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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 1998
Ralcorp Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri 1-12619 43-1766315
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
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Item 5. Other Events.
In a press release dated July 29, 1998, a copy of which is attached hereto as
Exhibit 99.1 and the text of which is incorporated by reference herein, the
Registrant announced they have signed a definitive agreement to sell its
Beech-Nut Nutrition Corporation subsidiary for $68 million in cash.
Additionally, in a press release dated July 29, 1998, a copy of which is
attached hereto as Exhibit 99.2 and the text of which is incorporated by
reference herein, the Registrant announced its earnings for the fiscal quarter
and nine month periods ended June 30, 1998 including pro forma financial
information after giving effect to the announced planned divestiture of Beech-
Nut Nutrition Corporation. Upon consummation of the sale of Beech-Nut, the
Registrant will file additional pro forma financial information as required by
applicable laws and regulations.
Item 7. Financial Statements and Exhibits.
Exhibit 99.1 Press release dated July 29, 1998
Exhibit 99.2 Press release dated July 29, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
(Registrant)
Date: August 6, 1998 By: /s/ T. G. Granneman
-------------------
Duly Authorized Signatory and
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
Exhibit 99.1 Press release dated July 29, 1998
Exhibit 99.2 Press release dated July 29, 1998
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FOR IMMEDIATE RELEASE
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Contact: Daniel P. Zoellner, Ralcorp, 314/877-7052
Kelly O'Malley, Milnot, 314/982-8635
RALCORP HOLDINGS, INC. AGREES TO SELL BRANDED BABY FOOD SUBSIDIARY TO THE
MILNOT COMPANY
ST. LOUIS, MO, JULY 29, 1998 - Ralcorp Holdings, Inc. today announced
that it has reached a definitive agreement to sell its branded baby food
subsidiary, Beech-Nut Nutrition Corporation, to St. Louis-based The Milnot
Company for $68 million in cash. The transaction is expected to close within
45 days pending appropriate government approvals.
After completion, Ralcorp will remain a leading manufacturer of private
label ready-to-eat cereals, crackers and cookies, and snack nuts.
"It was a difficult decision to part with a piece of our company that has
been with us since our initial spin-off from Ralston Purina, but we feel it is
in the best interest of our shareholders and the Beech-Nut company to take
this step," said Mr. Joe Micheletto, Chief Executive Officer and President of
Ralcorp Holdings, Inc. "At the same time we are pleased to have struck this
deal with Milnot, a company with strong local roots and quality management."
"The sale of Beech-Nut will also allow us to sharpen our focus on our
remaining three businesses, all of which compete primarily in the private
label arena. Although we have certainly not closed the book on forays into
branded businesses, private label is our primary focus," said Mr. Micheletto.
Ralcorp anticipates that the proceeds from this transaction will be used
for, among other things, stock repurchases, funding future acquisitions,
paydown of any outstanding debt and other general corporate purposes deemed
reasonable by management.
Mr. Scott Meader, Milnot President and CEO, said, "We view Beech-Nut as
an important initial step toward realizing our vision of becoming a national
branded and private-label food company through acquisitions and internal
growth. This acquisition reflects our strategy of shifting towards a more
balanced sales mix of private-label and branded products. It is particularly
exciting because the Beech-Nut name brings with it a national reputation for
quality, tremendous consumer awareness and brand equity."
The purchase more than doubles Milnot's revenue base, from $90 million to
$230 million.
Mr. Meader continued, "Milnot is poised for growth, having posted record
revenues and earnings for fiscal 1998 ended June 26. With strong cash flow
and a strong balance sheet, we have the financial resources to aggressively
pursue highly targeted acquisitions and to fund internal growth."
Mr. Meader concluded, "We're pleased that we're able to keep a St.
Louis-based company in St. Louis. Milnot is committed to St. Louis and
through its growth hopes to play a larger role in the St. Louis business
community."
Milnot manufactures branded and private-label food products, including
Milnot evaporated and sweetened condensed milk, Chilli Man chili, and salsa.
Milnot, founded in 1912, has 165 employees, with 25 located at the St. Louis
headquarters. The company operates plants in Litchfield, Ill., Seneca, Mo.,
and Denver.
Milnot is privately held by Chicago-based Madison Dearborn Partners, Inc.
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Immediate
Daniel P. Zoellner
314/877-7052
RALCORP HOLDINGS REPORTS SIGNIFICANTLY IMPROVED THIRD QUARTER, NINE MONTH 1998
EARNINGS
NOTE: Previously, Ralcorp Holdings, Inc. announced the intended sale of its
branded baby food subsidiary, Beech-Nut Nutrition Corporation, to the Milnot
Company for $68 million in cash. As a result of announcing this transaction,
accompanying this earnings release are unaudited pro forma statements of
earnings reflecting the Company's results without the results of Beech-Nut
included. In addition, comparisons of pro forma results are made throughout
this release.
ST. LOUIS, MO, JULY 29, 1998 Ralcorp Holdings, Inc. today reported net sales
and net earnings for the third quarter ended June 30, 1998 of $143.3 million
and $13.2 million compared to net sales and earnings for the same quarter last
year of $140.7 million and $3.1 million, respectively. Basic and diluted
earnings per share for the current year's third quarter were $.40, compared to
last year's third quarter basic and diluted earnings per share of $.09. The
earnings increase is primarily due to the continued operating improvements of
the Company's private label cereal and cracker and cookie divisions and
favorable equity earnings related to Ralcorp's investment in Vail Resorts,
Inc. Partially offsetting these gains are the continued competitive and
category difficulties that are negatively effecting the Company's branded baby
food subsidiary.
A comparison of unaudited pro forma results for the quarter ended June 30,
1998 to the same quarter of the prior year reflects net sales and net earnings
of $111.6 million and $13.8 million, respectively, for the period ended June
30, 1998 compared to net sales of $96.2 million and net earnings of $1.4
million for the same prior year period. This improvement in sales and
earnings further accents the significant operating progress of the Company's
private label cereal and cracker and cookie divisions, as well as the
favorable equity earnings from Ralcorp's Vail investment.
On a comparison of unaudited pro forma results for the nine month period ended
June 30, 1998 to unaudited pro forma results for the same period of the prior
year, net sales were $330.7 million and $271.1 million, respectively, an
improvement of $59.6 million, or nearly 22 percent. Pro forma net earnings
for the current year's first nine months were $29.4 million, or $.90 per basic
share and $.89 per diluted share, compared to prior year pro forma net
earnings of $3.5 million, or $.11 per share (basic and diluted). Included in
the prior year pro forma results is a $4.6 million ($2.9 million after tax)
charge to cover certain severance-related costs. Excluding this charge, prior
year pro forma net earnings would have been $6.4 million, or $.20 per share
(basic and diluted). The Company took no unusual charges during the current
nine month period.
The unaudited pro forma information assumes the divestitures of the Company's
branded cereal and snack mix businesses and ski resort operations were
completed as of the beginning of the prior year nine month period. Actual
timing of these divestitures occurred during the quarter ended March 31, 1997.
The Company's ski resort holdings were sold to Vail Resorts, Inc. on January
3, 1997 and the Company's branded cereal and snack mix businesses were sold to
General Mills, Inc. on January 31, 1997. In addition, both current and prior
year unaudited pro forma information reflects the elimination of operating
results related to the Company's branded baby food subsidiary. Earlier,
Ralcorp announced the planned sale of Beech-Nut Nutrition Corporation to the
Milnot Company. Therefore, comparisons of unaudited pro forma results in the
current year to the unaudited pro forma results of the prior year provide a
more meaningful analysis of operating results and trends.
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Actual net sales for the nine month period ended June 30, 1997 were $595.0
million compared to $427.6 million for the same period of the current fiscal
year. The significant decline in net sales year-over-year is due to the prior
year period including sales of the Company's branded cereal and snack business
through January 31, 1997 and revenues attributable to the Company's ski resort
operations through January 3, 1997.
Net earnings for the nine months ended June 30, 1997, were $24.6 million, or
$.74 per diluted share compared to the aforementioned net earnings for the
corresponding current year period of $28.5 million, or $.86 per diluted share.
Excluded from the first nine months of fiscal 1997 net earnings are two
separate restructuring charges totaling $23.0 million pre-tax ($14.5 million
after tax or $.44 per basic and diluted share) and a one-time, tax-free gain
on the sale of the branded businesses of $516.5 million or $15.56 per diluted
share.
NET SALES BY DIVISION
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Ralston Food $ 66.9 $ 63.0 $ 207.1 $ 193.1*
Bremner 36.5 33.2 115.4 78.0
Beech-Nut 31.7 44.5 96.9 118.3
Flavor House 8.2 - 8.2 -
$ 143.3 $ 140.7 $ 427.6 $ 389.4
* On a pro forma basis, reflecting elimination of sales related to the
branded cereal and snack business.
CONSUMER FOODS
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Actual Consumer Foods sales improved $2.6 million, or nearly 2 percent for the
quarter and declined $167.4 million for the nine months, as the prior nine
month period includes the October 1996 through January 1997 sales of the now
divested branded cereal and snack business. Comparing sales of the first nine
months of the current fiscal year to the same prior year period, excluding the
benefit of the branded cereal and snack business, sales rose $38.2 million, or
nearly 10 percent. These sales dollar increases can be attributed primarily
to the increase from the Bremner cracker and cookie operation, which benefited
in the current year from three full quarters of integrating the Wortz Company
sales. The Wortz Company, a private label cracker and cookie operation, was
acquired on April 21, 1997. In addition, store brand ready-to-eat cereal
sales improved over the prior year on a 7.3 percent volume increase on a
current quarter to prior year quarter comparison and a 6.5 percent volume
improvement when comparing nine month periods. Net sales for the quarter were
also aided by the Company's acquisition of Flavor House, Inc., a snack nut
business, on April 23, 1998. Flavor House, which is currently being managed
by the Company's private label cereal division, contributed $8.2 million of
net sales. Offsetting a good portion of the sales improvement, were
year-over-year sales declines of $12.8 million for the quarter, on a nearly 31
percent case volume decline, and $21.4 million for the nine months, on a 20.7
percent case volume drop, from Beech-Nut baby foods. Beech-Nut's
quarter-to-quarter comparison is difficult as the prior year's third quarter
benefited from the grocery trade's buy-in ahead of a July 1, 1997 price
increase. The baby food business, however, continued to be negatively
effected by both significant competitive pricing pressures and a declining
category.
From an operating results perspective, Ralcorp recorded an operating profit of
$12.6 million for the current quarter and $36.6 million for the nine months
ended June 30, 1998. While the operating profit for the nine months is
significantly below the branded business-enhanced operating profit level of
the prior year's first nine months, the operating profit for the current
quarter represents more than a 31 percent improvement over the same quarter of
the prior year, the first comparable quarter which also reflects no benefit of
branded business operations. On an EBITDA basis (earnings before interest,
taxes, depreciation and amortization) the Company recorded $45.6 million for
the nine months ended June 30, 1998, excluding the equity earnings from its
Vail Resorts, Inc. investment. Ralston Foods recorded significant operating
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profit improvement on the strength of its volume growth, while maintaining the
substantially lower cost base achieved through previous restructuring and cost
containment efforts. Bremner operating profit improved considerably in both
the quarter and nine months due primarily to the addition of Wortz and an
improved product mix. Operating results at Beech-Nut were significantly down
from both prior year comparison periods. Beech-Nut recorded a modest
operating loss for the quarter ended June 30, 1998, ending an extended period
of profitable quarterly results. As referred to earlier, the Company's baby
food subsidiary has been and continues to be plagued by heavy competitive
pricing pressure and a significant decline in the overall baby food category.
EQUITY INTEREST IN VAIL RESORTS, INC.
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Upon the sale of Ralcorp's resort operations to Vail Resorts, Inc. in January
1997, Ralcorp retained an equity ownership interest in Vail, which as of June
2, 1998 was approximately 22 percent. On November 6, 1997, Vail announced a
change in its fiscal year end from September 30 to July 31. As a result,
Ralcorp reports current year equity earnings on a two month time lag and the
Company's entire current fiscal year will include only ten months of equity
earnings from Vail.
The quarter ended June 30, 1998, benefited from non-cash, pre-tax equity
earnings of $9.7 million compared to an equity loss of $2.6 million in the
same prior year period. As explained, this significant difference is due to
timing, in that, Ralcorp's reporting for the current year quarter includes the
historically profitable months of February through April. The prior year
equity loss amount relates to the months of April 1997 through June 1997.
Through the nine months ended June 30, 1998, the Company's equity stake in
Vail Resorts resulted in non-cash, pre-tax earnings of $13.9 million compared
to $7.9 million during the same prior year period. Ralcorp's reporting
through the first nine months of fiscal 1998 includes Vail's results for only
the period of October 1997 through April 1998 and the prior year's equity
earnings reflects only the months of January through June (the period
subsequent to the Vail transaction). Ralcorp's equity ownership interest in
Vail earnings for Vail's fourth quarter ending July 31, 1998 will be reported
in the Company's quarter ending September 30, 1998.
UNAUDITED PRO FORMA INFORMATION
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The accompanying Unaudited Pro Forma Combined Statement of Earnings reflects
pro forma information for the quarter and nine month periods ended June 30,
1998 and 1997. This information assumes the divestitures of the Company's
branded baby food subsidiary, branded cereal and snack business and Resort
Operations were completed as of the beginning of the periods presented.
See attached schedules and notes for additional information on the quarter and
nine month results for both years.
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RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(in millions except per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Net Sales $ 143.3 $ 140.7 $ 427.6 $ 595.0
Costs and Expenses
Cost of products sold 94.8 92.9 277.9 328.4
Selling, general
and administrative 25.2 24.6 74.5 101.8
Advertising and
promotion 12.2 15.7 43.3 125.0
Interest expense
(income), net - .2 (.1) 8.1
Gain on Branded Sale - - - (516.5)
Restructuring charge - - - 23.0
Equity (earnings) loss
in Vail Resorts, Inc. (9.7) 2.6 (13.9) (7.9)
122.5 136.0 381.7 61.9
Earnings before
Income Taxes 20.8 4.7 45.9 533.1
Income Taxes 7.6 1.6 17.4 6.5
Net Earnings $ 13.2 $ 3.1 $ 28.5 $ 526.6
Basic Earnings per
Common Share $ .40 $ .09 $ .87 $ 15.98
Diluted Earnings per
Common Share $ .40 $ .09 $ .86 $ 15.86
Weighted Average Shares
Outstanding - Basic 32.6 33.0 32.8 33.0
Weighted Average Shares
Outstanding - Diluted 33.1 33.2 33.2 33.2
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RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except per share data)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
Net Sales $ 111.6 $ 96.2 $ 330.7 $ 271.1
Costs and Expenses
Cost of products sold 78.0 69.9 228.1 196.6
Selling, general and
administrative 19.7 18.5 57.7 62.8
Advertising and promotion 2.6 3.7 14.2 14.5
Interest expense (income), net (.9) (.7) (2.7) (2.7)
Restructuring charge - - - 4.6
Equity (earnings) loss in
Vail Resorts (9.7) 2.6 (13.9) (10.2)
89.7 94.0 283.4 265.6
Earnings before Income Taxes 21.9 2.2 47.3 5.5
Income Taxes 8.1 .8 17.9 2.0
Net Earnings $ 13.8 $ 1.4 $ 29.4 $ 3.5
Basic Earnings per
Common Share $ .42 $ .04 $ .90 $ .11
Diluted Earnings per
Common Share $ .42 $ .04 $ .89 $ .11
Weighted Average Shares
Outstanding - Basic 32.6 33.0 32.8 33.0
Weighted Average Shares
Outstanding - Diluted 33.1 33.2 33.2 33.2
Notes:
1. Previously, the Company announced the intended sale of its branded baby
food subsidiary, Beech-Nut Nutrition Corporation, to the Milnot Company
for $68 million in cash. As referred to in Note 4 below, the
accompanying comparative unaudited pro forma combined statements of
earnings reflects the Company's results of operations without the
benefit of Beech-Nut results.
2. During the nine months ended June 30, 1997, the Company recorded a $516.5
million tax-free gain related to the sale of its branded cereal and snack
business to General Mills, Inc. on January 31, 1997.
3. On January 3, 1997, the Company sold its Resort Operations and related
ski resort properties to Vail Resorts, Inc. in exchange for the
assumption of $165 million in Company debt and an equity interest in
Vail.
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4. The accompanying comparative unaudited pro forma combined statements of
earnings for the quarter and nine month periods ended June 30, 1998 and
1997 are presented to reflect the results of operations assuming the
sales of the Company's Beech-Nut Nutrition Corporation, Resort Operations
and branded cereal and snack business had been completed as of the
beginning of these periods. These unaudited pro forma statements of
earnings are for informational purposes only and may not necessarily
reflect future results of operations or what the results of operations
would have been had the sale transactions been completed during the
periods shown.
5. During the quarter ended March 31, 1997, the Company recorded a $18.4
million ($11.6 million after taxes or $.35 per basic and diluted share)
restructuring charge to cover severance payments to employees whose jobs
were eliminated as a result of the Company's sale of its branded cereal
and snack business. This charge also covers the payment of certain
penalties related to the early termination of information systems
contracts and other costs related to the disposition. The level of
systems support included in these contracts was no longer warranted
after the branded cereal and snack business sale.
6. During the quarter ended December 31, 1996, the Company recorded a
restructuring charge to cover expenses related to the severance packages
received by certain separated employees. The amount of the charge was
$4.6 million ($2.9 million after taxes) and reduced earnings per basic
and diluted share for the quarter by $.09.
7. The Company has adopted Statement of Financial Accounting Standards
No. 128 - "Earnings per Share", by so doing, prior year earnings per
share have been restated to conform to the presentation required by FAS
128 of basic and diluted earnings per share. The weighted average
shares outstanding used to compute earnings per common share (basic
and diluted) for the three and nine month periods ended June 30, 1998
and 1997 are based on the weighted average number of Ralcorp Stock
shares outstanding for the periods then ended. In addition, the
calculation of diluted earnings per share includes all other common
stock equivalents.
8. Earnings per common share (basic and diluted) are computed independently
for each of the periods presented, therefore, the sum of the earnings per
common share (basic and diluted) amounts for the quarters may not total
the year-to-date.
9. Operating results for any quarter are not necessarily indicative of the
results for any other quarter or for the full year.
