.2% 21.0% Dollar market Volume market share, up 0.4 share, up 0.6 share points share points No.3 0.2% 0.5% Annual dollar Annual volume growth market position growth in the ready-to-eat Consumption figures per Nielsen xAOC Ready-to-eat cereal category cereal category Last 52 weeks ended September 26, 2015 was successful under family ownership for three genera- The MOM Brands acquisition increases our exposure tions. By 2014, the company had reached sales and to the RTE cereal category to approximately 34% of reve- Adjusted EBITDA(1) of approximately $760 million and nue. As a result, some category commentary is warranted. $120 million, respectively. The phrase “down but not out” comes to mind. Since As MOM Brands grew, and Post Foods struggled 2007, the category has faced a series of demand shocks: under its previous owners, the two companies became • Record grain inflation from 2007-2012; intense competitors. Even in the early days of Post Hold- • Declining household incomes following the 2008 ings, a combination with MOM Brands was at the very top recession; of our acquisition wish list. As is often the case, timing can • Shifts in consumer behavior to away-from-home, conve- be everything. In 2015, this transaction was realized with nience and higher protein options; and Post Holdings acquiring MOM Brands for $1.18 billion. • Government reductions to the Supplemental Nutrition The acquisition of MOM Brands created an opportu- Assistance Program (SNAP). nity to compare two different organizational models and draw from the best of both. From February until May, we did While we pride ourselves on the clinical nature of our a review of both businesses’ operating structures. analysis, lately we find a degree of optimism. Encouraging Ultimately, we made the decision to move the legacy Post signs include: Foods business into the MOM Brands management struc- • Slowing rates of decline in both dollars and pounds for ture and to headquarter the newly combined business in each quarter of our fiscal year 2015; Lakeville, Minnesota. This was a decision with difficult con- • Modestly improving consumer profile; and sequences for many people who dedicated much to Post. • Overall increase in cereal advertising. Throughout the year, their conduct was unwaveringly professional and their ongoing contributions to managing In short, about the RTE cereal market we echo a fel- the business was a major factor in Post having such a low Missourian who said “the reports of my (its) death are successful year. We owe them our thanks. greatly exaggerated”(3). With the initial decision around location and structure made, we have consolidated our cereal business within our Post Consumer Brands segment. Post Consumer Brands Michael Foods Group share of the important RTE cereal market in dollars and pounds is 18.2% and 21.0%, respectively(2). This business The 2014 acquisition of Michael Foods resulted in Post offers 16 of the top 50 brands in the category. Notably, it is becoming the largest purchaser of shelled eggs in the the industry leader in bagged cereal. We expect the combi- country. In fact, Michael Foods breaks approximately one nation of these businesses to yield $50 million in run-rate of every six eggs in the United States. On April 20, we cost reductions by the end of fiscal 2017. learned that a chicken farm in Iowa had its flock wiped out Post Holdings, Inc. 2015 Annual Report 3 16 of the topt 50 ready-to-eatready-t cereal brandsb by a virulent form of high pathogenic avian influenza. April has advantages and disadvantages. Nonetheless, con- would indeed become the cruelest month. By the time the sumers and customers are demonstrably moving toward crisis ended, we had seen the largest outbreak of avian egg products from cage-free housing, and Michael Foods influenza in our Nation’s recorded history. Over 35 million will move with the market. We expect to add cage-free layers had been destroyed nationwide and Michael Foods capacity and/or to convert existing capacity to cage-free in had lost 25% of its egg supply. In a year during which we lockstep partnership with customers who have determined achieved much, we are most proud of our handling of this that they will convert to cage-free sourcing. difficult situation. From our farm managers who dealt with the devastation, to the sales people who triaged custom- ers short on supply, to Michael Foods’ senior leadership Active Nutrition who made difficult decisions on priorities, to our investor relations team who sought to balance your need for trans- Our Active Nutrition business added PowerBar to its portfo- parency with the reality of enormous uncertainty – our lio in 2015 and now includes Premier Nutrition, Dymatize organization shined. and PowerBar. These are three brands with three different We cannot declare this threat has passed.