# TO OUR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_POST_2018/NYSE_POST_2018.mmd` · pages 2-8_

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TO OUR SHAREHOLDERS

## Value Algorithm

## 1.

Post now derives greater than 50% of its EBITDA from businesses that grow in aggregate >6% per year

## 2.

The remainder of EBITDA is derived from cereal: a high-cash generative category Post accomplished much in fiscal 2018 despite a challenging environment. Among this year's highlights, we:

• Delivered on financial targets for the year, including generating nearly $500 million in free cash flow \( ^{(1)} \) .

• Completed the acquisition of Bob Evans Farms in January 2018.

• Successfully reorganized Michael Foods and Bob Evans into pure channel-focused businesses.

• Announced the formation of 8th Avenue Food & Provisions ("8th Avenue") via a partnership with Thomas H. Lee Partners, L.P.
Our scorecard ultimately remains the value we build. During fiscal 2018 our share price grew 11% from the beginning to the end of the year, but with meaningful volatility along the way. That volatility has continued into fiscal 2019. From our formation in 2012 through year end fiscal 2018, our share price has compounded at an average of 21% per annum.

The macro environment remains challenging. Last year the headline story was Amazon acquiring Whole Foods and its implications on traditional retail. The channel migration toward electronic and mobile commerce continued this year, and this shift implicates supply chain execution, consumer marketing and product

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# Great Taste

## All Bagged Up

![](images/3_0.jpg)

2%

POST CONSUMER BRANDS
THREE-YEAR BAG COMPOUND
ANNUAL GROWTH RATE \( ^{(2)} \) 

![](images/3_1.jpg)

20%

POST CONSUMER BRANDS
U.S. READY-TO-EAT
CEREAL MARKET SHARE \( ^{(3)} \) 

![](images/3_2.jpg)

development. Our traditional channels are becoming omni channel and this will become the new normal. This year "disruption" seemed the focus, specifically as it relates to new brands in old categories. Disruption is not new. The first disruptor noticed that a rounded block would roll and thus gave birth to the transportation industry. Unfortunately, they did not plan enough drivers for the wheels they invented, but that's another story. While disruption pre-dates modern capitalism, the pace of disruption has accelerated as new technologies enable new ideas to commercialize at a remarkable clip. The challenge we face as stewards of your capital is to separate the disruptors from the interrupters. Disruptors permanently alter the landscape of a category and require response

and investment. Interrupters are, by definition, transitory and risk overreaction. Our organization must be adaptable enough to respond to disruptors—ideally to be disruptors—and to ignore interrupters.

Our success or failure in this challenge begins with our organizational design. Summer reading this year included On Grand Strategy by John Lewis Gaddis. We highly recommend it. In a passage that loosely describes the difference between a decentralized and centralized form of organization, Gaddis writes, "Controlled environments encourage complacency, making it hard to cope when controls break down, as they sooner or later must. Constant disruptions, however, prevent recuperation: nothing's ever healthy. There's a balance, then, between integrative

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and disintegrative processes in the natural world—an edge of chaos, so to speak—where adaptation, especially self-organization, tends to occur."

This in short is how we seek to create value for you. By seeking to balance the integrative and the disintegrative we strive to find the equilibrium that leads to adaptation. We believe that value can be built by harnessing energy (integrative) or by unleashing energy (disintegrative). In 2018, we had examples of each.

## Integrative – Bob Evans Farms and Michael Foods

In January 2018 we completed the acquisition of Bob Evans Farms. We are delighted to welcome to Post the Bob Evans associates. This transaction is important in several ways. First, it provides Post greater exposure to growing areas of traditional grocery—chiefly the rapidly growing retail side dish category. In a short time, Bob Evans has become a leader in this category which for the last five years has grown approximately 14% per year \( ^{(4)} \) . The product offerings address large conflated themes such as convenience, great taste and affordability. The integrative nature of the transaction is derived from the Bob Evans business being highly complementary with the Michael Foods retail and foodservice businesses. Michael Foods' Simply brand of potatoes is the market leader in cut potatoes where Bob Evans leads in mashed potatoes. All retail brands have been combined under Mike Townsley and Bob Evans leadership and all foodservice business

![](images/4_0.jpg)

43%

PENETRATION OF
WEETABIX BRAND
PRODUCTS IN U.K. HOMES \( ^{(6)} \) 

## #1

READY-TO-EAT U.K.
CEREAL BRAND \( ^{(5)} \) 

## Iconic

## U.K. Brand

![](images/4_1.jpg)

![](images/4_2.jpg)

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![](images/5_0.jpg)

6%

EGG FOODSERVICE
VOLUME GROWTH IN
FISCAL 2018
has been combined under Mark Westphal and Michael Foods leadership. The combination affords opportunity with respect to both in terms of better cost, service and merchandising. Finally, both businesses share a common supply chain which enables us to better leverage scale across the platform.

## Disintegrative – 8th Avenue Food & Provisions

We have often said that on the spectrum of strategic to opportunistic, Post tends towards the latter. Nothing better illustrates this philosophy than our approach to private brands. Recall that our prior parent was the leader in private brands food, and was ultimately sold. At the time, we perceived there to be an opportunity for Post to be a consolidator in private brands and we acquired several businesses toward that effort. Eventually, our prior parent became available in the market. By that time, we had acquired Michael Foods and we chose to allocate capital in a different manner. This pivot rendered our private brands business less strategic to us. Nevertheless, we continued to believe in the long-term opportunity behind private brands.

With our capital allocation focused elsewhere, and a perceived opportunity to consolidate the private brands sector, we sought a different structure and announced in January of this year our intent to "strategically partner" in this pursuit. This strategic partnership could have been via a partial public offering and we initially followed that course. During the process, we were approached

# Innovative Leader

## and Partner

## #1

FOODSERVICE PROVIDER OF
VALUE-ADDED EGGS AND
VALUE-ADDED POTATOES \( ^{(7)} \) 

![](images/5_1.jpg)

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![](images/6_0.jpg)

14%

SIDE DISH CATEGORY
FIVE-YEAR COMPOUND
ANNUAL GROWTH RATE \( ^{(4)} \) 

# Quick-to-Table

# Farm Fresh

![](images/6_1.jpg)

by several firms who saw similar opportunity. In August, we announced that we had reached an agreement with Thomas H. Lee Partners, L.P. to recapitalize our private brands business into 8th Avenue Food & Provisions. The transaction resulted in Post receiving $875 million in cash while retaining approximately 60% of the common equity of 8th Avenue. We are delighted with the outcome and we look forward to further building this business with a great partner. We are especially pleased to have Jim Dwyer, an experienced business builder and formerly the leader of our Michael Foods business, running 8th Avenue. As an aside, 8th Avenue in Brooklyn is where Jim's grandparents lived after immigrating to the United States.

## 2018 Performance

Post Consumer Brands Post Consumer Brands continued to outperform a somewhat sluggish ready-to-eat cereal category. Our acquisition of MOM Brands has over-delivered in cost reduction, and we are applying the same discipline to the North American operations of Weetabix. Meanwhile, looking to the future of this business and this category we had a leadership change. Chris Neugent led the combination of Post Foods and MOM Brands following seven years as CEO of MOM Brands. In July, Chris moved into a strategic planning role working with Weetabix and our other businesses in honing their strategies for organic growth. At the same time, Howard Friedman joined us from Kraft Heinz where he ran

#1

MANUFACTURER OF
REFRIGERATED SIDE
DISHES \( ^{(8)} \) 

![](images/6_2.jpg)

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# Full of Good

## Energy

Industry leading
growth in
ready-to-drink
shakes

31%

SHAKE NET SALES
GROWTH IN FISCAL 2018

![](images/7_0.jpg)

![](images/7_1.jpg)

their meat and dairy business. We want to congratulate Chris for all he accomplished with Post and with MOM Brands. We are fortunate to have his continued commitment. We are equally fortunate to be able to attract a business leader like Howard – an exceptional executive who we expect to lead our business in its next phase of development.

Weetabix In 2017 we acquired Weetabix, our first predominantly international business. We had a challenging pricing year in 2018 — mostly self-inflicted. However, we have course corrected and remain long-term confident. We invested at a time when the pound sterling, as a result of Brexit, was at a relative historic low compared to the U.S. dollar. Brexit and its impact remains a short-term uncertainty that could create near-term volatility until trading relationships between the U.K. and its partners are clarified.
Refrigerated Food Michael Foods had a stellar year, continuing to improve both its level of earnings and its quality of earnings. Bob Evans performed to our expectations during the period under our ownership.

Active Nutrition Active Nutrition continues to grow rapidly. We believe we are in the early stages of category development for several of our protein-based products and we view this as a source of value to unlock.

## Capital Activities

Our capital structure changed considerably in 2018. As you are aware, we view capital structure a bit differently than some of our peers. We tend to maintain higher levels of leverage, and we do not pay a dividend on our common stock. We believe this approach balances appropriate equity capitalization to

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# Platform for

Leading provider
of private label
nut butter, granola
and dry pasta in
the U.S. \( ^{(7)} \) 

# Consolidation

![](images/8_0.jpg)

support high returns in low growth categories and it enables us to opportunistically return capital to shareholders or to invest in operating assets. In 2018 we did all the above. First, we generated free cash flow \( ^{(1)} \)  of nearly 500 million. In tandem with the receipt of proceeds from the 8th Avenue transaction (which closed on October 1, 2018), we reduced our net debt to Adjusted EBITDA \( ^{(1)} \)  ratio, as measured by our credit facility, from 5.7x to 5.4x. As mentioned, we acquired Bob Evans and lastly, we repurchased 2.8 million shares of our common stock for a total investment of 218.6 million.

We look to fiscal 2019 with optimism balanced by an objective assessment of the challenges we face. Our business has an attractive blend of growth opportunities and cash generation capacity. Most critically, each business is led by talented executives with owner/operator mindsets and the freedom to make decisions. We believe this freedom is imperative in being able to respond rapidly to an environment that changes rapidly. To again borrow from Mr. Gaddis, we stand on the "edge of chaos" and from that vantage point attempt to extract opportunity.

As always, we thank you for your support.

![](images/8_1.jpg)

WILLIAM P. STIRITZ
Chairman of the Board

![](images/8_2.jpg)

ROBERT V. VITALEE
President and Chief Executive Officer

![](images/8_3.jpg)