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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-12619
RALCORP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES)
MISSOURI 43-1766315
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
800 MARKET STREET
ST. LOUIS, MISSOURI 63101
(314) 877-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
-------------------- ---------------------
Common Stock, $.01 par value New York Stock Exchange, Inc.
Common Stock Purchase Rights New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ x ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant was $585,158,026 based upon the closing market price on December 21,
1999. Excluded from this figure is the voting stock held by Registrant's
Directors, who are the only persons known to Registrant who may be considered to
be its "affiliates" as defined under Rule 12b-2.
Number of shares of Common Stock, $.01 par value, outstanding as of close
of business on December 21, 1999: 30,537,149.
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the year ended September 30, 1999, to
the extent indicated in Parts I, II and IV. Except as to information
specifically incorporated, the 1999 Annual Report to Shareholders is not to be
deemed filed as part of this Form 10-K report.
2. Proxy Statement filed with the Commission dated December 20, 1999, to
the extent indicated in Part III.
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Report. These
forward-looking statements are sometimes identified by their use of terms and
phrases such as "anticipates," "intends," "should," "believes" and similar
expressions elsewhere in this report. The Company's results of operations and
liquidity status may differ materially from those in the forward-looking
statements. Such statements are based on management's current view and
assumptions, and involve risks and uncertainties that could affect expected
results. For example any of the following factors cumulatively or individually
may impact expected results:
(i) If the Company is unable to maintain a meaningful price gap between
its private label products and the branded products of its competitors,
successfully introduce new products or successfully manage costs across all
parts of the Company, then the Company's private label operations could incur
operating losses;
(ii) Consolidation among members of the grocery trade may lead to
increased wholesale price pressure from large grocery trade customers and could
result in the loss of key accounts if the surviving entities are not customers
of the Company;
(iii) Significant increases in the cost of certain raw materials used in
the Company's products, to the extent not reflected in the price of the
Company's products, could adversely impact the Company's results. For example,
the cost of wheat, nuts, and soybean oil can change significantly;
(iv) In light of its significant ownership in Vail Resorts, Inc., the
Company's non-cash earnings can be adversely affected by Vail's unfavorable
performance;
(v) The Company is currently generating profit from certain copacking
contract arrangements with other manufacturers within its competitive
categories. The termination or expiration of these contracts, and the inability
of the Company to replace this level of business could negatively affect the
Company's operating results;
(vi) The Company's businesses compete in mature segments with competitors
having large percentages of segment sales; and
(vii) The Company's disclosure under the heading "INFORMATION SYSTEMS
DEVELOPMENTS AND YEAR 2000 ISSUES" in the "Financial Review" section of the
Annual Report to Shareholders for the year ended September 30, 1999, includes
cautionary statements regarding the Company's ability to successfully address
Year 2000 compliance issues, and such statements are incorporated herein.
TABLE OF CONTENTS
PART I
Page
Item 1.
Business......................................................................2
Recent Business
Developments..................................................................2
Other Information Pertaining to the Business of the Company......3
Item 2.
Properties....................................................................6
Item 3. Legal
Proceedings...................................................................7
Item 4. Submission of Matters to a Vote of Security Holders......7
Item 4(a). Executive Officers of the Registrant.........................7
PART II
Item 5. Market for Registrant's Common Equity and Related Matters.....8
Item 6. Selected Financial
Data..........................................................................8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of
Operation.....................................................................9
Item 7(a). Quantitative and Qualitative Disclosure About Market Risk........9
Item 8. Financial Statements and Supplementary Data..................9
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial
Disclosure....................................................................9
PART III
Item 10. Directors and Executive Officers of the Registrant.........9
Item 11. Executive
Compensation..................................................................9
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 9
Item 13. Certain Relationships and Related Transactions...............9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.10
Item 15.
Signatures...................................................................11
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PART I
ITEM 1. BUSINESS.
Ralcorp Holdings, Inc. is a Missouri corporation incorporated on October
23, 1996. Its principal executive offices are located at 800 Market Street, St.
Louis, Missouri 63101. The terms "Company", "Ralcorp" and "Registrant" as used
herein refer to Ralcorp Holdings, Inc. and its consolidated subsidiaries.
The Company is primarily engaged in the manufacturing, distribution and
marketing of private label ready-to-eat and hot cereal products, private label
and branded crackers and cookies, private label and value branded snack nuts and
private label shelf stable salad dressings and mayonnaise.
The following sections of the 1999 Annual Report to Shareholders contain
financial and other information concerning the Company's business developments
and operations, and are incorporated herein by reference: "Financial Review" on
pages 14 through 21; Note 18 "Segment Information" on pages 34 through 35; Note
4 "Acquisitions" on pages 27 through 28; and Note 5 "Supplemental Earnings
Statement Information" on page 28.
The Company was incorporated on October 23, 1996, under the name "New
Ralcorp Holdings, Inc." as a wholly owned subsidiary of the company known as
Ralcorp Holdings, Inc. ("Old Ralcorp"). The Company was formed to facilitate
Old Ralcorp's divestiture of its branded cereal and snack business. To effect
the divestiture, Old Ralcorp undertook a series of internal transactions whereby
the businesses, assets and liabilities of Old Ralcorp's branded cereal and snack
business (the "Branded Business") were transferred to a newly formed subsidiary
("Chex Inc.") and the businesses, assets and liabilities of Old Ralcorp's
private label foods businesses, baby food business ("Beech-Nut") and ownership
interest in Vail Resorts, Inc. were owned by the Company. Following this
internal restructuring on January 31, 1997, Old Ralcorp spun-off the Company by
distributing the Company's Common Stock to each owner of Old Ralcorp Common
Stock on a share-for-share basis (the "Distribution"). Following the
Distribution on January 31, 1997, a subsidiary of General Mills, Inc. ("General
Mills") was merged (the "Merger") into Old Ralcorp (which then consisted solely
of Old Ralcorp's branded cereal and snack business through its subsidiary Chex
Inc.), with Old Ralcorp surviving the Merger as a subsidiary of General Mills.
The Merger Agreement setting forth the terms of the Merger (the "Merger
Agreement") is an Exhibit to this Report. After the Merger, the Company changed
its name to "Ralcorp Holdings, Inc." Unless the context otherwise indicates,
references to "Ralcorp" and "Company" for periods prior to the Distribution are
references to Old Ralcorp.
RECENT BUSINESS DEVELOPMENTS
On November 20, 1998, the Company completed a Dutch Auction Self-Tender
Offer whereby it repurchased 586,368 shares of its common stock.
On March 4, 1999, the Company completed the purchase of Martin Gillet &
Co., Inc. a private label shelf-stable salad dressing and mayonnaise company
with annual sales of approximately $70 million.
On March 24, 1999, the Company completed the purchase of Southern Roasted
Nuts of Georgia, Inc., a private label snack nut company with annual sales of
approximately $30 million.
On April 29, 1999, the Company entered into a three-year $125 million
credit facility.
On October 4, 1999, the Company completed the purchase of Ripon Foods,
Inc., a private label and branded cookie company with annual sales of
approximately $64 million.
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OTHER INFORMATION PERTAINING TO THE BUSINESS OF THE COMPANY
AGREEMENT AND PLAN OF REORGANIZATION
The Company, Old Ralcorp and General Mills entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement") providing for, among
other things, the principal corporate transactions required to effect the
Distribution and certain other agreements governing the relationship between the
Company and General Mills with respect to or in consequence of the Distribution.
The Reorganization Agreement is an Exhibit to this Report.
Indemnification. Pursuant to the Reorganization Agreement, General Mills
and the Company agreed to indemnify each other for losses, liabilities, claims,
damages, obligations, payments, costs and expenses (including, without
limitation, reasonable attorneys' fees) (collectively, "Indemnifiable Losses"),
arising from certain matters. The indemnification provided by the
Reorganization Agreement also applies to the indemnified parties' respective
affiliates, employees, directors, benefit plan fiduciaries, shareholders,
agents, consultants, representatives, successors, transferees and assigns. For
a period of five years (ending on January 31, 2002), the Company agreed to
indemnify General Mills for certain pre-closing liabilities, if any, of the
Branded Business to the extent such liabilities exceed in the aggregate $6
million. Presently, no claims for indemnification have been asserted by General
Mills.
The Company has agreed to maintain a certain minimum net worth level until
January 31, 2002. For fiscal year 2000 the net worth of the Company can be not
less than $75 million plus any indemnification claims made by General Mills (up
to a total net worth of $100 million). As of September 30, 1999, the Company's
net worth was $324.1 million.
Tax Sharing Agreement. The Tax Sharing Agreement provides that each of
General Mills and the Company are responsible for, and will indemnify the other
party against, its (and its respective affiliates) allocable share of tax
liabilities before and after the Distribution. The Company is liable for all
taxes of (a) the Company or any of its affiliates for any pre- or
post-Distribution tax period, (b) Old Ralcorp or any affiliate for any
pre-Distribution tax period, including any liabilities resulting from an audit
or other adjustment to previously filed tax returns and (c) any person arising
out of or directly resulting from any of the transactions set forth in the
Reorganization, or the Merger Agreement unless such liability results from a
breach of certain covenants by General Mills with respect to taxes. General
Mills will be liable for all taxes of Old Ralcorp or any Old Ralcorp affiliate
attributable to any post-Distribution tax period. In the Tax Sharing Agreement,
General Mills and the Company agreed to cooperate with respect to the
preparation and filing of tax returns and with respect to any tax-related
challenges or proceedings.
Technology Agreement. The Company and General Mills are subject to a
Technology Agreement (the "Technology Agreement") pursuant to which the parties'
rights with respect to certain shared technology is determined. Generally, the
Company licenses from General Mills the technology necessary to produce certain
cereal and snack mix products produced by Old Ralcorp immediately prior to the
Distribution. Additionally, the Technology Agreement contains certain
provisions pursuant to which the Company has agreed not to make certain products
for certain periods of time, except as may otherwise be provided in the Supply
Agreement or in the Distribution Agreement. The Company has also agreed not to
use on its products any snack mix recipes that have been used in the three years
prior to the Distribution in connection with Chex products. The Technology
Agreement provides that the Company will not make or sell (a) any ready-to-eat
cereals that are Chex and Cookie Crisp-type products outside of the United
States, its territories, possessions, military installations or the Commonwealth
of Puerto Rico for the five year period commencing upon the Distribution; (b)
any snack mix containing those products, or a product substantially similar to,
or identical to, products which have been, prior to the Distribution, offered
for sale in connection with any form of the Chex trademark, which shall include
products sold under the Crispy Hexagon designation, for the five year period
commencing upon the Distribution.
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TRADEMARKS
The Company owns a number of trademarks that it considers substantially
important to its business, including "Nutcracker", "Flavor House", "Rippin
Good" and "Golden Batch".
SEGMENTS
The Company is presently comprised of three reportable business segments:
Cereals, Crackers and Cookies; Snack Nuts; and Mayonnaise and Dressings.
CEREALS, CRACKERS AND COOKIES
The Cereals, Crackers and Cookies segment is composed of two product lines:
private label cereal, (the "Private Label Cereal Business"); and private label
and branded crackers and cookies (the "Cracker and Cookie Business")
PRIVATE LABEL CEREAL BUSINESS
Currently, the Private Label Cereal Business accounts for approximately 63%
of the Company's Cereals, Crackers and Cookies segment sales. Private label
ready-to-eat cereals are currently produced at three operating facilities. The
Company's Cracker and Cookie Business produces a shredded wheat cereal for the
Private Label Cereal Business. Private label and branded hot cereals are
produced at one facility. The hot cereal products include old fashioned
oatmeal, quick oats, plain instant oatmeal, flavored instant oatmeal, farina and
instant Ralston, a branded hot wheat cereal. The Private Label Cereal Business
also sells hot cereal under the brand 3 Minute Brand Oats. The Company believes
it is the largest manufacturer of the private label ready-to-eat and hot
cereals.
The Company's ready-to-eat and hot cereals are warehoused in and
distributed through four independent distribution facilities and two of its
plants and shipped to customers principally via independent truck lines. The
ready-to-eat and hot cereal products are sold to grocery wholesalers, retail
chains, mass merchandisers, warehouse club outlets and other customers through
in-house district sales managers and independent food brokers.
CRACKER AND COOKIE BUSINESS
The Company believes its Cracker and Cookie Business is currently the
leading private label cracker manufacturer and a producer of private label and
branded cookies for sale in the United States. The Cracker and Cookie Business
also produces Ry Krisp branded crackers. Management positions the Cracker and
Cookie Business as the premier quality and low cost producer of a wide variety
of private label crackers and cookies.
The Cracker and Cookie Business operates six plants: one produces solely Ry
Krisp crackers, two produce private label crackers and cookies and three produce
private label and branded cookies. The Cracker and Cookie Business' products
are largely produced to order and shipped directly to customers. Private label
crackers and cookies are sold through a broker network and an internal sales
staff. Branded Ry Krisp crackers are sold through a direct store distributor
network.
SNACK NUTS
The Snack Nuts segment is composed of Flavor House Products, Inc.,
Nutcracker Brands, Inc. and Southern Roasted Nuts of Georgia, Inc. which was
acquired during the fiscal year. The segment operates three plants that produce
a variety of jarred, canned and bagged snack nuts. The segment's products are
largely produced to order and shipped directly to customers. The segment sells
its products through an internal sales staff and a broker network. The segment
produces store brand products as well as value branded products under the
Nutcracker and Flavor House brands.
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MAYONNAISE AND DRESSINGS
The Mayonnaise and Dressings segment comprises Martin Gillet & Co., Inc.
which was acquired during the fiscal year. The segment operates three plants
that produce a variety of private label shelf-stable salad dressings, sauces and
mayonnaise. The segment's products are largely produced to order and shipped
directly to customers. The products are sold through an internal sales staff
and a broker network.
OWNERSHIP OF VAIL STOCK
The Company owns 7,554,406 shares of Vail Resorts, Inc. Common Stock
(approximately 21.9 percent of the shares outstanding as of September 30, 1999).
Additionally, two of the Company's Directors, Messrs. Stiritz and Micheletto,
are on the Vail Board of Directors. Currently, the Company utilizes the equity
method of accounting to reflect the portion of Vail's earnings (or losses)
applicable to the Company on a non-cash basis.
Pursuant to a Shareholder Agreement entered into in connection with the
acquisition of the Vail Common Stock, the Company can only sell its Vail Common
Stock in a registered offering allowed under the Shareholder Agreement or in
private transactions (provided the purchaser agrees to be bound by the
Shareholder Agreement). Vail's results of operations are highly seasonal and
are dependent in part on weather conditions and consumers' discretionary
spending trends. In light of the significance of the Company's ownership in
Vail in comparison to earnings and assets of the Company, changes in the price
of Vail's Common Stock can impact the Company's stock price.
COMPETITION
The Company's businesses face intense competition from large branded
cereal, cracker and cookie, snack nut manufacturers, and mayonnaise and salad
dressing and highly competitive private label cereal, cracker and cookie and
snack nut manufacturers. Top branded ready-to-eat cereal competitors include
Kellogg, General Mills, Kraft Foods and Quaker Oats. The Cracker and Cookie
Business faces intense competition from large branded manufacturers such as
Nabisco and Keebler/Sunshine who possess approximately 40% and 25%,
respectively, of the branded cracker category and significant shares in the
cookie category (on a volume basis). Promotional spending by large branded
cracker and cookie manufacturers have negatively impacted the Company's sales of
crackers and cookies during fiscal year 1999. In addition, private label
cracker and cookie manufacturers provide significant competition in the store
brand segment. The Snack Nuts segment faces significant competition from one
significant branded snack nut producer and many private label snack nut
manufacturers. The Mayonnaise and Dressings segment faces intense competition
from several large branded and many private label producers.
The industries in which the Company competes are highly sensitive to both
pricing and promotion. Competition is based upon product quality, price,
effective promotional activities, and the ability to identify and satisfy
emerging consumer preferences. These industries are expected to remain highly
competitive in the foreseeable future. Future growth opportunities for the
Company are expected to depend on the Company's ability to implement strategies
for competing effectively in all of its businesses, including strategies
relating to enhancing the performance of its employees, maintaining effective
cost control programs, developing and implementing methods for more efficient
manufacturing and distribution operations, and developing successful new
products, while at the same time maintaining aggressive pricing and promotion of
its products.
EMPLOYEES
The Company employs approximately 3,400 people in the United States.
Approximately 1,200 of the Company's personnel are covered by eight union
contracts and, from time to time the Company has experienced union organizing
activities at its non-union plants. The contracts expire at various times
beginning on July 31, 2000 and ending October 31, 2002. The Company believes
its relations with its employees, including union employees, are good.
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RAW MATERIALS
The principal raw materials used in the Company's businesses are grain and
grain products, flour, sugar, soybean oil and various nuts such as peanuts and
cashews. The Company purchases such raw materials from local, regional,
national and international suppliers. The cost of raw materials used in the
Company's products may fluctuate widely due to weather conditions, government
regulations, economic climate, or other unforeseen circumstances. Agricultural
products represent 35% to 50% of the Company's cost of goods sold in fiscal
1999. Packaging prices represent 15% to 30% of the Company's cost of goods sold
in fiscal 1999. From time to time the Company will enter into supply contracts
for periods up to twelve months to secure favorable pricing for ingredients and
packaging supplies.
GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS
The operations of the Company are subject to regulation by various federal,
state and local governmental entities and agencies. As a producer of goods for
human consumption, such operations are subject to stringent production and
labeling standards. In the early 1990's, new labeling regulations were
promulgated and implemented which required the Company businesses to modify the
information disclosed on their packaging. Management expects that similar
changes in laws in the future could be implemented without a material adverse
impact on the Company businesses if existing packaging stock may be used during
a transition period while packaging information is modified.
The operations of the Company businesses, like those of similar businesses,
are subject to various federal, state and local laws and regulations with
respect to environmental matters, including air and water quality, underground
fuel storage tanks, waste handling and disposal and other regulations intended
to protect public health and the environment. While it is difficult to quantify
with certainty the potential financial impact of actions regarding expenditures
for environmental matters, particularly remediation, and future capital
expenditures for environmental control equipment, in the opinion of management,
based upon the information currently available, the ultimate liability arising
from such environmental matters, taking into account established accruals for
estimated liabilities, should not have a material effect on the Company's
capital expenditures or consolidated results of operations or financial
position.
ITEM 2. PROPERTIES.
The Company's principal properties are its manufacturing locations. Shown
below are the Company's owned, and where indicated, leased principal properties.
The Company leases its principal executive offices and research and development
facilities in St. Louis, Missouri. Management believes its facilities are
suitable and adequate for the purposes for which they are used and are
adequately maintained.
Cereal Plants Cracker and Cookie Plants Snack Nut Plants
-------------- -------------------------- ----------------
Battle Creek, MI Princeton, KY Billerica, MA
Cedar Rapids, IA Poteau, OK Dothan, AL (leased)
Lancaster, OH Minneapolis, MN Fitzgerald, GA
Sparks, NV Tonawanda, NY
Ripon, WI (two plants)
Mayonnaise & Dressings Plants
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Baltimore, MD
Kansas City, KS
Los Angeles, CA (leased)
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve complex
questions of fact and law. Additionally, the operations of the Company, like
those of similar businesses, are subject to various federal, state, and local
laws and regulations intended to protect public health and the environment,
including air and water quality and waste handling and disposal.
Pending legal liability, if any, from these proceedings cannot be determined
with certainty; however, in the opinion of Company management based upon the
information presently known, the liability of the Company, if any, arising from
the pending legal proceedings, as well as from asserted legal claims and known
potential legal claims which are probable of assertion, taking into account
established accruals for estimated liabilities (if any), are not expected to be
material to the Company's consolidated financial position and results of
operation. In addition, while it is difficult to quantify with certainty the
potential financial impact of actions regarding expenditures for compliance with
regulatory matters, in the opinion of management, based upon the information
currently available, the ultimate liability arising from such compliance matters
should not be material to the Company's consolidated financial position and
results of operations.
Additionally, the Company has retained certain potential liabilities associated
with divested businesses (the Branded Business, Ralston Resorts and Beech-Nut).
Presently, management believes that taking into account applicable liability
caps, sharing arrangements with acquiring entities and the known facts and
circumstances regarding the retained liabilities, potential liabilities of the
divested businesses should not be material to the Company's consolidated
financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the security holders during the fourth
quarter of fiscal year 1999.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT.
Joe R. Micheletto. 63 Chief Executive Officer and President since
1996. He served as Co-Chief Executive Officer
and Chief Financial Officer from 1994 to 1996
with the Company. He served as Vice President
and Controller of Ralston Purina from 1985 to
1994, and as Chief Executive Officer of Ralston
Resorts from 1991 to 1997. Mr. Micheletto
is also a Director of the Company.
Thomas G. Granneman 50 Corporate Vice President and Controller. Mr.
Granneman has been Corporate Vice President and
Controller since January 1999. He joined Old
Ralcorp in 1996 as Vice President and
Controller. Prior to joining Ralcorp, Mr.
Granneman was Vice President of Finance for
Lowell Shoe Company, Inc. from 1995 to 1996.
From 1992 to 1995, Mr. Granneman was Vice
President and Controller of Brown Shoe
Company Division of Brown Group, Inc.
Kevin J. Hunt 48 Corporate Vice President; and President,
Bremner, Inc. He has held the same position
with the Company since 1995. Mr. Hunt joined
Ralston Purina in 1985. In 1988, he was named
Director of Marketing for Continental Baking
Company, and in 1992 he was named Director of
Planning for Ralston Purina and President of
Bremner, Inc.
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Robert W. Lockwood 56 Corporate Vice President General Counsel and
Secretary of the Company. He has held the same
position with the Company since 1994. Mr.
Lockwood joined Ralston Purina in 1976. In
1981, he was named Associate Counsel and
Assistant Secretary; and in 1989, he was
named Vice President, Senior Counsel and
Assistant Secretary.
James A. Nichols. 51 Corporate Vice President; and President,
Ralston Foods. He has held the same position
with the Company since 1995. Mr. Nichols joined
Ralston Purina in 1975. In 1985 he was named
Vice President and Director of Marketing
-Cereal. In 1989, he was named President,
Beech-Nut Nutrition Corporation. In 1994,
he was named Corporate Vice President and
President of Beech-Nut Nutrition Corporation.
Daniel J. Sescleifer 37 Corporate Vice President and Treasurer since
January, 1999. He joined Ralston Purina in
1986. In 1996, he was named Director-Corporate
Finance. In 1997 he was named Vice President
and Treasurer.
David P. Skarie 53 Corporate Vice President and Director of
Customer Development of Ralston Foods. He has
has held the same position with the Company
since 1994. Mr. Skarie joined Ralston Purina
in 1986. In 1988, he was named National Sales
Director, General Merchandise. In 1990, he
was named Vice President, Eastern Division
Sales. In 1991, he was named Vice President,
Field Sales. In 1993, he was named Vice
President-Director, Customer Development,
Human Foods.
Ronald D. Wilkinson 49 Corporate Vice President and Director of
Product Supply of Ralston Foods. He has held
the same position with the Company since 1996.
Mr. Wilkinson joined Ralcorp in November, 1995.
In 1991, he was named Director, Engineering
U.S. Cereals for the Quaker Oats Company; and
in 1992, was named Vice President, Supply Chain
U.S. Cereals for The Quaker Oats Company. In
November, 1995, Mr. Wilkinson joined Old
Ralcorp as Executive Vice President and
Director, Manufacturing for Ralston Foods;
and in June, 1996, was named Executive Vice
President and Director of Product Supply for
Ralston Foods.
(Ages are as of December 31, 1999)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
The Company's common stock (RAH) is traded on the New York Stock Exchange.
There were 15,360 common shareholders of record on November 19, 1999. Other
information required by Item 5 appears in Note 19 - "Quarterly Financial Data"
on page 35 of the 1999 Annual Report to Shareholders and is incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The summary of financial data appears on page 13 of the 1999 Annual Report
to Shareholders under the caption "Selected Financial Data" and is incorporated
herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Information appearing under the caption "Financial Review" on pages 14
through 21 and in Note 18 "Segment Information" on pages 34 through 35 of the
1999 Annual Report to Shareholders is hereby incorporated by reference.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Information appearing in the "Market Risk" section of "Financial Review,"
in the "Inventories" portion of Note 2 "Summary of Significant Accounting
Policies," and in Note 12 "Financial Instruments" on pages 19-20, 26 and 30,
respectively, of the 1999 Annual Report to Shareholders is hereby incorporated
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements of the Company and its subsidiaries
and related Notes thereto, appearing on pages 22 through 35 together with the
report thereon of PricewaterhouseCoopers LLP on page 36 of the 1999 Annual
Report to Shareholders are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding directors on pages 3 through 4 and 7 of the
Company's Notice of Annual Meeting and Proxy Statement dated December 20, 1999,
is hereby incorporated by reference. Information regarding Executive Officers of
the Company is included under Item 4(a) of Part I.
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Information on Executive Compensation" on
pages 8 through 13, and the remuneration information under the caption "How does
Ralcorp compensate its directors?" on page 7 of the Company's Notice of Annual
Meeting and Proxy Statement dated December 20, 1999, are hereby incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion of the security ownership of certain beneficial owners and
management appearing under the caption "How much Ralcorp stock do directors and
executive officers own?" on page 6 of the Company's Notice of Annual Meeting and
Proxy Statement dated December 20, 1999, is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under the captions "Compensation Committee Interlocks
and Insider Participation" on page 13 of the Company's Notice of Annual Meeting
and Proxy Statement dated December 20, 1999, is hereby incorporated by
reference.
9
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed with this report:
(1) Financial statements previously incorporated by reference under
Item 8 herein above.
-Report of Independent Accountants.
-Consolidated Statement of Earnings for years ended September 30,
1999, 1998 and 1997.
-Consolidated Balance Sheet at September 30, 1999 and 1998.
-Consolidated Statement of Cash Flows for years ended September 30,
1999, 1998 and 1997.
-Consolidated Statement of Shareholders' Equity for the three years
ended September 30, 1999.
-Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules: None
(3) Exhibits. See the Index to Exhibits that appears at the end of
this document and which is incorporated herein. Exhibits 10.14 to 10.34 are
management compensation plans or arrangements.
(b) Reports on Form 8-K. The Company filed the following reports on Form
8-K during the last quarter of the fiscal year:
Form 8-K filed July 27, 1999 relating to a press release announcing earnings for
third quarter ended June 30, 1999.
Form 8-K filed September 13, 1999 relating to a press release announcing the
Company's agreement to purchase Ripon Foods, Inc.
10
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Ralcorp Holdings, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
RALCORP HOLDINGS, INC.
By: /s/Joe R. Micheletto
----------------------------
Joe R. Micheletto
Chief Executive Officer
and President
December 23, 1999
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints R. W. Lockwood and T. G. Granneman and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resolution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Joe R. Micheletto Chief Executive Officer, December 23, 1999
- ---------------------------- President and Director
Joe R. Micheletto (Principal Executive Officer
and Principal Financial Officer)
/s/ Thomas G. Granneman Corporate Vice President and December 23, 1999
- ---------------------------- Controller (Principal
Thomas G. Granneman Accounting Officer)
/s/ William D. George, Jr. Director December 23, 1999
- ----------------------------
William D. George, Jr.
/s/ Jack W. Goodall Director December 23, 1999
- ----------------------------
Jack W. Goodall
/s/ David W. Kemper Director December 23, 1999
- ----------------------------
David W. Kemper
/s/ William P. Stiritz Director December 23, 1999
- ----------------------------
William P. Stiritz
11
<PAGE>
<PAGE>
FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements of the Registrant have been
incorporated by reference under Item 8. Financial statements of the Registrant's
50% or less owned companies have been omitted because, in the aggregate, they
are not significant. Financial Schedules not included have been omitted because
they are not applicable or the required information is shown in the financial
statements or notes thereto.
12
<PAGE>
<PAGE>
RALCORP HOLDINGS, INC.
<TABLE>
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------
<C> <S>
<F*>3.1 Restated Articles of Incorporation of Ralcorp Holdings, Inc.
(Filed as Exhibit 3.1 to the Company's Form 10-Q for the period
ending December, 31, 1996).
<F*>3.2 Bylaws of Ralcorp Holdings, Inc. (Filed as Exhibit 3.2 to the
Company's Registration Statement on Form 10 dated December 27,
1996).
<F*>4.1 Shareholder Protection Rights Agreement (Filed as Exhibit 4.1 to
the Company's Registration Statement on Form 10 dated December 27,
1996).
<F*>4.2 First Amendment to Shareholder Rights Protection Plan (Filed as
Exhibit 4 to the Company's Form 10-Q for the period ending
June 30, 1997).
<F*>10.1 $125,000,000 Credit Agreement among Ralcorp Holdings, Inc., the
lenders named therein, and the First National Bank of Chicago, as
Agent, dated as of April 28, 1999. (Filed as Exhibit 10.1 to the
Company's Form 10-Q for the period ending March 31, 1999.
<F*>10.2 Reorganization Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc. New Ralcorp Holdings, Inc., Ralston Foods,
Inc., Chex, Inc. and General Mills, Inc. (Filed as Exhibit 10.2 to
the Company's Form 10-Q for the period ending December 31, 1997).
<F*>10.3 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp
Holdings, Inc. and New Ralcorp Holdings, Inc. (Filed as Exhibit
10.5 to the Company's Form 10-Q for the period ending December 31,
1996).
<F*>10.4 Stock Purchase Agreement made as of July 29, 1999 by and among
Milnot Holding Corporation, RH Financial Corporation and Ralcorp
Holdings, Inc. (filed as Exhibit 99.2 to the Company's Form 8-K
dated September 10, 1999).
<F*>10.5 Technology Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., and Chex, Inc.
(Filed as Exhibit 10.4 to the Company's Form 10-Q for the period
ending December 31, 1996).
<F*>10.6 Trademark Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
(Filed as Exhibit 10.3 to the Company's Form 10-Q for the period
ending December 31, 1996).
<F*>10.7 Agreement and Plan of Merger dated as of August 13, 1996 by and
among Ralcorp Holdings, Inc., General Mills, Inc. and General
Mills Missouri, Inc. (Filed as Exhibit 2.6 to the Company's Form
10-Q for the period ending December 31, 1996).
<F*>10.8 Stock Purchase Agreement by and among Vail resorts, Inc., Ralston
Foods, Inc. and Ralston Resorts, Inc. dated July 22, 1996 (Filed
as Exhibit 10.10 to the Company's Registration Statement on Form
10, dated December 27, 1996).
<F*>10.9 Shareholder Agreement dated as of January 3, 1997 among Vail
Resorts, Inc., Ralston Foods, Inc. and Apollo Ski Partners L.P.
(Filed as Exhibit 10.9 to the Company's Form 10-Q for the period
ending December 31, 1996).
10.9(a) First Amendment to Shareholder Agreement dated as of November 1,
1999 among Vail Resorts, Inc., Ralcorp Holdings, Inc. and Apollo
Ski Partners LP.
<F*>10.10 Stock Purchase Agreement among Bremner, Inc. and all of the
shareholders of the Wortz Company dated March 14, 1997 (Filed as
exhibit 10.0 to the Company's Form 10-Q for the period ending
March 31, 1997).
13
<PAGE>
<PAGE>
<CAPTION>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------
<C> <S>
<F*>10.11 Amendment to Agreement and Plan of Merger dated October 26, 1996 by
and among Ralcorp Holdings, Inc., General Mills, Inc. and General
Mills Missouri, Inc. (filed as Exhibit 10.11 to the Company's Form
10-K for the period ending September 30, 1997).
<F*>10.12 Second Amendment to Agreement and Plan of Merger dated January 29,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc., and
General Mills Missouri, Inc. (Filed as Exhibit 10.7 to the
Company's Form 10-Q for the period ending December 31, 1996).
<F*>10.13 Third Amendment to Agreement and Plan of Merger dated January 31,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and
General Mills Missouri, Inc. (Filed as Exhibit 10.8 to the
Company's Form 10-Q for the period ending December 31, 1996).
<F*>10.14 Incentive Stock Plan (Filed as Exhibit 10.01 to the Company's
Registration Statement on Form 10 dated December 27, 1997).
<F*>10.15 Form of 1997 Non-Qualified Stock Option Agreement (Filed as Exhibit
10.01 to Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.16 Form of 1997 Non-Qualified Stock Option Agreement for
Non-Management Directors (Filed as Exhibit 10.01 to Company's Form
10-Q for the period ending June 30, 1997).
<F*>10.17 Form of Management Continuity Agreement (Filed as Exhibit 10.3 to
the Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.18 Employment Agreement For J. R. Micheletto (Filed as Exhibit 10.4 to
the Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.18(a) Amendment to Employment Agreement For J. R. Micheletto (Filed as
Exhibit 10.18 to the Company's Form 10-K for the year ending
September 30, 1997).
<F*>10.19 Employment Agreement For K. J. Hunt (Filed as Exhibit 10.5 to the
Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.20 Employment Agreement For R. W. Lockwood (Filed as Exhibit 10.6 to
the Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.21 Employment Agreement For J. A. Nichols (Filed as Exhibit 10.7 to
the Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.22 Employment Agreement For D. P. Skarie (Filed as Exhibit 10.8 to
the Company's Form 10-Q for the period ending June 30, 1997).
<F*>10.23 Summary of Terms for 1999 Non-Qualified Stock Options. (Filed as
Exhibit 10.23 to the Company's Form 10-K for the year ending
September 30, 1998.)
<F*>10.24 Employment Agreement for R. D. Wilkinson (Filed as Exhibit 10.24 to
the Company's Form 10-K for the year ending September 30, 1997).
<F*>10.25 Split Dollar Second to Die Life Insurance Arrangement (Filed as
Exhibit 10.07 to the Company's Registration Statement on Form 10
dated December 27, 1996).
<F*>10.26 Change in Control Severance Plan (Filed as Exhibit 10.06 to the
Company's Registration Statement on Form 10 dated December 27,
1996).
14
<PAGE>
<PAGE>
<CAPTION>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------
<C> <S>
10.28 Deferred Compensation Plan for Non-Management Directors
10.29 Deferred Compensation Plan for Key Employees
<F*>10.30 Executive Life Insurance Plan (Filed as Exhibit 10.10 to the
Company's Registration statement on Form 10 Dated December 27,
1996).
<F*>10.31 Executive Health Plan (Filed as Exhibit 10.11 to the Company's
Registration Statement on Form 10 Dated December 27, 1996).
<F*>10.32 Executive Long Term Disability Plan (Filed as Exhibit 10.12 to the
Company's Registration Statement on Form 10 dated December 27,
1996).
<F*>10.33 Supplemental Retirement Plan (Filed as Exhibit 10.14 to the
Company's Registration Statement on Form 10 dated December 27,
1996).
<F*>10.34 Executive Savings Investment Plan (Filed as Exhibit 10.15 to the
Company's Registration Statement on Form 10 dated December 27,
1996).
10.35 Form of Indemnification Agreement for all Non-Management Directors
of the Company
10.36 Form of Indemnification Agreement for all Management Directors of
the Company.
10.37 Form of Indemnification Agreement for all Corporate Officers who
are not Directors of the Company.
10.38 Summary of Terms of 1999 Non-Qualified Stock Options.
13 Portion of the 1999 Annual Report to Shareholders
21 Subsidiaries of the Company
23(a) Consent of PricewaterhouseCoopers LLP
23(b) Consent of Arthur Andersen LLP
<F*>24 Power of Attorney (Included in Part II)
27 Financial Data Schedule
99.1 Opinion of Arthur Anderson LLP
<FN>
- ----------
<F*> Incorporated by reference
</TABLE>
15
FIRST AMENDMENT TO
SHAREHOLDER AGREEMENT
This FIRST AMENDMENT to the SHAREHOLDER AGREEMENT dated as of November 1,
1999 (the "First Amendment") is made by and among Vail Resorts, Inc., a Delaware
corporation ("Vail"), Ralcorp Holdings, Inc., a Missouri corporation (f/k/a
Ralston Foods, Inc., a Nevada corporation) ("Foods"), and Apollo Ski Partners,
L.P., a Delaware limited partnership ("Apollo"), amending certain provisions of
the Shareholder Agreement dated as of January 3, 1997 (the "Shareholder
Agreement"), by and among Vail, Foods and Apollo. Terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Shareholder Agreement.
WHEREAS, the Shareholder Agreement contains a covenant pursuant to which
Foods has agreed to vote each class of Vail Equity owned by Foods and its
Affiliates in the manner set forth in the Shareholder Agreement;
WHEEREAS, Vail, Foods and Apollo have agreed to modify the voting provisions of
the Shareholder Agreement as specifically set forth in this First Amendment.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
AMENDMENTS TO THE SHAREHOLDER AGREEEMENT
1.1. Section 2.3 of the Shareholder Agreement is revised in its entirety
to read as follows:
"Section 2.3 Voting of Vail Equity. Foods agrees that during the term of this
---------------------
Agreement, with respect to the election of directors of Vail, each class of Vail
Equity owned by Foods and its Affiliates shall be voted (i) "for" the nominees
recommended by the Board of Directors of Vail, provided Vail and Apollo are in
compliance with the terms of Section 11.2 of this Agreement, (ii) in accordance
with the recommendation of the Board of Directors of Vail on each proposal of a
security holder pursuant to Rule 14a-8 under the Exchange Act, so long as the
subject matter of such proposal does not fall, within the second proviso hereto,
and (iii) with respect to all other matters requiring a vote of the Vail Equity,
"for" any proposal in the same proportion as the votes cast "for" any proposal
in the same proportion as the votes cast "for" such proposal by the holders of
the Vail Securities of the same class (excluding the Vail Equity owned by
Foods), and "against" any proposal in the same proportion as the votes cast
"against" such proposal in the same proportion as the votes cast "against" such
proposal by the holders of each such class of Vail Securities (excluding the
Vail Equity owned by Foods) and that with respect to broker non-votes and
abstentions, each class of Vail Equity owned by Foods will be voted in the same
proportion as votes deemed "for," "against" or "abstain," giving effect to
broker non-votes and abstentions as required under the laws and rules then
applicable; provided, however, that Foods shall retain the right to vote all of
-------- -------
its Vail Equity in favor of the approval of the Vail Resorts, Inc. 1999 Long
Term Incentive and Share Award Plan as adopted and approved by the Board of
Directors of Vail and submitted to a vote of the shareholders generally;
provided, further, that Foods shall retain the right to vote its Vail Equity in
- -------
any manner it sees fit with respect to any proposals for (1) the merger,
consolidation or other business combination of Vail or any subsidiary of Vail
with or into any other corporation, (2) the sale, lease, exchange, transfer or
other disposition of all or substantially all of the assets of Vail and all of
its subsidiaries taken together as a single business, (3) the creation of any
other class of stock with voting rights, (4) changes to the Certificate of
Incorporation or Bylaws of Vail that adversely affect Foods' rights under this
Agreement. The provisions of this Section 2.3 shall apply to both the casting
of votes at meetings of shareholders and execution of actions by written
consent."
1
<PAGE>
<PAGE>
ARTICLE II
PROVISIONS OF GENERAL APPLICATION
2.1. Except as otherwise expressly provided by this First Amendment, all
of the terms, conditions and provisions to the Shareholder Agreement remain
unaltered. The Shareholder Agreement and this First Amendment shall be read and
construed as one agreement.
2.2. If any of the terms of this First Amendment shall conflict in any
respect with any of the terms of the Shareholder Agreement, the terms of this
First Amendment shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed by their duly authorized officers, all as of the day and year first
above written.
VAIL RESORTS, INC.
By:______________________________
Name:
Title:
RALCORP HOLDINGS, INC.
By:_________________________
Name:
Title:
APOLLO SKI PARTNERS, L.P.
By: Apollo Investment Fund, L.P.
By: Apollo Advisors, L.P.
By: Apollo Capital Management, Inc.
By:_________________________
Name:
Authorized Signatory
2
DEFERRED COMPENSATION PLAN FOR
NON-MANAGEMENT DIRECTORS
(Effective: December 15, 1999)
1. General Provisions
1.1 Purpose of Plan
The purpose of the Plan is to enhance the profitability and value of
the Company for the benefit of its shareholders by providing a supplemental
retirement program to attract and retain qualified non-management directors who
have made or will make important contributions to the success of the Company.
1.2 Definitions
(a) "Acquiring Person" means any person or group of Affiliates or
Associates who is or becomes the beneficial owner, directly or indirectly, of
shares representing 20% or more of the outstanding Stock.
(b) "Affiliate" or "Associate" shall have the meanings set forth
as of March 1, 1990, in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(c) "Beneficiary" means the person or persons (including legal
entities) who have been designated in accordance with Section 3.2 hereof to
receive benefits under this Plan following a Participant's death.
(d) "Board" means the Board of Directors of Ralcorp Holdings, Inc.
(e) "Change in Control" means the time when (i) any person, either
individually or together with such person's Affiliates or Associates, shall have
become the beneficial owner, directly or indirectly, of shares representing at
least 50% of the outstanding Stock and there shall have been a public
announcement of such occurrence by the Company or such person or (ii)
individuals who shall qualify as Continuing Directors shall have ceased for any
reason to constitute at least a majority of the Board of Directors of Ralcorp
Holdings, Inc.; provided however, that in the case of either clause (i) or
clause (ii), a Change in Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a majority of
the Continuing Directors who shall then be members of such Board of Directors.
(f) "Company" means Ralcorp Holdings, Inc. and its subsidiaries
and affiliates.
(g) "Compensation" means all or any part of any cash, or other
consideration to be paid to a Director by the Company as directors' fees or
retainers.
(h) "Continuing Director" means any member of the Board while such
person is a member of the Board, who is not an Affiliate or Associate of an
Acquiring Person or of any such Acquiring Person's Affiliate or Associate and
was a member of the Board prior to the time when such Acquiring Person became an
Acquiring Person, and any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or a representative or nominee of
an Acquiring Person or of any Affiliate or Associate of such Acquiring Person
and is recommended or elected to succeed the Continuing Director by a majority
of the Continuing Directors.
(i) "Date of Crediting" means, with respect to any Compensation
deferred pursuant to the Plan, the first day of the month following the date
when such Compensation would otherwise be paid to a Participant.
(j) "Director" means any member of the Board.
(k) "Market Value" means, in the case of Stock, the average of the
closing prices of the Stock as reported by the New York Stock Exchange -
Composite Transactions during the ten (10) trading days immediately preceding
the date in question, or, if the Stock is not quoted on such composite tape or
if such Stock is not listed on such exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which the Stock is listed, or if the Stock is not listed on any such
exchange, the average of the closing bid quotations with respect to a share of
the Stock during the ten (10) days immediately preceding the date in question on
the NASDAQ Stock Market National Market System or any system then in use, or if
no such quotations are available, the fair market value on the date in question
of a share of the Stock as determined by a majority of the Continuing Directors
in good faith.
(l) "Non-Management Director" means any Director who is not an
officer or employee of the Company.
(m) "Participant" means any Director who participates in the Plan.
(n) "Plan" means the Deferred Compensation Plan for Non-Management
Directors.
(o) "Stock" means the Company's $.01 par value common stock or any
such other security outstanding upon the reclassification of the Company's
common stock, including, without limitation, any Stock split-up, Stock dividend,
or other distributions of stock in respect of Stock, or any reverse Stock
split-up, or recapitalization of the Company or any merger or consolidation of
the Company with any subsidiary or affiliate, or any other transaction, whether
or not with or into or otherwise involving an Acquiring Person.
(p) "Year" means calendar year unless otherwise specified.
1.3 Eligibility and Participation
Any Non-Management Director who is entitled to Compensation, and who
is permitted to request the deferral of such Compensation by an independent
majority of the Board is eligible to participate in the Plan. An eligible
Director becomes a Participant in this Plan upon the effective date of an
agreement executed by the parties pursuant to Section 2.1(c).
1.4 Administration of the Plan
The Board shall administer the Plan and, in connection therewith,
shall have full power and sole discretion to designate or approve Directors
eligible to participate in the Plan; to approve or disapprove eligible
Directors' requests for deferral in any option; to impose on any deferral any
terms and conditions in addition to those set forth in the Plan; to construe and
interpret the Plan; to establish rules and regulations; to delegate
responsibilities to others to assist it in administering the Plan or performing
any responsibilities hereunder; and to perform all other acts it believes
reasonable and proper in connection with the administration of the Plan.
1.5 Power to Amend
The power to amend, modify or terminate this Plan at any time is
reserved to the Board except that no amendment, modification or termination
which would reasonably be considered to be adverse to a Participant or
Beneficiary may apply to or affect the terms of any deferral of Compensation
deferred prior to the effective date of such amendment, modification or
termination, without the consent of the Participant or Beneficiary affected
thereby.
2. Deferral Options
2.1 Terms and Conditions
(a) Deferral options available - The options for deferral of
----------------------------
Compensation offered under this Plan shall consist of the Equity Option, the
Variable Interest Option and such other options as the Board may from time to
time determine. Prior to commencement of directorships, or with respect to
existing Directors, on or before December 31 of the Year prior to the Year in
which any such Compensation will be earned, an eligible director may request in
writing that the Board approve a deferral either into or under any single
deferral option provided under this Plan, or any combination thereof. The
Board, in its sole discretion, may permit amounts deferred by an eligible
Director pursuant to any other deferred compensation program of the Company to
be converted into any deferral option provided under this Plan. Participants in
this Plan shall be permitted monthly to transfer any amounts which have been
deferred (other than Company Matching Deferrals, as hereinafter defined) in a
Deferred Stock Equivalent Account established pursuant to the Equity Option into
a Deferred Cash Account established pursuant to the Variable Interest Option or
one of the six Vanguard mutual funds, or conversely from one of the other funds
into another fund or into a Deferred Stock Equivalent Account. Transfers
between or among such funds are subject to compliance with the terms of SEC Rule
16(b) (short swing stock profits). Effective October 31, 2000, the Variable
Interest Option will be eliminated and any balance including credited interest
must be transferred to one of the other available investment options. Company
Matching Deferrals may not be transferred from the Stock Equivalent Account to
which they are originally credited.
(b) Source of terms and conditions - Any deferral under the Plan
--------------------------------
shall be subject to the provisions of the Plan, any other conditions imposed by
law, and the terms of any award of Compensation. Approval of a deferral of
Compensation shall in no event constitute a waiver by the Company of any
conditions to the receipt of such Compensation.
(c) Written agreement - Every deferral that is approved by the
------------------
Board or its designees shall be made pursuant to a written agreement signed by
the Participant and the Company. Any modifications or amendments to such
agreement shall also be in writing, signed by the parties. In the event of any
conflict or inconsistency between the terms of such written agreement and the
terms of the Plan, such written agreement shall control.
2.2 Equity Option
(a) Stock equivalents - Upon approval of a deferral in the Equity
------------------
Option, a "Deferred Stock Equivalent Account" shall be established in the
Participant's name. Stock equivalents and fractions thereof shall be credited
to such Deferred Stock Equivalent Account in an amount determined by dividing
the amount of Compensation to be deferred under this option by the Market Value
of the Stock on the Date of Crediting. Upon the occurrence of any of the events
described in Section IV of the Ralcorp Holdings, Inc. Incentive Stock Plan, the
number of Stock equivalents in each Deferred Stock Equivalent Account shall, to
the extent appropriate, be adjusted accordingly.
(b) Company Matching Deferral - Upon a deferral into the Equity
---------------------------
Option and the associated crediting of Stock equivalents to a Participant's
Deferred Stock Equivalent Account, the Company shall credit such Deferred Stock
Equivalent Account, on the same Date of Crediting, with additional Stock
equivalents equal to 33-1/3% of the Compensation deferred into such Deferred
Stock Equivalent Account divided by the Market Value of the Stock on the Date of
Crediting. Such additionally credited Stock equivalents, and all dividend
equivalents associated therewith, are hereinafter referred to as "Company
Matching Deferrals".
(c) Time of crediting - Deferrals in Stock equivalents shall be
-------------------
credited to a Participant's Deferred Stock Equivalent Account on the Date of
Crediting.
(d) Dividend Equivalents - To the extent dividends on the Stock
---------------------
are paid, dividend equivalents and fractions thereof on the stock equivalents
and fractions thereof in a Participant's Deferred Stock Equivalent Account shall
be awarded, converted to additional Stock equivalents and credited to the
Deferred Stock Equivalent Account as of the dividend payment dates. The number
of Stock equivalents to be credited as of each such date shall be determined by
dividing the amount of the dividend equivalent by the Market Value of the Stock
on the dividend payment date. The Participant's Deferred Stock Equivalent
Account shall continue to earn such dividend equivalents until fully distributed
if distributed in Stock, otherwise such dividend equivalents shall be earned
only until the time of a Participant's termination or the effective date of the
commencement of total and permanent disability. At the discretion of the Board,
dividend equivalents may be credited in cash to a Deferred Cash Account
established or existing for the Participant under the "Variable Interest
Option", described in Section 2.3 hereof, instead of converting them to
additional Stock equivalents.
(e) Form of distribution - Distributions under this Option,
----------------------
including distributions of Company Matching Deferrals, shall be in cash. The
amount fractional Stock equivalents in each Deferred Stock Equivalent Account
multiplied by the Market Value on the date of the Participant's termination or
the effective date of the determination of total and permanent disability, with
interest accruing, at the rate described in Section 2.3(a) hereof, from of cash
to be distributed shall be the number of whole and/or such date of termination
or determination of total and permanent disability until the time of
distribution.
(f) Change in Control - Upon a Change in Control, deferrals into
-------------------
the Equity Option will no longer be permitted and each Deferred Stock Equivalent
Account shall be immediately converted into a Deferred Cash Account established
pursuant to Section 2.3(a) hereof. The amount of cash to be credited to each
such Deferred Cash Account shall be equal to the number of whole and/or
fractional Stock equivalents in each Deferred Stock Equivalent Account
multiplied by the Market Value as of the Change in Control. Each Participant
whose Deferred Stock Equivalent Account is hereby converted to a Deferred Cash
Account shall have the right, at his sole discretion, to convert such Deferred
Cash Account into any other deferral option which may thereafter be established
pursuant to the Plan or any other deferred compensation plan established by the
Company or any successor.
2.3 Variable Interest Option
(a) Interest equivalents - Upon approval of a deferral in the
---------------------
Variable Interest Option, a "Deferred Cash Account" shall be established in the
Participant's name. The amount of Compensation being deferred under this option
will be credited to this account on or before the Date of Crediting. Interest
equivalents on amounts deferred under this option shall be calculated annually
as of December 31 of each year for the period from the Date of Crediting until
December 31, or, if such period is greater than one year, for the one-year
period commencing with the previous January 1. Such equivalents shall be based
on the average of the daily close of business prime rates for the 365 days of
such year, with respect to amounts credited prior to such year, or, with respect
to amounts credited during such year, for the number of days from the Date of
Crediting. The daily close of business prime rates shall be as established by
Morgan Guaranty Trust Company of New York or such other bank as may be
designated by the Board. At distribution, interest equivalents shall be
similarly calculated on amounts in the Deferred Cash Account based on average
daily prime rates from the preceding January 1, or, if later, the Date of
Crediting, through the date of distribution, and added to the total to be
distributed. The crediting of interest equivalents to the Participant's
Deferred Cash Account shall continue until the balance in such account is fully
distributed. Effective October 31, 2000, this option shall be eliminated under
the Plan and any balance including credited interest shall be transferred to one
of the other available investment options.
(b) Time of crediting - The interest equivalents calculated each
-------------------
December 31 shall be credited to a Participant's Deferred Cash Account on
January 1 of the next Year. Prior to distribution to a Participant pursuant to
Section 3.3 hereof, interest equivalents calculated as described above shall be
credited to such Participant's Deferred Cash Account.
(c) Form of distribution - Distribution under this option shall be
--------------------
in cash.
2.4 Vanguard Mutual Funds
(a) Effective Date - On February 1, 2000, the following
---------------
Vanguard mutual funds shall be available for investment of deferred amounts:
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Small-Cap Index Fund
Vanguard Total International Stock Index Fund
Vanguard Total Bond Market Index Fund
Vanguard Prime Money Market Fund
(b) Creation of Deferral - Upon approval of a deferral under any
----------------------
of the Vanguard Funds, an account for each fund selected shall be established
and the amount being deferred shall be credited to such account. The value of
each Participant's account shall be dependent upon the market value of the
selected Vanguard fund in which such deferral was made.
(c) Form of Distribution - Distributions under this option shall
----------------------
be in cash.
3. Other Governing Provisions
3.1 Company's Obligations Unfunded - All benefits due a Participant or
-------------------------------
a Beneficiary under this Plan are unfunded and unsecured and are payable out of
the general funds of the Company. The Company, in its sole and absolute
discretion, may establish a "grantor trust" for the payment of benefits and
obligations hereunder, the assets of which shall be at all times subject to the
claims of creditors of the Company as provided for in such trust, provided that
such trust does not alter the characterization of the Plan as an "unfunded plan"
for purposes of the Employee Retirement Income Security Act, as amended. Such
trust shall make distributions in accordance with the terms of the Plan.
3.2 Beneficiary Designation - A Participant may file with the Secretary
-----------------------
of the Company a written designation of a beneficiary or beneficiaries (subject
to such limitations as to the classes and number of beneficiaries and contingent
beneficiaries as the Board may from time to time prescribe) to receive,
following the death of the Participant, benefits payable under any option of the
Plan. The Board reserves the right to review and approve beneficiary
designations. A Participant may from time to time revoke or change any such
designation of beneficiary and any designation of beneficiary under the Plan
shall be controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Board shall be in doubt as to the right of such
beneficiary to receive any benefits under the Plan, the Board may determine to
recognize only the rights of the legal representative of the Participant, in
which case the Company, the Board and the members thereof shall not be under any
further liability to anyone.
3.3 Time of distribution to Participant - All amounts due to the
---------------------------------------
Participant under the Plan shall be payable on the 60th day following the
Participant's termination, unless at least one year prior to the date of
termination the Participant has made an election to receive equal installment
payments over a period of either five (5) years or ten (10) years following
termination. Distributions to Participants found to be totally and permanently
disabled shall be on the 60th day following the determination of such
disability. No amounts shall be payable to a Participant prior to such
Participant's termination or total and permanent disability.
3.4 Distribution upon death - In the event of the Participant's death,
------------------------
all amounts due under this Plan shall be paid to the Beneficiary; but if none is
designated then benefits shall be paid to Participant's estate or as provided by
law. Distribution in full shall be made on the 60th day following the
Participant's death.
3.5 Hardship Withdrawals - The Board in its sole and absolute
---------------------
discretion may permit withdrawal by a Participant of any amount from his
accounts under the Equity Option or the Variable Interest Option, if the Board
determines, in its discretion, that such funds are needed due to serious and
immediate financial hardship from an unforeseeable emergency. Serious and
immediate financial hardship to the Participant must result from a sudden and
unexpected illness or accident of the Participant or a dependent, loss of
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the control of the Participant. A
distribution based upon such financial hardship cannot exceed the amount
necessary to meet such immediate financial need. In addition, the Board may
impose suspensions or other penalties as a condition to such withdrawals.
3.6 Transferability of Benefits - The right to receive payment of
-----------------------------
benefits under this Plan shall not be transferred, assigned or pledged except by
beneficiary designation, will or pursuant to the laws of descent and
distribution.
3.7 Address of Participant or Beneficiary - A Participant shall keep
----------------------------------------
the Company apprised of his current address and that of any Beneficiary at all
times during his participation in the Plan. At the death of a Participant, a
Beneficiary who is entitled to receive payment of benefits under the Plan shall
keep the Company apprised of his current address until the entire amount to be
distributed to him has been paid.
3.8 Taxes - Any taxes required to be withheld under applicable federal,
-----
state or local tax laws or regulations may be withheld from any payment due
hereunder.
3.9 Gender - The use of masculine pronouns herein shall be deemed to
------
include both males and females.
3.10 Compliance with Section 16 - Notwithstanding any election made or
--------------------------
action taken by a Participant who is subject to Section 16 of the Securities
Exchange Act of 1934 ("Section 16") with respect to such Participant's account
in the Equity Option shall be null and void if any such election or action
subjects such Participant to short-swing profit recovery under Section 16.
INCENTIVE STOCK PLAN
SECTION I. GENERAL PROVISIONS
A. PURPOSE OF PLAN
The purpose of the Ralcorp Incentive Stock Plan (the "Plan") is to enhance
the profitability and value of the Company for the benefit of its shareholders
by providing for stock options and other stock awards to attract, retain and
motivate directors, officers and other key employees who make important
contributions to the success of the Company.
B. DEFINITIONS OF TERMS AS USED IN THE PLAN
1. "Affiliate" means any subsidiary, whether directly or indirectly owned,
---------
or parent of the Company, or any other entity designated by the Committee.
2. "Award" means a Stock Option granted under Section II of the Plan or
-----
Other Stock Award granted under Section III of the Plan.
3. "Board" means the Board of Directors of Ralcorp Holdings, Inc.
4. "Committee" means the Nominating and Compensation Committee of the Board
---------
of Directors of the Company or any successor committee the Board of Directors
may designate to administer the Plan.
5. "Company" means Ralcorp Holdings, Inc.
-------
6. "Employee" means any person who is employed by the Company or an
--------
Affiliate.
7. "Fair Market Value" of any class or series of Stock means the fair and
-------------------
reasonable value thereof as determined by the Committee according to prices in
trades as reported on the New York Stock Exchange-Composite Transactions. If
there are no prices so reported or if, in the opinion of the Committee, such
reported prices do not represent the fair and reasonable value of the Stock,
then the Committee shall determine Fair Market Value by any means it deems
reasonable under the circumstances.
8. "Stock" means the Ralcorp Common Stock or any other authorized class or
-----
series of common stock or any such other security outstanding upon the
reclassification of any of such classes or series of common stock, including,
without limitation, any stock split-up, stock dividend, creation of targeted
stock, spin-off or other distributions of stock in respect of stock, or any
reverse stock split-up, or recapitalization of the Company or any merger or
consolidation of the Company with any Affiliate.
C. SCOPE OF PLAN AND ELIGIBILITY
Any Employee or director selected by the Board or Committee shall be
eligible for any Award contemplated under the Plan.
D. AUTHORIZATION AND RESERVATION
There shall be established a reserve of 2,900,000 authorized shares of
Stock, which shall be the total number of shares of Stock that may be presently
issued pursuant to Awards. (Subject to adjustments pursuant to other provisions
of the Plan.) The reserves may consist of authorized but unissued shares of
Stock or of reacquired shares, or both. Upon the cancellation or expiration of
an Award, all shares of Stock not issued thereunder shall become available for
the granting of additional Awards. The total number of shares of Stock that may
be issued to any one participant during the term of Plan shall not exceed
1,500,000 shares of Stock.
E. ADMINISTRATION OF THE PLAN
1. The Committee shall administer the Plan and, in connection therewith, it
shall have full power to grant Awards, construe and interpret the Plan,
establish rules and regulations and perform all other acts it believes
reasonable and proper, including the power to delegate responsibility to others
to assist it in administering the Plan.
2. The Committee shall include three or more members of the Board of
Directors of the Company. Its members shall be appointed by and serve at the
pleasure of the Board of Directors.
3. The determination of those eligible to receive Awards, and the amount and
type of each Award shall rest in the sole discretion of the Committee or the
Board, subject to the provisions of the Plan.
SECTION II. STOCK OPTIONS
A. DESCRIPTION
The Committee or the Board may grant options with respect to any class or
series of Stock ("Stock Options") that qualify as "Incentive Stock Options"
under Section 422A of the Internal Revenue Code of 1986, as amended, and it may
grant Stock Options that do not so qualify.
B. TERMS AND CONDITIONS
1. Each Stock Option shall be set forth in a written agreement containing
such terms and conditions as the Committee or the Board may determine, subject
to the provisions of the Plan.
2. The purchase price of any shares exercised under any Stock Option must be
paid in full upon such exercise. The payment shall be made in such form, which
may be cash or Stock, as the Committee or the Board may determine.
3. No Incentive Stock Option may be exercised after the expiration of ten
(10) years from the date such option is granted.
4. The option price of shares subject to any Stock Option may be any price
determined by the Committee or the Board.
5. In the case of an Incentive Stock Option, the aggregate Fair Market Value
(determined as of the time the option is granted) of the appropriate class or
series of Stock with respect to which options are exercisable for the first time
by any Employee during any calendar year (under all such plans of his employer
corporation and its parent and subsidiary corporations) shall not exceed
$100,000.
SECTION III. OTHER STOCK AWARDS
In addition to Stock Options, the Committee or the Board may grant Other
Stock Awards payable in any class or series of Stock upon such terms and
conditions as the Committee or the Board may determine, subject to the
provisions of the Plan. Other Stock Awards may include, but are not limited to,
the following types of Awards:
1. Restricted Stock Awards. The Committee or the Board may grant Restricted
------------------------
Stock Awards, each of which consists of a grant of shares of any class or series
of Stock subject to terms and conditions determined by the Committee or the
Board in each entity's discretion, subject to the provisions of the Plan. Such
terms and conditions shall be set forth in written agreements. The shares of
Stock granted will be restricted and may not be sold, pledged, transferred or
otherwise disposed of until the lapse or release of restrictions in accordance
with the terms of the agreement and the Plan. Prior to the lapse or release of
restrictions, all shares of Stock are subject to forfeiture in accordance with
Section IV of the Plan. Shares of Stock issued pursuant to a Restricted Stock
Award will be issued for no monetary consideration.
2. Stock Related Deferred Compensation. The Committee or the Board may, in
-------------------------------------
its discretion, permit the deferral of payment of an Employee's cash bonus or
other cash compensation in the form of either cash or any class or series of
Stock (or Stock equivalents, each corresponding to a share of such Stock) under
such terms and conditions as the Committee or the Board may prescribe. Payment
of such compensation may be deferred for such period or until the occurrence of
such event as the Committee or the Board may determine. The Committee or the
Board may, in each entity's discretion, determine whether any deferral, whether
made in cash or such class or series of Stock (or Stock equivalents) shall be
paid on distribution in cash or in Stock. If a deferral is permitted in the form
of Stock or Stock equivalents, the number of shares of Stock or number of Stock
equivalents deferred will be determined by dividing the amount of the Employee's
bonus or other cash compensation being deferred by the average of the closing
prices of the appropriate class or series of Stock, as reported by the New York
Stock Exchange-Composite Transactions, during the ten trading days preceding the
effective date of the Committee's or the Board's decision to defer. If the
Committee or the Board directs the payments in any class or series of Stock of
any portion of amounts deferred in cash, the number of shares of such Stock paid
will be determined based on the average of the closing prices of such Stock, as
reported by the New York Stock Exchange-Composite Transactions, during the ten
trading days before the payment is due. The Committee, or the Board in its
discretion, may permit the conversion of deferrals in any class or series of
Stock or Stock equivalents into deferrals in cash or other investments, or the
conversion of deferrals in cash or other investments into deferrals in any class
or series of Stock or Stock equivalents. In the event such conversion is
permitted, the conversion price of the appropriate class or series of Stock
shall be based on the Fair Market Value of such Stock. Additional rights or
restrictions may apply in the event of a change in control of the Company.
SECTION IV. FORFEITURE OF AWARDS
A. Unless the Committee or the Board shall have determined otherwise,
the recipient of an Award shall forfeit all amounts not payable or rights not
exercisable upon the occurrence of any of the following events:
1. The recipient is discharged for cause.
2. The recipient voluntarily terminates his employment other than by
retirement after attainment of age 62, or such other age as may be provided for
in the Award.
3. The recipient engages in competition with the Company or any
Affiliate.
4. The recipient engages in any activity or conduct contrary to the
best interests of the Company or any Affiliate.
B. The Committee or the Board may include in any Award any additional
or different conditions of forfeiture it may deem appropriate. The Committee or
the Board also, after taking into account the relevant circumstances, may waive
any condition of forfeiture stated above or in the Award contract.
C. In the event of forfeiture, the recipient shall lose all rights in
and to the Award. Except in the case of Restricted Stock Awards as to which the
restrictions have not lapsed, this provision, however, shall not be invoked to
force any recipient to return any Stock already received under an Award.
D. Such determinations as may be necessary for application of this
Section, including any grant of authority to others to make determinations under
this Section, shall be at the sole discretion of the Committee or the Board, and
its determinations shall be conclusive.
SECTION V. DEATH OF AWARDEE
Upon the death of an Award recipient, the following rules apply:
1. A Stock Option, to the extent exercisable on the date of his death, may
be exercised at any time within six (6) months, or such longer period not
exceeding three years as the Committee or the Board may determine, after the
recipient's death, but not after the expiration of the term of the Option, by
the recipient's designated beneficiary or personal representative or the person
or persons entitled thereto by will or in accordance with the laws of descent
and distribution.
2. In the case of any other Award, the Stock due shall be determined as of
the date of the recipient's death, and the Company shall issue the appropriate
number of shares of the appropriate class or series of Stock or pay cash equal
to the Fair Market Value thereof or such other value as the Committee or the
Board may in its sole discretion determine. Such issuance of shares of such
Stock or payment of cash shall be made to recipient's designated beneficiary or
personal representative or the person or persons entitled thereto by will or in
accordance with the laws of descent and distribution.
An Award recipient may file with the Committee a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries as the Committee and the
Board may from time to time prescribe) to exercise, in the event of the death of
the recipient, a Stock Option, or to receive, in such event, any Other Stock
Awards. The Committee and the Board reserve the right to review and approve
beneficiary designations. A recipient may from time to time revoke or change any
such designation or beneficiary and any designation of beneficiary under the
Plan shall be controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Committee or the Board shall be in doubt as to
the right of any such beneficiary to exercise any Stock Option or to receive any
Other Stock Award, the Committee or the Board, as the case may be, may determine
to recognize only an exercise by the legal representative of the recipient, in
which case the Company and the Committee and the Board and the members thereof
shall not be under any further liability to anyone.
SECTION VI. OTHER GOVERNING PROVISIONS
A. TRANSFERABILITY
Except as otherwise noted herein, no award shall be transferable other than
by beneficiary designation, will or the laws of descent and distribution, and
any right granted under an Award may be exercised during the lifetime of the
holder thereof only by him or by his guardian or legal representative.
B. RIGHTS AS A SHAREHOLDER
A recipient of an Award shall, unless the terms of the Award provide
otherwise, have no rights as a shareholder, with respect to any options or
shares which may be issued in connection with the Award until the issuance of a
Stock certificate for such shares, and no adjustment other than as stated herein
shall be made for dividends or other rights for which the record date is prior
to the issuance of such Stock certificate.
C. GENERAL CONDITIONS OF AWARDS
No Employee or other person shall have any right with respect to this Plan,
the shares reserved or in any Award, contingent or otherwise, until written
evidence of the Award shall have been delivered to the recipient and all the
terms, conditions and provisions of the Plan applicable to such recipient have
been met.
D. RESERVATION OF RIGHTS OF COMPANY
The selection of an Employee for any Award shall not give such person any
right to continue as an Employee and the right to discharge any Employee is
specifically reserved.
E. ACCELERATION
The Committee or the Board may, in its sole discretion, accelerate the date
of exercise of any Award.
F. ADJUSTMENTS
Upon any stock split-up, spin-off, stock dividend, issuance of any targeted
stock, combination or reclassification with respect to any outstanding class or
series of Stock, or consolidation, merger or sale of all or substantially all of
the assets of the Company, appropriate adjustments shall be made to the shares
reserved under Section I.D. of the Plan and the terms of all outstanding Awards.
G. WITHHOLDING OF TAXES
The Company shall deduct from any payment, or otherwise collect from the
recipient, any taxes required to be withheld by federal, state or local
governments in connection with any Award. The recipient may elect, subject to
approval by the Committee or the Board, to have shares withheld by the Company
in satisfaction of such taxes, or to deliver other shares of Stock owned by the
recipient in satisfaction of such taxes. Provided, however, that no such
election may be made within six months of the date of grant of the relevant
award, with respect to Awards of recipients subject to Section 16 of the
Securities Exchange Act of 1934 ("Section 16"). The number of shares to be
withheld or delivered shall be calculated by reference to the Fair Market Value
of the appropriate class or series of Stock on the date that such taxes are
determined.
H. NO WARRANTY OF TAX EFFECT
Except as may be contained in the terms of any Award, no opinion is
expressed nor warranties made as to the effect for federal, state, or local tax
purposes of any Award.
I. AMENDMENT OF PLAN
The Board of Directors of the Company may, from time to time, amend,
suspend or terminate the Plan in whole or in part, and if terminated may
reinstate any or all of the provisions of the Plan, except that no amendment,
suspension or termination may apply to the terms of any Award (contingent or
otherwise) granted prior to the effective date of such amendment, suspension or
termination without the recipient's consent.
J. CONSTRUCTION OF PLAN
The place of administration of the Plan shall be in the State of Missouri,
and the validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Missouri.
K. ELECTIONS OF CORPORATE OFFICERS
Notwithstanding anything to the contrary stated herein, any election or
other action with respect to an Award of a recipient subject to Section 16 will
be null and void if any such election or other action would cause said recipient
to be subject to short-swing profit recovery under Section 16.
SECTION VII. EFFECTIVE DATE AND TERM
This Plan shall be effective upon adoption by the shareholders of the
Company. The Plan shall continue in effect until January 31, 2007, when it shall
terminate. Upon termination, any balances in the share reserve shall be
canceled, and no Awards shall be granted under the Plan thereafter. The Plan
shall continue in effect, however, insofar as is necessary to complete all of
the Company's obligations under outstanding Awards to conclude the
administration of the Plan.
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT (the "Agreement") effective December 18, 1996,
between RALCORP HOLDINGS, INC., a Missouri corporation (the "Company") and
___________________ ("Participant").
WHEREAS, Participant is a Director of the Company, and in such capacity is
performing a valuable service for the Company; and
WHEREAS, the Company's Restated Articles of Incorporation (the "Articles")
and Section 351.355 of the Missouri Revised Statutes, as amended to date (the
"Indemnification Statute"), permit the indemnification of directors, officers,
employees and certain agents of the Company, under certain circumstances; and
WHEREAS, in order to induce Participant to continue to serve as a Director
of the Company, Company has determined and agreed to enter into this contract
with Participant;
NOW THEREFORE, in consideration of Participant's continued service as a
Director of the Company after the date hereof, the Company and Participant agree
as follows:
1. Indemnity of Participant. Company hereby agrees to hold harmless
--------------------------
and indemnify Participant to the full extent authorized or permitted by the
provisions of the Indemnification Statute, or by any amendment thereof, or any
other statutory provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Additional Indemnity. Subject to the exclusions set forth in
---------------------
Section 3 hereof, the Company further agrees to hold harmless and indemnify
Participant against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by
Participant in connection with any Claim. Such indemnification shall be made by
the Company without regard to whether or not there has been a determination that
Participant has met any standard of conduct prescribed by law or otherwise in
connection with the specific matter for which indemnification is sought by (i) a
majority of a quorum of disinterested directors, (ii) independent legal counsel
by written opinion, or (iii) the Company's shareholders by a majority vote. For
purposes of this Indemnification Agreement, a "Claim" is a threatened, pending
or completed action, claim, suit, or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of the
Company) to which Participant is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Participant is, was or
at any time (whether before or after the date of this Agreement) becomes a
director, officer, employee or agent of the Company, or is or was serving or at
any time (whether before or after the date of this Agreement) serves at the
request of the Company as a director, officer, employee, member, trustee, or
agent of another corporation, partnership, joint venture, trust, trade or
industry association or other enterprise (whether incorporated or
unincorporated, for-profit or not-for-profit).
3. Limitations on Additional Indemnity. Notwithstanding anything else
------------------------------------
contained in this Agreement, no indemnity shall be paid by Company pursuant to
this Indemnification Agreement:
(a) In respect to remuneration paid to Participant if it shall be
finally judicially adjudged that such remuneration was paid in violation of law;
(b) On account of any suit for an accounting of profits made from the
purchase or sale by Participant of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
or similar provisions of any state or local statutory law;
<PAGE>
<PAGE>
(c) On account of Participant's conduct which is finally judicially
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct;
(d) If a final decision by a Court having jurisdiction in the matter
(all appeals having been denied or none having been taken) shall determine that
such indemnification is not lawful; or
(e) In connection with indemnity pursuant to Section 2 only, except to
the extent the aggregate of losses to be indemnified thereunder exceeds the
amount of such losses for which the Participant actually receives payments
pursuant to Section 1 hereof or pursuant to any insurance policies or other
comparable policies purchased and maintained by the Company.
4. Continuation of Indemnity. All agreements and obligations of the
---------------------------
Company contained herein shall continue during the period Participant is a
Director of the Company and shall continue thereafter so long as Participant
shall be subject to any possible Claim.
5. Notification and Defense of Claim. Promptly after receipt by
-------------------------------------
Participant of notice of the commencement of any Claim, Participant will notify
the Company of the commencement thereof; provided, however, that the omission to
so notify the Company will not relieve Company from any liability which it may
have to Participant under this Agreement unless and to the extent that Company's
rights are prejudiced by such failure. With respect to any Claim, as to which
Participant notifies the Company of the commencement thereof:
(a) Company will be entitled to participate in the defense thereof at
its own expense;
(b) Except as otherwise provided below, the Company jointly with any
other party will be entitled to assume the defense thereof at the Company's
expense, with counsel satisfactory to Participant. After notice from the
Company to Participant of its election to so assume the defense thereof, the
Company will not be liable to Participant under this Agreement for any legal or
other expenses subsequently incurred by Participant in connection with the
defense thereof unless Participant shall have reasonably concluded that there
may be a conflict of interest between the Company and Participant in the conduct
of the defense of such Claim, in which case, the Company shall not be entitled
to assume the defense of such Claim. For purposes of this Indemnification
Agreement, there shall be deemed to be a conflict of interest between the
Company and Participant with respect to any Claim brought by or in the right of
the Company; and
(c) Company shall not be liable to indemnify Participant under this
Agreement for any amounts paid in settlement of any Claim effected without the
Company's written consent. Company shall not settle any Claim in any manner
which would impose any penalty or limitation on Participant without
Participant's written consent. Neither Company nor Participant will
unreasonably withhold their consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-----------------------------------------
(a) To the extent that the Company assumes the defense of any Claim,
Participant agrees that he will reimburse the Company for all reasonable
expenses paid by the Company in defending such Claim in the event and only to
the extent that it shall be ultimately judicially determined that Participant is
not entitled to be indemnified by the Company for such expenses under the
provisions of either the Indemnification Statute, the Restated Articles, this
Agreement or otherwise.
<PAGE>
<PAGE>
(b) To the extent that the Company does not assume the defense of any
Claim, the Company shall advance to Participant all reasonable expenses,
including all reasonable attorneys' fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily incurred in
connection with defending, preparing to defend or investigating any civil or
criminal action, suit or proceeding, within twenty days after the receipt by the
Company of a statement or statements from Participant requesting such advance or
advances, whether prior to or after final disposition of such Claim. Such
statement or statements shall reasonably evidence the expenses incurred by
Participant and shall include or be preceded or accompanied by an undertaking by
or on behalf of Participant to repay all of such expenses advanced if it shall
be ultimately judicially determined that Participant is not entitled to be
indemnified against such expenses. Any advances and undertakings to repay
pursuant to this paragraph shall be unsecured and interest free.
7. Enforcement.
-----------
(a) Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on the Company hereby in order to
induce Participant to continue to serve as a Director of the Company, and
acknowledges that Participant is relying upon this Agreement in continuing in
such capacity.
(b) In the event Participant is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Participant for all of Participant's
attorneys' fees and expenses in bringing and pursuing such action.
8. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
9. Governing law; Binding Effect; Amendment and Termination.
--------------------------------------------------------------
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Missouri without giving effect to the conflict of laws
provisions thereof.
(b) This Agreement shall be binding upon Participant and upon the
Company, its successors and assigns, and shall inure to the benefit of
Participant, his heirs, personal representatives and assigns, and to the benefit
of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless signed in writing by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this
23rd day of June, 1999.
RALCORP HOLDINGS, INC.
By:____________________________
Secretary
By:____________________________
Participant
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT (the "Agreement") effective December 18, 1996,
between RALCORP HOLDINGS, INC., a Missouri corporation (the "Company") and J. R.
Micheletto ("Participant").
WHEREAS, Participant is a Director and an Officer of the Company, and in
such capacities is performing a valuable service for Company; and
WHEREAS, the Company's Restated Articles of Incorporation (the "Articles")
and Section 351.355 of the Missouri Revised Statutes, as amended to date (the
"Indemnification Statute"), permit the indemnification of directors, officers,
employees and certain agents of the Company, under certain circumstances; and
WHEREAS, in order to induce Participant to continue to serve as a Director
and an Officer of the Company, Company has determined and agreed to enter into
this contract with Participant;
NOW THEREFORE, in consideration of Participant's continued service as a
Director and an Officer of the Company after the date hereof, the Company and
Participant agree as follows:
1. Indemnity of Participant. Company hereby agrees to hold harmless
--------------------------
and indemnify Participant to the full extent authorized or permitted by the
provisions of the Indemnification Statute, or by any amendment thereof, or any
other statutory provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Additional Indemnity. Subject to the exclusions set forth in
---------------------
Section 3 hereof, Company further agrees to hold harmless and indemnify
Participant against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by
Participant in connection with any Claim. Such indemnification shall be made by
the Company without regard to whether or not there has been a determination that
Participant has met any standard of conduct prescribed by law or otherwise in
connection with the specific matter for which indemnification is sought by (i) a
majority of a quorum of disinterested directors, (ii) independent legal counsel
by written opinion, or (iii) the Company's shareholders by a majority vote. For
purposes of this Indemnification Agreement, a "Claim" is a threatened, pending
or completed action, claim, suit, or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of the
Company) to which Participant is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Participant is, was or
at any time (whether before or after the date of this Agreement) becomes a
director, officer, employee or agent of the Company, or is or was serving or at
any time (whether before or after the date of this Agreement) serves at the
request of the Company as a director, officer, employee, member, trustee, or
agent of another corporation, partnership, joint venture, trust, trade or
industry association or other enterprise (whether incorporated or
unincorporated, for-profit or not-for-profit).
3. Limitations on Additional Indemnity. Notwithstanding anything else
------------------------------------
contained in this Agreement, no indemnity shall be paid by Company pursuant to
this Indemnification Agreement:
(a) In respect to remuneration paid to Participant if it shall be
finally judicially adjudged that such remuneration was paid in violation of law;
(b) On account of any suit for an accounting of profits made from the
purchase or sale by Participant of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
or similar provisions of any state or local statutory law;
<PAGE>
<PAGE>
(c) On account of Participant's conduct which is finally judicially
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct;
(d) If a final decision by a Court having jurisdiction in the matter
(all appeals having been denied or none having been taken) shall determine that
such indemnification is not lawful; or
(e) In connection with indemnity pursuant to Section 2 only, except to
the extent the aggregate of losses to be indemnified thereunder exceeds the
amount of such losses for which the Participant actually receives payments
pursuant to Section 1 hereof or pursuant to any insurance policies or other
comparable policies purchased and maintained by the Company.
4. Continuation of Indemnity. All agreements and obligations of
---------------------------
Company contained herein shall continue during the period Participant is a
Director and an Officer of Company and shall continue thereafter so long as
Participant shall be subject to any possible Claim.
5. Notification and Defense of Claim. Promptly after receipt by
-------------------------------------
Participant of notice of the commencement of any Claim, Participant will notify
Company of the commencement thereof; provided, however, that the omission to so
notify Company will not relieve Company from any liability which it may have to
Participant under this Agreement unless and to the extent that Company's rights
are prejudiced by such failure. With respect to any Claim, as to which
Participant notifies Company of the commencement thereof:
(a) Company will be entitled to participate in the defense thereof at
its own expense;
(b) Except as otherwise provided below, Company jointly with any other
party will be entitled to assume the defense thereof at Company's expense, with
counsel satisfactory to Participant. After notice from Company to Participant
of its election to so assume the defense thereof, Company will not be liable to
Participant under this Agreement for any legal or other expenses subsequently
incurred by Participant in connection with the defense thereof unless
Participant shall have reasonably concluded that there may be a conflict of
interest between Company and Participant in the conduct of the defense of such
Claim, in which case, Company shall not be entitled to assume the defense of
such Claim. For purposes of this Indemnification Agreement, there shall be
deemed to be a conflict of interest between Company and Participant with respect
to any Claim brought by or in the right of the Company; and
(c) Company shall not be liable to indemnify Participant under this
Agreement for any amounts paid in settlement of any Claim effected without the
Company's written consent. Company shall not settle any Claim in any manner
which would impose any penalty or limitation on Participant without
Participant's written consent. Neither Company nor Participant will
unreasonably withhold their consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-----------------------------------------
(a) To the extent that the Company assumes the defense of any Claim,
Participant agrees that he will reimburse Company for all reasonable expenses
paid by Company in defending such Claim in the event and only to the extent that
it shall be ultimately judicially determined that Participant is not entitled to
be indemnified by Company for such expenses under the provisions of either the
Indemnification Statute, the Restated Articles, this Agreement or otherwise.
(b) To the extent that the Company does not assume the defense of any
Claim, Company shall advance to Participant all reasonable expenses, including
all reasonable attorneys' fees, retainers, court costs, transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in connection with
<PAGE>
<PAGE>
defending, preparing to defend or investigating any civil or criminal action,
suit or proceeding, within twenty days after the receipt by Company of a
statement or statements from Participant requesting such advance or advances,
whether prior to or after final disposition of such Claim. Such statement or
statements shall reasonably evidence the expenses incurred by Participant and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Participant to repay all of such expenses advanced if it shall be ultimately
judicially determined that Participant is not entitled to be indemnified against
such expenses. Any advances and undertakings to repay pursuant to this
paragraph shall be unsecured and interest free.
7. Enforcement.
-----------
(a) Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on Company hereby in order to
induce Participant to continue to serve as a Director and an Officer of Company,
and acknowledges that Participant is relying upon this Agreement in continuing
in such capacity.
(b) In the event Participant is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Company shall reimburse Participant for all of Participant's attorneys'
fees and expenses in bringing and pursuing such action.
8. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
9. Governing law; Binding Effect; Amendment and Termination.
--------------------------------------------------------------
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Missouri without giving effect to the conflict of laws
provisions thereof.
(b) This Agreement shall be binding upon Participant and upon Company,
its successors and assigns, and shall inure to the benefit of Participant, his
heirs, personal representatives and assigns, and to the benefit of the Company,
its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless signed in writing by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this
23rd day of June, 1999.
RALCORP HOLDINGS, INC.
By:____________________________
Secretary
By:____________________________
Participant
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT (the "Agreement") effective December 18, 1996,
between RALCORP HOLDINGS, INC., a Missouri corporation (the "Company") and
___________________ ("Participant").
WHEREAS, Participant is an Officer of the Company, and in such capacity is
performing a valuable service for the Company; and
WHEREAS, the Company's Restated Articles of Incorporation (the "Articles")
and Section 351.355 of the Missouri Revised Statutes, as amended to date (the
"Indemnification Statute"), permit the indemnification of directors, officers,
employees and certain agents of the Company, under certain circumstances; and
WHEREAS, in order to induce Participant to continue to serve as an Officer
of the Company, the Company has determined and agreed to enter into this
contract with Participant;
NOW THEREFORE, in consideration of Participant's continued service as an
Officer of the Company after the date hereof, the Company and Participant agree
as follows:
1. Indemnity of Participant. Company hereby agrees to hold harmless
--------------------------
and indemnify Participant to the full extent authorized or permitted by the
provisions of the Indemnification Statute, or by any amendment thereof, or any
other statutory provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Additional Indemnity. Subject to the exclusions set forth in
---------------------
Section 3 hereof, the Company further agrees to hold harmless and indemnify
Participant against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by
Participant in connection with any Claim. Such indemnification shall be made by
the Company without regard to whether or not there has been a determination that
Participant has met any standard of conduct prescribed by law or otherwise in
connection with the specific matter for which indemnification is sought by (i) a
majority of a quorum of disinterested directors, (ii) independent legal counsel
by written opinion, or (iii) the Company's shareholders by a majority vote. For
purposes of this Indemnification Agreement, a "Claim" is a threatened, pending
or completed action, claim, suit, or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of the
Company) to which Participant is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Participant is, was or
at any time (whether before or after the date of this Agreement) becomes a
director, officer, employee or agent of the Company, or is or was serving or at
any time (whether before or after the date of this Agreement) serves at the
request of the Company as a director, officer, employee, member, trustee, or
agent of another corporation, partnership, joint venture, trust, trade or
industry association or other enterprise (whether incorporated or
unincorporated, for-profit or not-for-profit).
3. Limitations on Additional Indemnity. Notwithstanding anything else
------------------------------------
contained in this Agreement, no indemnity shall be paid by the Company pursuant
to this Indemnification Agreement:
(a) In respect to remuneration paid to Participant if it shall be
finally judicially adjudged that such remuneration was paid in violation of law;
(b) On account of any suit for an accounting of profits made from the
purchase or sale by Participant of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
or similar provisions of any state or local statutory law;
<PAGE>
<PAGE>
(c) On account of Participant's conduct which is finally judicially
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct;
(d) If a final decision by a Court having jurisdiction in the matter
(all appeals having been denied or none having been taken) shall determine that
such indemnification is not lawful; or
(e) In connection with indemnity pursuant to Section 2 only, except to
the extent the aggregate of losses to be indemnified thereunder exceeds the
amount of such losses for which the Participant actually receives payments
pursuant to Section 1 hereof or pursuant to any insurance policies or other
comparable policies purchased and maintained by the Company.
4. Continuation of Indemnity. All agreements and obligations of the
---------------------------
Company contained herein shall continue during the period Participant is an
Officer of the Company and shall continue thereafter so long as Participant
shall be subject to any possible Claim.
5. Notification and Defense of Claim. Promptly after receipt by
-------------------------------------
Participant of notice of the commencement of any Claim, Participant will notify
the Company of the commencement thereof; provided, however, that the omission to
so notify the Company will not relieve the Company from any liability which it
may have to Participant under this Agreement unless and to the extent that the
Company's rights are prejudiced by such failure. With respect to any Claim, as
to which Participant notifies the Company of the commencement thereof:
(a) Company will be entitled to participate in the defense thereof at
its own expense;
(b) Except as otherwise provided below, the Company jointly with any
other party will be entitled to assume the defense thereof at the Company's
expense, with counsel satisfactory to Participant. After notice from the
Company to Participant of its election to so assume the defense thereof, the
Company will not be liable to Participant under this Agreement for any legal or
other expenses subsequently incurred by Participant in connection with the
defense thereof unless Participant shall have reasonably concluded that there
may be a conflict of interest between the Company and Participant in the conduct
of the defense of such Claim, in which case, the Company shall not be entitled
to assume the defense of such Claim. For purposes of this Indemnification
Agreement, there shall be deemed to be a conflict of interest between the
Company and Participant with respect to any Claim brought by or in the right of
the Company; and
(c) Company shall not be liable to indemnify Participant under this
Agreement for any amounts paid in settlement of any Claim effected without the
Company's written consent. Company shall not settle any Claim in any manner
which would impose any penalty or limitation on Participant without
Participant's written consent. Neither Company nor Participant will
unreasonably withhold their consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-----------------------------------------
(a) To the extent that the Company assumes the defense of any Claim,
Participant agrees that he will reimburse the Company for all reasonable
expenses paid by Company in defending such Claim in the event and only to the
extent that it shall be ultimately judicially determined that Participant is not
entitled to be indemnified by the Company for such expenses under the provisions
of either the Indemnification Statute, the Restated Articles, this Agreement or
otherwise.
(b) To the extent that the Company does not assume the defense of any
Claim, the Company shall advance to Participant all reasonable expenses,
<PAGE>
<PAGE>
including all reasonable attorneys' fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily incurred in
connection with defending, preparing to defend or investigating any civil or
criminal action, suit or proceeding, within twenty days after the receipt by the
Company of a statement or statements from Participant requesting such advance or
advances, whether prior to or after final disposition of such Claim. Such
statement or statements shall reasonably evidence the expenses incurred by
Participant and shall include or be preceded or accompanied by an undertaking by
or on behalf of Participant to repay all of such expenses advanced if it shall
be ultimately judicially determined that Participant is not entitled to be
indemnified against such expenses. Any advances and undertakings to repay
pursuant to this paragraph shall be unsecured and interest free.
7. Enforcement.
-----------
(a) Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on the Company hereby in order to
induce Participant to continue to serve as an Officer of the Company, and
acknowledges that Participant is relying upon this Agreement in continuing in
such capacity.
(b) In the event Participant is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Participant for all of Participant's
attorneys' fees and expenses in bringing and pursuing such action.
8. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
9. Governing law; Binding Effect; Amendment and Termination.
--------------------------------------------------------------
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Missouri without giving effect to the conflict of laws
provisions thereof.
(b) This Agreement shall be binding upon Participant and upon the
Company, its successors and assigns, and shall inure to the benefit of
Participant, his heirs, personal representatives and assigns, and to the benefit
of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless signed in writing by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this
23rd day of June, 1999.
RALCORP HOLDINGS, INC.
By:____________________________
Secretary
By:____________________________
Participant
NON-QUALIFIED STOCK OPTIONS
SUMMARY OF TERMS
Date of Grant: September 23, 1999
Exercise Price: NYSE Closing Price on Grant Date - $17.1875
Exercisable: 25% - September 23, 2002
25% - September 23, 2003
25% - September 23, 2004
25% - September 23, 2005
Expiration Date: September 22, 2009
Acceleration: Award becomes fully exercisable upon:
(a) Death of Optionee (exercisable for three
years)
(b) Optionee's total and permanent disability
(exercisable for three years)
(c) Optionee's voluntary termination after age
62 (exercisable for three years)
(d) Involuntary termination of Optionee, other
than for cause (exercisable for six months)
(e) A change in control of the Company
(exercisable for six months after Optionee's
voluntary or involuntary termination
following a change in control)
Forfeiture: All shares not exercisable at the time of the
declaration of forfeiture are forfeited upon:
(a) Optionee's termination for cause
(b) Optionee's voluntary termination prior to age 62
(c) Optionee engaging in any activity or conduct
contrary to the best interests of the Company
(d) Optionee engaging in competition with the
Company
Change in Control: In a change of control in which Ralcorp is not the
survivor, recipients would be entitled to be paid, in
cash, the spread between the strike price and the merger
consideration or tender offer price.
<PAGE>
12 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
COMPANY OVERVIEW
The Company is presently composed of four operating segments: Cereals,
Crackers and Cookies, Snack Nuts, and Mayonnaise and Dressings. The
Company's revenues are primarily generated by sales within the United
States.
Store brand cereals are produced at four manufacturing facilities,
warehoused in independent warehouse facilities and at several plants and
shipped to customers principally via independent truck lines. These
products are marketed primarily through food brokers to grocery
wholesalers, retail chains, mass merchandisers, warehouse club outlets
and other customers.
Store brand and branded crackers and store brand cookies are
manufactured and stored in five locations (including Ripon Foods,
Inc.<F*>, acquired October 4, 1999) and shipped directly to accounts'
warehouses.
The Snack Nuts segment operates three plants that produce and
store a variety of jarred, canned and bagged snack nuts. The segment's
products are sold through an internal sales staff and broker network and
are largely produced to order and shipped directly to customers.
Mayonnaise and salad dressings are produced to order and stored in
three plants and sold through an internal sales staff and broker network
to retail grocery chains as well as through food service channels.
The Company, through a divestiture of its ski resort operations,
owns approximately 22% of Vail Resorts, Inc. Vail is the leading ski
resort operation in North America.
The Company employs approximately 3,400 people in the United
States (including Ripon Foods). The continuing policy of the Company is
to provide equal opportunity for all its employees and applicants on the
basis of merit and without discrimination because of race, sex, color,
age, religion, national origin, creed, ancestry, veteran status, or
physical or mental disability. In addition to providing equal
opportunity, affirmative action is taken at each step of the employment
process. The Company realizes that only through the cooperation of all
employees can the Company's nondiscrimination policy be meaningful.
COMMUNITY COMMITMENT
Ralcorp has proudly defined its commitment to the communities where its
employees live and work through a sizable hunger relief effort in 1999
consisting of donated food products and charitable contributions.
PRODUCT DONATIONS - Ralcorp's giving priorities strategically link
what the Company does best - produce quality food products - with a
great need in this country to provide nourishing food to the hungry.
This past year, Ralcorp provided food products to thousands of people in
need.
UNITED WAY - With so many worthwhile organizations in need, it is
impossible for a company the size of Ralcorp to have enough dollars to
single-handedly make a lasting difference. Like many companies
throughout the country, Ralcorp turned to the expertise of the United
Way, an organization that combines the resources of many companies and
individuals to help make a positive difference in communities. The
United Way is generously supported at Ralcorp headquarters and
manufacturing locations through Company and employee contributions.
CHARITABLE GRANTMAKING - In addition to the sizable amount of in-
kind product donations made by Ralcorp subsidiary operations, a limited
amount of charitable grants were made in fiscal 1999 to targeted
programs that share the Company's commitment to hunger relief.
By providing food donations, United Way support and strategic
grant money, Ralcorp is dedicated to doing what it can to make its
communities better places to live for its employees and all citizens.
- -----------------------------------------------------------------------
* CORPORATE HEADQUARTERS - St. Louis, MO [MAP]
1 CEREALS
Battle Creek, MI
Cedar Rapids, IA
Lancaster, OH
Sparks, NV
2 CRACKERS/COOKIES
Princeton, KY
Poteau, OK
Minneapolis, MN
Tonawanda, NY
[FN]
<F*>Ripon, WI
3 SNACK NUTS
Dothan, AL
Billerica, MA
Fitzgerald, GA
4 MAYONNAISE/DRESSINGS
Baltimore, MD
Kansas City, KS
Los Angeles, CA
/ / EQUITY INVESTMENT -
Vail Resorts, Inc.
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 13
1999 ANNUAL REPORT
<TABLE>
SELECTED FINANCIAL DATA
(Dollars in millions except per share data, shares in thousands)
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR
Net Sales $ 636.6 $ 582.9 $ 739.7 $1,027.4 $1,013.4
Costs and Expenses (558.5) (523.6) (665.9) (901.3) (861.8)
Depreciation and Amortization (23.1) (18.2) (24.4) (46.4) (46.7)
Interest Expense, Net (1.4) - (7.9) (26.8) (28.2)
Gain on Sale of Business <Fa> - 18.7 515.4 - -
Restructuring Charges <Fb> - - (19.7) (16.5) -
Nonrecurring Charges <Fc> - - - (109.5) (21.9)
Equity in Earnings of Vail Resorts, Inc. 4.7 10.6 4.7 - -
Income Taxes (21.9) (26.8) (10.4) 26.3 (21.4)
---------------------------------------------------------------------
Net Earnings (Loss) $ 36.4 $ 43.6 $ 531.5 $ (46.8) $ 33.4
=====================================================================
Per Share - Basic $ 1.17 $ 1.33 $ 16.11 $ (1.42) $ 1.00
Per Share - Diluted $ 1.15 $ 1.32 $ 16.01 $ (1.42) $ .99
YEAR END POSITION
Working Capital <Fd> $ 66.4 $ 33.3 $ 56.5 $ 92.4 $ 104.7
Total Assets 483.8 417.9 400.3 627.1 716.2
Long-term Debt 42.8 - - 376.6 395.4
Shareholders' Equity 324.1 307.3 286.7 107.4 162.4
Per Share Outstanding $ 10.61 $ 9.69 $ 8.68 $ 3.26 $ 4.88
YEAR END STATISTICS
Shares Outstanding 30,537 31,711 33,011 32,917 33,266
Weighted Average Shares - Basic 31,112 32,684 32,955 32,997 33,532
Weighted Average Shares - Diluted 31,684 33,083 33,215 32,997 33,907
Approximate Number of Employees 2,800 2,400 2,500 6,400 7,200
<FN>
<Fa> See Note 3 of the Notes to Consolidated Financial Statements.
<Fb> See Note 7 of the Notes to Consolidated Financial Statements.
<Fc> 1996 results include a $109.5 pre-tax impairment charge ($68.8
after taxes) related to Ralcorp's private label ready-to-eat
cereal and consumer hot cereal operations, and 1995 includes $21.9
pre-tax nonrecurring charges ($13.6 after taxes) related to exit
of industrial oats and oats milling operations and impairment of
the consumer hot cereal business.
<Fd> Excludes cash and cash equivalents and current maturities of long-
term debt, where applicable.
</TABLE>
<PAGE>
<PAGE>
14 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
FINANCIAL REVIEW
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition, liquidity and
capital resources of Ralcorp Holdings, Inc. (Company). This discussion
should be read in conjunction with the Consolidated Financial Statements
and Notes to Consolidated Financial Statements, especially "Note 18 -
Segment Information."
Significant changes to the Company's business mix and nonrecurring
events that have been recorded over the last three years affect the
comparisons of fiscal 1999 operations to those of 1998, and of 1998 to
1997. As a result, comparative results are more difficult to analyze
and explain. Where practicable, this discussion attempts to address not
only the financial results as reported, but also the key results and
factors affecting Ralcorp's on-going businesses.
For financial reporting purposes, the existing Ralcorp Holdings,
Inc. (Ralcorp) is a "successor registrant" to the Ralcorp Holdings, Inc.
that was acquired by General Mills, Inc. on January 31, 1997 (Old
Ralcorp) and, as such, all financial statements represent the historical
financial information of Old Ralcorp for periods prior to January 31,
1997, and Ralcorp for subsequent periods. Therefore, references to the
"Company" or "Ralcorp", as they relate to financial information for
periods prior to January 31, 1997, are references to Old Ralcorp.
OVERVIEW
Net sales for the full fiscal years ended September 30, 1999 and
1998 were $636.6 million and $582.9 million, respectively, a 9.2 percent
improvement. Net earnings improved nearly 13.8 percent to $36.4 million
for the year ended September 30, 1999 from $32.0 million for the prior
year, excluding an after-tax gain on the sale of Beech-Nut Nutrition
Corporation (Beech-Nut) of $11.6 million. The corresponding diluted
earnings per share were $1.15 in fiscal 1999 and $.97 in fiscal 1998, an
18.5 percent improvement, again excluding the gain on sale of Beech-Nut,
which - on a diluted earnings per share basis - amounted to $.35.
The Company's core food operations (which excludes equity earnings
from the Company's investment in Vail Resorts, Inc. and the gain on sale
of Beech-Nut) recorded even more impressive operating gains in a year-
to-year comparison of fiscal 1999 to fiscal 1998. Net earnings for the
core food businesses in fiscal 1999 were $33.5 million, a 31.9 percent
improvement over the $25.4 million of core food earnings in fiscal 1998.
On a diluted earnings per share basis, core food operations for fiscal
1999 resulted in $1.06 per diluted share compared to $.77 per diluted
share in fiscal 1998, a 37.7 percent increase.
The significantly improved fiscal 1999 results can be attributed
to a number of positive factors. The Company's cereal business
experienced solid sales and volume growth in both ready-to-eat and hot
cereals. Results for fiscal 1999 were also boosted by results from
current year acquisitions, especially compared to the prior year results
of the now divested Beech-Nut business. Acquisitions benefited
Ralcorp's cracker and cookie and snack nut operations, and also added
the results of the mayonnaise and salad dressings business. In addition,
the Company's operating results continue to be positively affected by
its aggressive cost containment focus.
The results of Beech-Nut are included in the Company's fiscal 1998
consolidated results of operations through September 10, 1998, the
effective date of the sale. During this period, Beech-Nut continued to
be pressured by heavy price competition and a shrinking category.
OPERATING RESULTS
There were no unusual items included in the Company's Consolidated
Statement of Earnings for the year ended September 30, 1999. However,
the Company's Consolidated Statement of Earnings for each of the years
ended September 30, 1998 and 1997 include certain items that make year-
to-year comparisons difficult. The following describes each of these
items and quantifies their effect on net earnings.
The single unusual operating item included in the Company's
operating results for fiscal 1998 was an $18.7 million pre-tax ($11.6
million after taxes, or $.35 per diluted share) gain on the sale of
Beech-Nut. In fiscal 1997, the Company recorded a $515.4 million
($15.52 per diluted share) tax-free gain on the sale of the branded
cereal and snack mix business (Branded Business) to General Mills. Also
in fiscal 1997, the Company recorded two restructuring charges totaling
$19.7 million ($12.4 million after taxes, or $.37 per diluted share).
FISCAL 1999 COMPARED TO FISCAL 1998
CEREALS, CRACKERS & COOKIES
Net sales for the Cereals, Crackers & Cookies segment improved
$35.0 million from fiscal 1998 to fiscal 1999. Net sales for fiscal
1999 were $470.8 million compared to $435.8 million for the year ended
September 30, 1998, an increase of 8.0 percent. Both the Ralston Foods
store brand cereal division and the Bremner store brand cracker and
cookie operation contributed to this growth. Volume improvements in
both ready-to-eat and hot cereal and a slightly improved product mix
were the key factors driving the Ralston Foods sales increase. Ready-
to-eat cereal volume increased 2.1 percent in
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1999 ANNUAL REPORT
a flat to slightly down category, and hot cereal volume grew 17.5
percent for fiscal 1999. Sales revenue increases at Bremner can be
primarily attributed to the benefit of a full year of sales from Sugar
Kake Cookie Inc., which was acquired in August 1998. Volumes for the
pre-existing cracker and cookie operation (excluding Sugar Kake), which
were adversely affected by the aggressive promotional activity of large
branded product manufacturers, declined 1.2 percent for fiscal 1999 as
volume gains in cookies were more than offset by volume declines in
crackers.
From an operating results perspective, the Cereals, Crackers &
Cookies segment recorded an operating profit of $53.8 million for the
year ended September 30, 1999, an improvement of 15.2 percent over the
$46.7 million in operating profit recorded in fiscal 1998. Ralston
Foods' operating profit benefited primarily from ready-to-eat and hot
cereal volume gains, a slight product mix improvement, favorable
material costs, and continued operational cost containment. Bremner's
operating profit improved due to the addition of Sugar Kake's volume and
operating profit for the full fiscal 1999 period. In addition, the
Bremner operation benefited from lower ingredient costs, improved
production efficiencies, which greatly improved yields, and an improved
product mix.
In addition, operating results of the Cereals, Crackers & Cookies
segment were favorably affected in both fiscal 1999 and 1998 by certain
copacking arrangements with other companies operating in the same
competitive categories. Through these partnerships, Ralcorp is
contractually committed to provide its partner companies quality
products that are packaged for sale under the individual partner
company's label. In return, Ralcorp is compensated according to the
terms of the respective contracts, however, as with any of the Company's
other contractual arrangements, they can terminate at various times.
SNACK NUTS
The Company's snack nuts business, which consists of Nutcracker
Brands, Inc., Flavor House Products, Inc. and, as of March 24, 1999,
Southern Roasted Nuts of Georgia, Inc., recorded net sales and operating
profit for the year ended September 30, 1999 of $124.2 million and $8.2
million, respectively. A sharp increase in the cost of cashews lowered
operating results for this segment. A worldwide shortage of this
commodity caused the cost to rise significantly above prior year levels.
While the management of this division took steps to mitigate the impact
of these higher costs, such steps were not sufficient to fully offset
the lower operating margins. Despite this negative commodity issue, the
Snack Nuts segment continues to improve its volume and customer base.
The prior year included just $24.7 million in net sales, which
represented primarily the operations of Flavor House since its
acquisition on April 23, 1998. Nutcracker Brands, Inc. was acquired in
early September 1998 and, therefore, made minimal contribution to fiscal
1998 operations.
Operations in the Snack Nuts segment are somewhat seasonal, with a
significant percentage of sales and operating profits recorded in the
first fiscal quarter.
MAYONNAISE AND DRESSINGS
Ralcorp Holdings began operating in mayonnaise and shelf-stable
salad dressings with the March 4, 1999 acquisition of Martin Gillet &
Co., Inc. Since its acquisition, Martin Gillet's operations recorded
$41.6 million in net sales and $1.7 million of operating profit. Due to
the timing of the Martin Gillet acquisition, there are no prior year
comparisons for this segment.
The Company continues to work on the integration of Martin Gillet
into the Ralcorp business portfolio. As part of that effort, an
extensive cost reduction program has been initiated, which should
benefit this division's operating results in the future.
EQUITY INTEREST IN VAIL RESORTS, INC.
As a result of the sale of Ralcorp's ski resorts operations
(Resort Operations) to Vail Resorts, Inc. (Vail), Ralcorp maintains an
approximate 21.9 percent equity ownership interest in Vail. Aberrant
weather conditions during the peak ski season hurt the operating results
of Vail. These difficult weather conditions, plus timing issues
resulting from a fiscal year end change at Vail, combined to negatively
affect the Company's full year equity earnings from its investment in
Vail.
In a comparison of fiscal years ended September 30, 1999 and 1998,
the Company recorded non-cash, pre-tax equity earnings of $4.7 million
and $10.6 million, respectively. Due to the timing of a fiscal year end
change at Vail, the fiscal 1998 equity income amounts represent the
Company's portion of Vail's operating results for only the period of
October 1997 through July 1998. Fiscal 1999 equity earnings are based
on the full twelve-month period of August 1998 through July 1999, a
period that includes the historically unprofitable ski months of August
through October.
As the Company continues to grow, expand and add other businesses,
the equity earnings from the Company's investment in Vail should become
less significant. It must be noted, though, the skiing industry is
mature, with slow growth and high levels of competition. Nevertheless,
Company management is confident that Vail management will operate this
premier North American ski resort in a manner consistent with the best
interests of the Company.
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RALCORP HOLDINGS, INC.
CONSOLIDATED
Costs of products sold as a percentage of sales were 73.4% for
fiscal 1999 compared to 66.2% for the prior year. This increase can be
primarily attributed to changes in the Company's business mix. The
products of the Company's snack nut and mayonnaise/salad dressings
businesses generally have lower gross margins than the higher margin
products eliminated through the sale of Beech-Nut. In addition, as
noted above, the Company's snack nut business experienced significantly
higher cashew costs in fiscal 1999 which also effected gross margins.
Selling, general and administrative expense as a percent of sales
decreased considerably to 14.0% for fiscal 1999 compared to 16.8% for
the prior year. The decline in selling, general and administrative
expense is again a function of the shift in the Company's business mix.
The Beech-Nut baby food business had a significantly higher cost
structure than the snack nut and mayonnaise/salad dressings businesses.
In addition, both the cereal and the cracker and cookie operations have
been able to grow their respective revenue bases while keeping fixed
costs relatively flat. Advertising and promotion expense as a
percentage of sales declined to 3.9% from 10.0% in fiscal 1998. This
favorable reduction can be primarily attributed to the elimination of
Beech-Nut, whose branded products required a higher level of advertising
and promotional support than store brand products. The Company recorded
$1.4 million in net interest expense in fiscal 1999 as a result of
incurring a limited amount of debt throughout the year to fund both
acquisitions and stock repurchases. The Company recorded no interest
expense for fiscal 1998 due to its ability to remain essentially debt-
free following the fiscal 1997 sales of the Branded Business and Resort
Operations. Income tax provisions generally reflect statutory tax rates
for each of the fiscal years.
FISCAL 1998 COMPARED TO FISCAL 1997
CEREALS, CRACKERS & COOKIES
Comparisons of operating results in the Cereals, Crackers &
Cookies segment on a historical basis are complicated by the fact that
operations of the Company's Branded Business are included only through
January 31, 1997, the date of the Branded Business sale to General
Mills.
Actual Cereals, Crackers & Cookies net sales declined $119.7
million from fiscal 1997 to fiscal 1998. Net sales for fiscal 1998 were
$435.8 million compared to $555.5 million in the preceding fiscal year,
as the year ended September 30, 1997 includes the October 1996 through
January 1997 sales of the Branded Business. Comparing sales of fiscal
1998 to fiscal 1997, excluding the benefit of the Branded Business,
sales rose $52.8 million, or approximately 13.8 percent. This growth
was due primarily to the increase from the Bremner cracker and cookie
operation, which benefited from a full year of integrating Wortz, which
was acquired on April 21, 1997. In addition, fiscal 1998 store brand
cereal sales improved over fiscal 1997 on volume increases of 3.3
percent and 6.3 percent for ready-to-eat and hot cereals, respectively.
From an operating results perspective, the Cereals, Crackers &
Cookies segment recorded an operating profit of $46.7 million for the
year ended September 30, 1998. This fiscal 1998 operating profit level
was significantly below the Branded Business-enhanced operating profit
of fiscal 1997, excluding the $19.7 million restructuring charge.
Bremner operating profit improved considerably in fiscal 1998, due
primarily to the addition of Wortz, an improved product mix and
favorable ingredient costs. Ralston Foods operations reflected
considerable improvement for fiscal 1998 over the prior year (on a store
brand only basis). Key contributors to the improvement were increased
volumes of both ready-to-eat and hot cereals, improved margins obtained
by maintaining a substantially lower cost base, and the benefit of lower
raw material costs. The growth of the Company's store brand cereal
division was slowed, however, in the fourth quarter of fiscal 1998.
Significant promotional and trade dealing initiatives on the part of
larger, branded cereal competitors had a negative effect on Ralston
Foods operations, as well as on the profitability of the entire ready-
to-eat cereal category.
As described earlier, operating results in fiscal 1998 for the
Cereals, Crackers & Cookies segment were favorably affected by certain
copacking arrangements with other companies operating in the same
competitive categories.
BABY FOODS
Net sales from Beech-Nut baby foods declined $28.7 million from
fiscal 1997 to fiscal 1998. Fiscal 1997 sales were $151.1 million and
dropped to $122.4 million for fiscal 1998. Fiscal 1998 sales for baby
foods reflect only the period of October 1, 1997 through September 10,
1998, the date this divestiture was completed. Beech-Nut continued to
be plagued by both significant competitive pricing pressures and a
declining category.
Operating results of Beech-Nut for fiscal 1998 were well below the
levels attained in fiscal 1997. Beech-Nut recorded an operating loss of
$1.1 million for the fiscal 1998 period ended September 10, 1998. For
fiscal 1997, results of the Company's baby foods business resulted in
operating profit of $7.2 million. As with sales, the unfavorable year-
to-year change can be attributed to the difficult competitive
environment and a shrinking category.
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1999 ANNUAL REPORT
SNACK NUTS
During fiscal 1998, the Company made its entry to the snack nut
category. The operating results of the Company's snack nut subsidiary
were reported as a separate operating segment. For fiscal 1998, this
segment is comprised of Flavor House, acquired in April 1998, and
Nutcracker, acquired in September 1998. Based on the timing of these
acquisitions, there are no prior year comparisons. For the five-month
period of fiscal 1998 during which the Company competed in the snack nut
category, sales were $24.7 million and operating profit was $.9 million.
EQUITY INTEREST IN VAIL RESORTS, INC.
As referred to above, on November 6, 1997, Vail announced a change
in its fiscal year end from September 30 to July 31. As a result of the
related two-month reporting time lag the Company's entire fiscal 1998
includes only ten months of equity earnings from Vail.
For the year ended September 30, 1998, the Company's equity stake
in Vail resulted in non-cash, pre-tax earnings of $10.6 million compared
to $4.7 million during the prior year. Ralcorp's reporting through
September 30, 1998 includes Vail's results for only the period of
October 1997 through July 1998 and the prior year's equity earnings
reflects only the months of January 1997 through September 1997 (the
period subsequent to the Vail transaction). Vail's earnings are highly
seasonal with operating losses normally reported in the first and fourth
fiscal quarters.
CONSOLIDATED
Costs of products sold as a percentage of sales were 66.2% for
fiscal 1998 compared to 57.5% for the prior year. This increase can be
primarily attributed to the fact that many of the Company's higher
margin products were eliminated through the sale of the Branded
Business. In a comparison of fiscal 1998 fourth quarter to the same
prior year quarter, costs of products sold as a percentage of sales
increased to 69.6% from 66.9%. This increase is attributable to margin
contraction from baby food operations through September 10, 1998
(effective date of the Beech-Nut sale) and the fiscal 1998 fourth
quarter inclusion of the snack nut division, partially offset by
favorable raw material costs for the cereal and cracker and cookie
operations. Selling, general and administrative expense as a percent of
sales decreased to 16.8% for fiscal 1998 compared to 17.1% for the prior
year. This basically flat comparison indicates how the Company was able
to maintain the significantly reduced cost structure achieved through
reshaping the Company into a primarily private label corporation.
Advertising and promotion expense as a percentage of sales declined from
18.7% in fiscal 1997 to 10.0% in fiscal 1998, reflecting the reduced
level of advertising and promotional support necessary for a primarily
private label company. The Company recorded no interest expense for
fiscal 1998, as it remained essentially debt-free following the sales of
the Branded Business and Resort Operations. Net interest expense for
fiscal 1997 was $7.9 million, or 1.1% of net sales, which represents
interest expense incurred on outstanding debt balances through January
1997. Income tax provisions generally reflect statutory tax rates for
fiscal years 1998 and 1997, excluding the tax-free gain on the sale of
the Branded Business.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
The Company's primary source of liquidity is cash flow from
operations, which increased to $42.0 million in 1999 compared to $38.1
million in 1998. This $3.9 million increase is primarily due to the
improvement in net earnings, excluding the gain on the sale of Beech-
Nut. A portion of the net earnings benefit was offset by an increase in
accounts receivable and a further decrease in current liabilities,
excluding receivables and liabilities acquired in March 1999. The $39.4
million decrease in 1998 operating cash flow compared to 1997 was due
primarily to the changes in assets and liabilities used in operations,
specifically the components of working capital. In 1997, working
capital decreased substantially excluding amounts acquired or divested,
effectively resulting in a large cash inflow. In 1998, excluding the
effects of the 1998 acquisitions and divestiture, the changes in the
components of working capital were relatively minor. Working capital,
excluding cash and cash equivalents, was $66.4 million at September 30,
1999 compared to $33.3 million and $56.5 million at September 30, 1998
and 1997, respectively.
The Company's businesses have historically focused on generating
positive cash flows through operations. For the three years ended
September 30, 1999, the Company generated $157.6 million of cash from
operations. Management believes that the Company will continue to
generate operating cash flow through its mix of businesses and expects
that future liquidity requirements will be met through a combination of
operating cash flow and strategic use of borrowings available under its
revolving credit agreement and uncommitted credit arrangements.
INVESTING ACTIVITIES
Investing activities during fiscal 1999 include $55.6 million
related to business acquisitions. It was during fiscal 1999 that
Ralcorp purchased Martin Gillet, its first foray into mayonnaise and
salad dressings, and Southern Roasted Nuts of Georgia, its third snack
nut company. Investing activities in 1998 of $55.2 million include the
acquisitions of Flavor House, Sugar Kake and Nutcracker, as well as
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RALCORP HOLDINGS, INC.
a final payment related to the fiscal 1997 Wortz acquisition. In
addition, the 1998 sale of Beech-Nut resulted in net cash proceeds of
$67.1 million. Investing activities in 1997 include $41.6 million for
the purchase of Wortz. Capital expenditures were $20.5 million, $24.6
million and $24.9 million in fiscal years 1999, 1998 and 1997,
respectively. Capital expenditures for fiscal 2000 are expected to be
approximately $25-$30 million.
FINANCING ACTIVITIES
For the first time in three years, Ralcorp's year-end Consolidated
Balance Sheet reflected outstanding debt. At September 30, 1999, the
Company had $42.8 million in debt outstanding. During fiscal 1999,
Ralcorp closed on two acquisitions - Martin Gillet and Southern Roasted
- - and repurchased 1.2 million shares of its common stock. Strong
operating cash flow allowed the Company to pay down a significant
portion of the debt incurred to fund these activities. During fiscal
1998, operating cash flow and the proceeds from the sale of Beech-Nut
were sufficient sources of funds to pay for the Company's three
acquisitions and repurchase of 1.3 million shares of its common stock.
In fiscal 1997, borrowings to fund the acquisition of Wortz were
completely repaid by September 30, 1997.
On April 28, 1999, the Company announced it had entered into a new
$125 million, three-year revolving credit agreement with a group of six
banks. The proceeds of the facility may be used to fund Ralcorp's
working capital needs, capital expenditures, and other general corporate
purposes, including stock repurchases and acquisitions of new
businesses. Provisions of the $125 million credit facility require
Ralcorp to maintain certain financial ratios and a minimum level of
shareholders' equity, but, in general, the established requirements of
the new facility are less restrictive than those in place under the
previous credit facility.
During fiscal 1999, the Company repurchased $19.9 million of its
common stock compared to $23.0 million in fiscal 1998 and no repurchases
in fiscal 1997. As of September 30, 1999, there were approximately 1.4
million shares available for repurchase by the Company pursuant to an
authorization from the Company's Board of Directors allowing management
to repurchase its common stock. Included in the shares repurchased in
fiscal 1999 were 586,368 shares purchased at $16.00 per share. These
shares represent the result of the Company's Dutch Auction self-tender
offer to repurchase up to 5 million shares.
OUTLOOK
The Company's management firmly believes that the opportunities in
the private label and value brand areas are favorable for future growth
and prosperity. The results of the Company's core store brand food
businesses for fiscal 1999 were encouraging.
Ralcorp does, however, continue to operate in some intensely
competitive food categories. It is because of this level of competition
that it is important to the Company's outlook to continue to explore
diversifying and strengthening its business mix. Significant steps have
been taken to reshape the Company and lessen its reliance on any one
area of business. Management anticipates it will continue to improve
its business mix through sales and profit growth of existing businesses,
as well as through key strategic acquisitions or alliances.
Acquisitions are opportunistic, therefore management does not control
the availability of acquisition targets.
The level of competition in the ready-to-eat cereal category
continues to be very intense. Competition comes from large branded box
cereal manufacturers, branded bagged cereal producers and other private
label cereal providers. In recent history the category has failed to
record any meaningful growth, which has added to the competitive nature.
When the competition focuses on price/promotion, as has been the case
with certain branded cereal manufacturers, the environment for a private
label producer becomes more challenging, while the profitability of the
category itself is diminished. Recent developments in the category,
however, show some signs of an increased focus on brand-building
initiatives such as product development and advertising, rather than
pure price competition. Nonetheless, Company management realizes that
the competition for consumers will remain intense in the ready-to-eat
cereal category. Ralston Foods must maintain an effective price gap
between its quality private label cereal products and those of branded
cereal producers, thereby providing the best value alternative for the
consumer. Aggressive cost containment will remain an important focus of
the organization. Finally, the cereal division hopes to continue to
diversify its internal business mix. Fiscal 1999 results reflect some
of this mix change as the hot cereal business and copacking initiatives
were important contributors to operations. Recently, however, a
copacking partner notified the Company that their cereal copacking
contract would not be renewed after December 31, 1999. Though the loss
of this contract may, in the short-term, negatively impact results for
Ralston Foods, management believes it can replace the lost business
through new copacking arrangements or organic volume growth.
The Company's Bremner cracker and cookie subsidiary also conducts
business in a very competitive category. Major branded
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1999 ANNUAL REPORT
competitors continue to aggressively market and promote their branded
offerings and many smaller, regional participants provide additional
competitive pressures. In light of this environment, the Company's
cracker and cookie business has had to defend its leading store brand
cracker position. Bremner's ability to successfully respond to market
conditions will be important to its results of operations. In addition,
further integration of recent acquisitions should aid the subsidiary's
outlook. Bremner continues to realize improved operating efficiencies
on the cracker side of the business and the August 1998 addition of
Sugar Kake provides the Company a quality, low cost producer, as well as
critical mass on the cookie side of the operation. Fiscal 2000 will
also bring the challenge of integrating Ripon Foods, Inc., which was
acquired on October 4, 1999. Ripon Foods is a high quality manufacturer
of enrobed and wire-cut cookies and sugar wafers, giving Bremner the
capability to produce a full line of cookies in its own facilities.
However, just as they have been key to Bremner's operating results to
date, a focus on cost containment, the production of quality
alternatives to branded products and an emphasis on shifting its product
mix to higher margin products, where possible, as well as organic volume
growth, will be important to its future.
Cumulatively, fiscal 1999 operations for the Company's snack nut
operation (Nutcracker) were successful. The snack nut business is
seasonal, however, with a significant percentage of revenues and profits
realized in the first fiscal quarter, which encompasses the holiday
season. As anticipated, however, the Company's snack nut operation
continued to post meaningful quarterly profits through and including the
fourth fiscal quarter of 1999. The outlook for the overall snack nut
category remains favorable, as the category leader continues to drive
growth in this snack food segment. Currently, though, there is a
worldwide shortage of cashew nuts, which has significantly increased the
cost of this commodity. Price increases taken by the category leader,
as well as a strategic shift in Nutcracker's promotional programs should
partially mitigate this negative cost impact. The financial outlook for
Ralcorp's snack nut business is good, pending an easing of the high
cashew costs, as volume demands continue to be strong moving into fiscal
2000. In addition, the Company's snack nut business will continue its
integration of Southern Roasted Nuts of Georgia, Inc., which was
acquired on March 24, 1999. From an operational perspective, Nutcracker
will continue to focus on fully leveraging the combined strengths of its
three operations, growing its customer base and maintaining the quality
of its products.
As noted earlier, Ralcorp management realizes that in addition to
improved operations, effective cost containment and enhanced
efficiencies, a key growth opportunity may exist through strategic
acquisitions. The March 4, 1999, acquisition of Martin Gillet & Co.,
Inc., a leading producer of high quality private label mayonnaise and
pourable, shelf-stable salad dressings, is considered just such a
strategic acquisition. Martin Gillet's reputation for quality products
and excellent customer service makes it a particularly good addition to
Ralcorp's private label product offerings. The addition of Martin
Gillet also contributes to the Company's strategy of diversifying its
business portfolio, thereby reducing its reliance on any one operation.
While adding Martin Gillet does expand Ralcorp's private label product
offerings, it also takes the Company into another competitive,
commodity- driven category with large branded players and numerous
regional mayonnaise and salad dressing producers. Management, however,
believes the opportunities exist to increase private label penetration
in this category, remove costs from this operation and potentially
consolidate a fragmented segment. Ultimately, the key opportunity is to
benefit from a more diversified portfolio of product offerings.
Management will continue to explore those acquisition
opportunities that strategically fit with the Company's intentions of
being the premier provider of private label, or value-oriented, food
products. Ralcorp's low level of outstanding debt should provide the
Company greater flexibility to act upon any such opportunities.
INFLATION
Management recognizes that inflationary pressures may have an
adverse effect on the Company through higher asset replacement costs,
related depreciation and higher material costs. The Company tries to
minimize these effects through cost reductions and productivity
improvements as well as price increases to maintain reasonable
profit margins. It is management's view, however, that inflation has
not had a significant impact on operations in the three years ended
September 30, 1999.
MARKET RISK
In the ordinary course of business, the Company is exposed to
commodity price risks relating to the acquisition of raw materials. The
Company utilizes derivative financial instruments, including futures
contracts and options, to manage certain of these exposures when it is
practical to do so.
As of September 30, 1999 and 1998, a hypothetical 10% adverse
change in the market price of the Company's principal commodities,
including corn, oats, wheat and soybean oil, would have decreased the
fair value of the Company's derivatives portfolio by $.2 million and $.7
million, respectively.
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RALCORP HOLDINGS, INC.
The preceding volatility analysis ignores changes in the exposures
inherent in the underlying hedged transactions. Because the Company
does not hold or trade derivatives for speculation or profit, all
changes in derivative values are effectively offset by corresponding
changes in the underlying exposures. See "Note 2 - Summary of
Significant Accounting Policies" of the Notes to Consolidated Financial
Statements.
INFORMATION SYSTEMS DEVELOPMENTS AND YEAR 2000 ISSUES
The Company uses computer hardware and software in various aspects
of its business, including production, distribution and administration,
some of which required modification or replacement in order to interpret
the Year 2000 appropriately. Since 1997 the Company has been
implementing a plan to identify and correct all affected hardware and
software. As part of this plan, the Company monitors and tests the
implementation of needed corrections.
The Company's on-going information technology strategy includes
the elimination of mainframe computer systems and the migration to a
server environment in order to reduce costs and improve functionality.
A key component to the execution of this strategy is now completed as
the Company has replaced, upgraded or enhanced primary systems and
technology necessary to manage the business. The Company's current
accounting policy is to capitalize the related direct external costs and
employee-related costs, and amortize them over a period not to exceed
five years. The Company's replacement of primary systems was completed
on schedule and management believes that the resulting information
systems hierarchy is now Year 2000 ready. The assessment and
remediation of all other systems hardware and software, including
processors within production and other equipment, is substantially
complete. Testing of these changes commenced as soon as they were
completed and is essentially complete.
Based upon current expectations, management anticipates that the
incremental costs to the Company to modify or replace its systems in
order to remediate the Year 2000 issue should not exceed $1 million,
most of which was expended in fiscal 1999. Such costs do not include
normal system upgrades and replacements.
The Company has implemented an ongoing program of contacting
significant customers, critical suppliers, benefit plan providers, and
other parties to determine whether the Company's systems and operations
may be vulnerable to failures by such parties to satisfactorily address
their Year 2000 issues. Communications with these partners are
continuing in order to understand whether Year 2000 issues will
adversely affect them. In the event that any of the Company's
significant customers, critical suppliers or outside parties do not
successfully and timely achieve Year 2000 readiness, and the Company is
unable to replace them with new customers or alternate suppliers, the
Company's business or operations could be adversely affected.
The Company has developed contingency plans to be implemented in
the event of untimely or incomplete remediation of both internal and
third party Year 2000 issues. Such contingency plans are designed to
mitigate any Year 2000 failures encountered, but there can be no
absolute assurance that these plans, even if successful, will totally
mitigate all Year 2000 related failures.
While management believes it has identified and resolved all
mission critical Year 2000 issues, if modifications and replacements
should ultimately fail, there can be no absolute assurance that there
will not be a material adverse effect on the Company. In addition, if
critical third parties fail to convert their systems in a timely manner
and in a way that is compatible with the Company's systems, such
failures would result in an interruption of critical service to the
Company resulting in a number of operational inconveniences and
inefficiencies for the Company and its customers.
The discussion of the Company's efforts, and management's
expectations, relating to Year 2000 readiness are forward-looking
statements. The Company's ability to achieve Year 2000 readiness and
the level of incremental costs associated therewith, could be adversely
impacted by, among other things, the availability of testing resources,
vendors' ability to modify proprietary software, and unanticipated
problems identified in the ongoing compliance review.
CAUTIONARY STATEMENT ON FORWARD-
LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of
the Exchange Act are made throughout this document and include
information under the section titled "Financial Review," and are
preceded by, followed by or include the words "believes," "should,"
"expects," "anticipates" or similar expressions elsewhere in this
document. The Company's results of operations and liquidity status may
differ materially from those in the forward-looking statements. Such
statements are based on management's current views and assumptions, and
involve risks and uncertainties that could affect expected results. For
example, any of the following factors cumulatively or individually may
impact expected results:
(i) If the Company is unable to maintain a meaningful price gap
between its private label products and the branded products of its
competitors, successfully introduce new products, or successfully
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1999 ANNUAL REPORT
manage costs across all parts of the Company, then the Company's private
label businesses could incur operating losses;
(ii) Consolidation among members of the grocery trade may lead to
increased wholesale price pressure from larger grocery trade customers
and could result in the loss of key cereal accounts if the surviving
entities are not customers of the Company;
(iii) Significant increases in the cost of certain raw materials
used in the Company's products, to the extent not reflected in the price
of the Company's products, could adversely impact the Company's results.
For example, the cost of wheat, nuts, and soybean oil can change
significantly;
(iv) In light of its significant ownership in Vail Resorts, Inc.,
the Company's non-cash earnings can be adversely affected by Vail's
unfavorable performance;
(v) The Company is currently generating profit from certain
copacking contract arrangements with other manufacturers within its
competitive categories. The termination or expiration of these
contracts, and the inability of the Company to replace this level of
business could negatively effect the Company's operating results;
(vi) The Company's businesses compete in mature segments with
competitors having large percentages of segment sales; and
(vii) The Company's disclosure under the heading "INFORMATION
SYSTEMS DEVELOPMENTS AND YEAR 2000 ISSUES" includes cautionary
statements regarding the Company's ability to successfully address Year
2000 compliance issues, and such statements are incorporated herein.
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RALCORP HOLDINGS, INC.
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data, shares in thousands)
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 636.6 $ 582.9 $ 739.7
---------------------------------------
COSTS AND EXPENSES
Cost of products sold 467.5 386.0 425.2
Selling, general and administrative 89.3 97.7 126.5
Advertising and promotion 24.8 58.1 138.6
Interest expense, net 1.4 - 7.9
Equity in earnings of Vail Resorts, Inc. (4.7) (10.6) (4.7)
Gain on sale of Beech-Nut - (18.7) -
Gain on sale of Branded Business - - (515.4)
Restructuring charges - - 19.7
---------------------------------------
578.3 512.5 197.8
---------------------------------------
EARNINGS BEFORE INCOME TAXES 58.3 70.4 541.9
INCOME TAXES 21.9 26.8 10.4
---------------------------------------
NET EARNINGS $ 36.4 $ 43.6 $ 531.5
=======================================
BASIC EARNINGS PER SHARE $ 1.17 $ 1.33 $ 16.11
=======================================
DILUTED EARNINGS PER SHARE $ 1.15 $ 1.32 $ 16.01
=======================================
WEIGHTED AVERAGE SHARES FOR BASIC EARNINGS PER SHARE 31,112 32,684 32,955
Dilutive effect of:
Stock options 325 295 199
Deferred compensation awards 247 104 61
---------------------------------------
WEIGHTED AVERAGE SHARES FOR DILUTED EARNINGS PER SHARE 31,684 33,083 33,215
=======================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 23
1999 ANNUAL REPORT
<TABLE>
CONSOLIDATED BALANCE SHEET
(In millions except share and per share data)
<CAPTION>
SEPTEMBER 30, 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1.9 $ 12.3
Receivables, net 59.9 45.2
Inventories 75.3 61.5
Prepaid expenses 2.8 1.8
Deferred income taxes 5.5 6.2
-----------------------
Total Current Assets 145.4 127.0
Investment in Vail Resorts, Inc. 70.7 66.0
Intangible Assets, Net 100.7 70.3
Property, Net 165.5 150.2
Deferred Income Taxes - 3.1
Other Assets 1.5 1.3
-----------------------
Total Assets $483.8 $417.9
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 53.4 $ 50.7
Other current liabilities 23.7 30.7
-----------------------
Total Current Liabilities 77.1 81.4
-----------------------
Long-term Debt 42.8 -
-----------------------
Deferred Income Taxes 6.9 -
-----------------------
Other Liabilities 32.9 29.2
-----------------------
Commitments and Contingencies
Shareholders' Equity
Common stock, par value $.01 per share
Authorized: 300,000,000 shares
Issued: 33,011,317 shares .3 .3
Capital in excess of par value 110.1 110.1
Retained earnings 256.3 219.9
Common stock in treasury, at cost (2,474,168 and 1,300,000 shares) (42.6) (23.0)
-----------------------
Total Shareholders' Equity 324.1 307.3
-----------------------
Total Liabilities and Shareholders' Equity $483.8 $417.9
=======================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
24 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions, shares in thousands)
<CAPTION>
Common Stock in Unearned
Common Stock Capital in Treasury, at Cost Portion of
------------------ Excess of Retained ------------------ Restricted
Shares Amount Par Value Earnings Shares Amount Stock Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1996 33,925 $ .3 $130.9 $ (.2) (1,008) $(22.7) $ (.9) $ 107.4
--------------------------------------------------------------------------------------------
Net earnings 531.5 531.5
Activity under stock plans (52) (.7) 146 2.6 1.9
Amortization of restricted stock .1 .1
Accelerated vesting of
restricted stock .8 .8
Distribution of General Mills
Stock to Shareholders (355.0) (355.0)
Retirement of treasury stock (862) (20.1) 862 20.1 -
--------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1997 33,011 $ .3 $110.1 $ 176.3 - $ - $ - $ 286.7
--------------------------------------------------------------------------------------------
Net earnings 43.6 43.6
Purchase of treasury stock (1,300) (23.0) (23.0)
--------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 33,011 $ .3 $110.1 $ 219.9 (1,300) $(23.0) $ - $ 307.3
--------------------------------------------------------------------------------------------
Net earnings 36.4 36.4
Purchase of treasury stock (1,190) (19.9) (19.9)
Activity under stock plans 16 .3 .3
--------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 33,011 $ .3 $110.1 $ 256.3 (2,474) $(42.6) $ - $ 324.1
============================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 25
1999 ANNUAL REPORT
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net earnings $ 36.4 $ 43.6 $ 531.5
Adjustments to reconcile net earnings to net cash flow provided by operations:
Depreciation and amortization 23.1 18.2 24.4
Deferred income taxes 10.7 11.4 8.6
Equity in earnings of Vail Resorts, Inc. (4.7) (10.6) (4.7)
Gain on sale of Beech-Nut - (18.7) -
Gain on sale of Branded Business - - (515.4)
Restructuring charges, net of cash paid - - 2.4
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
(Increase) decrease in receivables (8.8) 5.7 24.9
(Increase) decrease in inventories (5.5) (5.0) 15.8
(Increase) decrease in prepaid expenses (.6) .6 (27.0)
(Decrease) increase in accounts payable and accrued liabilities (12.6) (5.5) 10.8
Other, net 4.0 (1.6) 6.2
-----------------------------------------
Net cash provided by operations 42.0 38.1 77.5
-----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquisitions, net of cash acquired (55.6) (55.2) (41.6)
Additions to property and intangible assets (20.5) (24.6) (24.9)
Proceeds from sale of property .5 1.5 3.4
Proceeds from sale of Beech-Nut - 67.1 -
Other, net - - (2.9)
-----------------------------------------
Net cash used by investing activities (75.6) (11.2) (66.0)
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under uncommitted credit arrangements 42.8 - -
Proceeds from exercise of stock options .3 - -
Purchase of treasury stock (19.9) (23.0) -
Repayments of long-term debt, including current maturities - - (3.1)
-----------------------------------------
Net cash provided (used) by financing activities 23.2 (23.0) (3.1)
-----------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (10.4) 3.9 8.4
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12.3 8.4 -
-----------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1.9 $ 12.3 $ 8.4
=========================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
26 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share data)
NOTE 1 - GENERAL INFORMATION
On January 31, 1997, the original Ralcorp Holdings, Inc. (Old
Ralcorp) was merged with a subsidiary of General Mills, Inc. (the
Merger). Immediately prior to the Merger, Old Ralcorp spun-off its
private label cereal, branded baby food and private label cracker and
cookie businesses and its ownership interest in Vail Resorts, Inc. (the
Spin-Off) by distributing one share of New Ralcorp Holdings, Inc. common
stock for each share of Old Ralcorp common stock owned as of the close
of business on January 31, 1997. Immediately prior to the Spin-Off, New
Ralcorp Holdings, Inc. (Ralcorp) changed its name to Ralcorp Holdings,
Inc. and in the Merger, Old Ralcorp, which was now comprised of the
branded cereal and snack mix businesses (Branded Business), changed its
name to General Mills Missouri, Inc. This completed the $570
transaction with General Mills, Inc. (General Mills) that was first
announced in August 1996.
For financial reporting purposes, Ralcorp is a "successor
registrant" to Old Ralcorp and, as such, the accompanying Ralcorp
financial statements represent the historical financial position,
results of operations and cash flows of Old Ralcorp for periods prior to
January 31, 1997, and Ralcorp for subsequent periods. Therefore,
references to the "Company" or "Ralcorp" for periods prior to January
31, 1997 are references to Old Ralcorp, without giving effect to the
Merger or the Spin-Off.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The financial statements are presented on
a consolidated basis and include the accounts of Ralcorp and its
majority-owned subsidiaries. All significant intercompany transactions
have been eliminated. Investments in 20% - 50%-owned companies are
presented on the equity basis (see Note 6).
ESTIMATES - The financial statements have been prepared in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect reported
amounts and disclosures. Actual results could differ from those
estimates.
CASH EQUIVALENTS are considered to be all highly liquid
investments with an original maturity of three months or less.
FINANCIAL INSTRUMENTS - The Company has a policy which allows the
use of various derivative financial instruments to manage the Company's
financial risk that exists as part of conducting business. Under the
policy, the Company is not permitted to engage in speculative or
leveraged transactions that have the potential for a disproportionate
ratio between the change in value of the liability being hedged and the
expected change in value of the related derivative instrument. The
Company will not hold or issue financial instruments for trading
purposes. See Note 12 for further disclosures relating to financial
instruments.
INVENTORIES are valued generally at the lower of average cost or
market. In connection with purchasing key raw ingredient materials, the
Company often uses commodities futures contracts to reduce the risk of
price fluctuations related to future raw materials requirements for
commodities such as corn, wheat, oats and soybean oil. The terms of
these financial instruments generally do not exceed twelve months, and
depend on the commodity and other market factors. The contracts are
accounted for as hedges, with related gains and losses ultimately
included as part of the cost of products sold. The effect of any
realized or deferred gains or losses is immaterial to the financial
condition, results of operations and cash flows of the Company.
DEPRECIATION is generally provided on the straight-line basis by
charges to costs or expenses at rates based on the estimated useful
lives of the properties. Estimated useful lives range from 3 to 15
years for machinery and equipment and 10 to 50 years for buildings and
leasehold improvements. Charges were $16.7, $16.1 and $22.5 in fiscal
1999, 1998 and 1997, respectively.
INTANGIBLE ASSETS - Goodwill represents the excess of cost over
the fair value of the net identifiable assets of acquired businesses and
is amortized evenly over estimated periods of related benefit ranging
from 20 to 40 years. Other intangible assets, primarily com-puter
software developed or obtained for internal use, are amortized evenly
over their estimated useful lives ranging from 3 to 5 years.
RECOVERABILITY OF LONG-LIVED ASSETS - The Company continually
evaluates whether events or circumstances have occurred which might
impair the recoverability of the carrying value of its long-lived
assets, including identifiable intangibles and goodwill. An asset is
deemed impaired and written down to its fair value if estimated related
future cash flows are less than its carrying amount.
ADVERTISING and promotion costs are expensed as incurred.
STOCK-BASED COMPENSATION is recognized using the intrinsic value
method. For disclosure purposes, pro forma net earnings and earnings
per share amounts are provided as if the fair value method had been
applied (see Note 16).
NEW ACCOUNTING RULES - In fiscal 1999, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," and Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These standards expanded or modified disclosure
requirements and had no effect on the Company's consolidated financial
position, results of operations or cash flows. The Company currently
has no transactions that would necessitate disclosure of comprehensive
income. See Note 18 for segment disclosures.
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 27
1999 ANNUAL REPORT
In fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," which revises employers' disclosures
about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. See Note 14.
In March 1998, the American Institute of Certified Public
Accountants issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement
requires the capitalization of internal use computer software costs when
certain criteria are met. The capitalized software costs will be
amortized on a straight-line basis over the useful life of the software.
The Company adopted this statement as of October 1, 1999, but management
does not expect any material impact on the Company's financial
statements.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was
issued. This statement establishes accounting and reporting standards
for derivative instruments and requires an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. Fair value adjustments will
impact either shareholders' equity or net earnings depending on whether
the derivative instrument qualifies as a hedge and, if so, the nature of
the hedging activity. The Company will adopt this new standard as of
October 1, 2000. Management does not expect the adoption to have a
material impact on the Company's results of operations; however, the
impact on the Company's financial position is dependent upon the fair
values of the Company's derivatives and related financial instruments at
the date of adoption.
RECLASSIFICATIONS - Certain prior years' amounts have been
reclassified to conform with the current year's presentation.
NOTE 3 - DIVESTITURES
On September 10, 1998, the Company completed the sale of its
branded baby food subsidiary, Beech-Nut Nutrition Corporation, to The
Milnot Company, a privately held company based in St. Louis, MO, for $68
in cash. The Company recorded an $18.7 pre-tax ($11.6 after tax) gain
related to this sale transaction.
On January 31, 1997, the Company effectively sold its Branded
Business through a tax-free transaction with General Mills. This
transaction was valued at $570, comprised of General Mills assuming $215
in Company debt and related accrued interest and distributing General
Mills stock totaling $355 to Ralcorp shareholders of record on January
31, 1997. Subsequent to the Merger, the Company recorded a $515.4 tax-
free gain related to this sale transaction.
On January 3, 1997, the Company sold its ski resort holdings
(Resort Operations) to Vail Resorts, Inc. (Vail) in exchange for an
approximate 22.6% of Vail's outstanding common stock (NYSE symbol: MTN),
or 7,554,406 shares, and the assumption by Vail of $165 of Resort
Operations debt. In accordance with Accounting Principles Board Opinion
No. 29, "Accounting for Nonmonetary Transactions," the Resort Operations
sale transaction with Vail was treated as a nonmonetary exchange.
Therefore, the initial equity investment in Vail was recorded at
Ralcorp's net book value of assets contributed, or $50.7. See Note 6
for further information about this investment.
NOTE 4 - ACQUISITIONS
All of the following acquisitions were accounted for using the
purchase method of accounting, whereby the results of operations are
included in the consolidated statement of earnings from the date of
acquisition.
FISCAL 1999
On March 4, 1999, the Company completed the purchase of Martin
Gillet & Co., Inc., a leading private label manufacturer of mayonnaise
and pourable, shelf-stable salad dressings, with sales to both retail
and foodservice customers. The $35.3 cost exceeded the fair value of
the net assets acquired by $20.5. Martin Gillet's general offices and a
manufacturing plant are located in Baltimore, MD, with additional plants
located in Kansas City, KS and Los Angeles, CA.
On March 24, 1999, the Company purchased Southern Roasted Nuts of
Georgia, Inc., a private label and value brand snack nut operation
located in Fitzgerald, GA. The $17.1 cost exceeded the fair value of
the net assets acquired by an estimated $13.7, subject to the receipt of
final appraisals.
FISCAL 1998
On April 23, 1998, the Company completed the purchase of Flavor
House, Inc., a leading private label snack nut business located in
Dothan, AL. The $21.5 cost exceeded the fair value of the net assets
acquired by $15.5.
On August 25, 1998, the Company increased its cookie production
capacity through the purchase of Sugar Kake Cookie Inc., a privately
held cookie manufacturer located in Tonawanda, NY. The $15.8 cost
exceeded the fair value of the net assets acquired by $5.8. Sugar Kake
is being operated as part of Ralcorp's Bremner, Inc. cracker and cookie
subsidiary.
On September 4, 1998, the Company purchased Nutcracker Brands,
Inc., a value brand and private label snack nut business located in
Billerica, MA. The $19.9 cost exceeded the fair value of the net assets
acquired by $10.2.
<PAGE>
<PAGE>
28 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
FISCAL 1997
On April 21, 1997, the Company completed the purchase of the Wortz
Company, a private label cracker and cookie operation with headquarters
in Poteau, OK. The $46.0 cost exceeded the fair value of the net assets
acquired by $23.5. Wortz is also operated as part of the Company's
Bremner operation.
PRO FORMA INFORMATION
The following unaudited pro forma information presents the results
of operations of the Company, including actual equity earnings from
Vail, as if the fiscal 1999 and 1998 acquisitions described above and
the 1998 divestiture described in Note 3 had occurred as of October 1,
1997. These pro forma results may not necessarily reflect the actual
results of operations that would have been achieved, nor are they
necessarily indicative of future results of operations.
1999 1998
- ------------------------------------------------------------------------
Net sales $681.4 $652.4
Net earnings 37.5 36.7
Basic earnings per share 1.21 1.12
Diluted earnings per share 1.18 1.11
NOTE 5 - SUPPLEMENTAL EARNINGS STATEMENT INFORMATION
1999 1998 1997
- ------------------------------------------------------------------------
Maintenance and repairs $19.8 $20.2 $21.2
Research and development 4.2 4.2 3.9
Provision for bad debts .8 .4 .2
NOTE 6 - EQUITY INVESTMENT IN VAIL RESORTS, INC.
The following table summarizes information about the Company's
equity investment in Vail at September 30:
1999 1998
- ------------------------------------------------------------------------
Ownership percentage 21.9% 21.9%
Carrying value $ 70.7 $ 66.0
Market value 175.2 150.5
As of the January 1997 sale of Resort Operations, the Company's
equity interest in the underlying net assets of Vail exceeded the net
book value of the net assets contributed by the Company to Vail by
$37.5. This excess is being amortized ratably to the investment in Vail
over 20 years.
Terms of a shareholder agreement provide that the Company will not
acquire any additional shares of Vail stock except in limited
circumstances. The Company has registration rights with respect to the
Vail stock, but the shareholder agreement provides that, with certain
limited exceptions, Vail and its controlling shareholder can purchase at
market prices any Vail stock the Company desires to sell. The
shareholder agreement provides that the Company will vote the shares of
Vail stock in accordance with the recommendation of Vail's Board of
Directors with respect to shareholder proposals and nominations to that
Board, and with respect to other proposals, in proportion to the votes
of all other shareholders. However, the Company may vote as it deems
appropriate with respect to proposals for the merger of Vail, the sale
of all Vail assets, the creation of any other class of voting stock of
Vail or changes to Vail's certificate of incorporation or bylaws if such
changes adversely affect the Company's rights under the shareholder
agreement. The Company has two representatives on the 17-member Vail
Board of Directors.
On November 6, 1997, Vail announced a change in its fiscal year
end from September 30 to July 31. As a result, the Company reports
current year equity earnings on a two-month time lag, with only ten
months of equity earnings from Vail included in fiscal 1998. Vail's
summarized financial information follows.
YEAR Ten Months Nine Months
ENDED Ended Ended
JULY 31, July 31, September 30,
1999 1998 1997
- ---------------------------------------------------------------------------
Net revenues $475.7 $410.3 $246.2
Total operating expenses 433.3 321.7 205.2
-----------------------------------------
Income from operations $ 42.4 $ 88.6 $ 41.0
=========================================
Net income $ 12.8 $ 41.0 $ 14.1
=========================================
Company equity income,
net of deferred taxes $ 2.9 $ 6.6 $ 2.9
=========================================
JULY 31, 1999 1998
- -------------------------------------------------------------------------
Current assets $ 92.7 $ 71.7
Noncurrent assets 996.5 840.4
-------------------------
Total assets $1,089.2 $912.1
=========================
Current liabilities $ 93.1 $ 59.0
Noncurrent liabilities 519.3 390.5
Stockholders' equity 476.8 462.6
-------------------------
Total liabilities and
stockholders' equity $1,089.2 $912.1
=========================
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 29
1999 ANNUAL REPORT
NOTE 7 - RESTRUCTURING CHARGES
During the year ended September 30, 1997, the Company recorded a
pre-tax restructuring charge of $15.1 ($9.5 after taxes, or $.29 per
share) to cover costs associated with the sale of the Company's Branded
Business, including severance payments to employees whose jobs were
eliminated and financial penalties related to the early termination of
information systems contracts. The level of systems support included in
these contracts was no longer warranted after the Branded Business sale.
Also, during the year ended September 30, 1997, the Company recorded a
pre-tax restructuring charge of $4.6 ($2.9 after taxes, or $.09 per
share). This charge covered severance costs for certain employees whose
jobs were eliminated in downsizing initiatives.
For the year ended September 30, 1996, the Company recorded a pre-
tax charge of $16.5 ($10.4 after taxes, or $.31 per share) to recognize
the costs related to the restructuring of its cereal subsidiary, Ralston
Foods.
The restructuring charges and their utilization are summarized in
the following table.
<TABLE>
<CAPTION>
Salaries,
severance Asset
and write- Contract
benefits downs penalties Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Charges $ 8.0 $ 7.3 $ - $ 1.2 $ 16.5
Utilized in 1996 (5.0) (7.3) - (.5) (12.8)
1997 Charges 8.8 3.0 6.2 1.7 19.7
Utilized in 1997 (11.2) (2.2) (6.2) (1.0) (20.6)
Utilized in 1998 (.6) (.8) - (.6) (2.0)
Utilized in 1999 - - - (.8) (.8)
--------------------------------------------------------------------
$ - $ - $ - $ - $ -
====================================================================
</TABLE>
NOTE 8 - INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
Federal $10.3 $13.7 $ 1.6
State .9 1.7 .2
-------------------------------------
11.2 15.4 1.8
-------------------------------------
DEFERRED
Federal 10.4 9.8 7.5
State .3 1.6 1.1
-------------------------------------
10.7 11.4 8.6
-------------------------------------
TOTAL PROVISION FOR INCOME TAXES $21.9 $26.8 $10.4
=====================================
</TABLE>
A reconciliation of income taxes with amounts computed at the
statutory federal rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax at federal statutory
rate (35.0% for all years) $20.4 $24.6 $ 189.7
Effect of nontaxable gain on sale
of Branded Business - - (180.4)
State income taxes, net of federal tax benefit .8 2.1 .9
Other, net .7 .1 .2
-------------------------------------
$21.9 $26.8 $ 10.4
=====================================
</TABLE>
<PAGE>
Deferred tax assets (liabilities) at September 30 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT
Accrued liabilities $ 2.9 $ 3.2
Inventories 2.0 1.7
Other items .6 1.3
--------------------------
5.5 6.2
--------------------------
NONCURRENT
Equity investment in Vail (18.1) (17.7)
Property basis differences (1.1) 5.0
Postretirement benefits 5.5 5.6
Deferred compensation 2.6 2.0
Insurance reserves 2.0 2.5
Intangible assets 1.1 2.5
Pension 1.1 3.1
Other items - .1
--------------------------
(6.9) 3.1
--------------------------
NET DEFERRED TAX (LIABILITIES) ASSETS $ (1.4) $ 9.3
==========================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The Company believes it is probable that the deferred tax
assets reflected above will be realized on future tax returns, primarily
from the generation of future taxable income.
NOTE 9 - EARNINGS PER SHARE
During the last quarter of 1999, 450,500 outstanding options were
excluded from the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of
the shares. See Note 16 for more information about outstanding options.
<PAGE>
<PAGE>
30 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
NOTE 10 - SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
RECEIVABLES
Trade $ 60.3 $ 44.1
Other 1.7 2.3
---------------------------
62.0 46.4
Allowance for doubtful accounts (2.1) (1.2)
---------------------------
$ 59.9 $ 45.2
============================
INVENTORIES
Raw materials and supplies $ 31.9 $ 23.7
Finished products 43.4 37.8
---------------------------
$ 75.3 $ 61.5
===========================
INTANGIBLE ASSETS
Goodwill $ 90.3 $ 55.2
Other intangible assets 20.5 19.6
---------------------------
110.8 74.8
Accumulated amortization (10.1) (4.5)
---------------------------
$ 100.7 $ 70.3
===========================
PROPERTY
Land $ 3.6 $ 2.1
Buildings 51.2 43.6
Machinery and equipment 214.1 194.7
Construction in progress 11.5 9.8
---------------------------
280.4 250.2
Accumulated depreciation (114.9) (100.0)
---------------------------
$ 165.5 $ 150.2
===========================
OTHER CURRENT LIABILITIES
Compensation $ 7.6 $ 6.0
Income taxes .6 4.7
Advertising and promotion 7.1 6.0
Other items 8.4 14.0
---------------------------
$ 23.7 $ 30.7
===========================
OTHER LIABILITIES
Postretirement medical and life $ 15.1 $ 14.7
Deferred compensation 8.5 5.3
Insurance 5.1 5.4
Other items 4.2 3.8
---------------------------
$ 32.9 $ 29.2
===========================
</TABLE>
NOTE 11 - LONG-TERM DEBT
On April 28, 1999 the Company entered into a $125 revolving credit
agreement (Credit Agreement). Borrowings under the Credit Agreement
bear interest at either, at the Company's option, (1) LIBOR plus the
applicable margin rate of 0.75% or (2) the maximum of the federal funds
rate plus the applicable margin rate of 0.50% or the prime rate.
Borrowings under the Credit Agreement are unsecured and mature on April
28, 2002 unless such date is extended. The Credit Agreement calls for
an unused commitment fee of 0.175%, payable quarterly in arrears, and
contains certain representations, warranties, covenants and conditions
customary to credit facilities of this nature. As of September 30,
1999, there were no borrowings outstanding under this Credit Agreement.
The Company had outstanding borrowings of $42.8 at a weighted
average interest rate of 6.2% under uncommitted credit arrangements with
banks as of September 30, 1999. This balance has been classified as
long-term debt based on management's ability and intent to refinance it
on a long-term basis.
As of September 30, 1999, $4.1 in letters of credit and surety
bonds were outstanding with various financial institutions, principally
related to self-insurance requirements.
The Company had no outstanding long-term debt as of September 30,
1998.
<PAGE>
NOTE 12 - FINANCIAL INSTRUMENTS
FAIR VALUES
The carrying amounts reported on the Consolidated Balance Sheet
for cash and cash equivalents, receivables, accounts payable and debt
(see Note 11) approximate fair value because of the short maturities of
these financial instruments. The Company's derivative financial
instruments, which consist of commodity futures contracts, are off-
balance-sheet and therefore have no carrying value. The contractual
amounts of those derivatives totaled $2.3 and $6.7 at September 30, 1999
and 1998, respectively, while the corresponding fair values were not
significant.
CONCENTRATION OF CREDIT RISK
The Company's primary concentration of credit risk is related to
certain trade accounts receivable due from several highly leveraged or
"at risk" customers. At September 30, 1999 and 1998 the amount of such
receivables was $2.3 and $3.2, respectively. Consideration was given to
the financial position of these customers when determining the
appropriate allowance for doubtful accounts.
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 31
1999 ANNUAL REPORT
NOTE 13 - COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings in various
state and federal jurisdictions. These proceedings are in varying
stages and many may proceed for protracted periods of time. Some
proceedings involve complex questions of fact and law. Additionally,
the operations of the Company, like those of similar businesses, are
subject to various federal, state, and local laws and regulations
intended to protect public health and the environment, including air and
water quality and waste handling and disposal.
Pending legal liability, if any, from these proceedings cannot be
determined with certainty; however, in the opinion of Company
management, based upon the information presently known, the ultimate
liability of the Company, if any, arising from the pending legal
proceedings, as well as from asserted legal claims and known potential
legal claims which are probable of assertion, taking into account
established accruals for estimated liabilities (if any), are not
expected to be material to the Company's consolidated financial
position, results of operations and cash flows. In addition, while it
is difficult to quantify with certainty the potential financial impact
of actions regarding expenditures for compliance with regulatory
matters, in the opinion of management, based upon the information
currently available, the ultimate liability arising from such compliance
matters should not be material to the Company's consolidated financial
position, results of operations and cash flows.
Additionally, the Company has retained certain potential
liabilities associated with divested businesses (see Note 3).
Presently, management believes that taking into account applicable
liability caps, sharing arrangements with acquiring entities and the
known facts and circumstances regarding the retained liabilities,
potential liabilities of the divested businesses should not be material
to the Company's consolidated financial position, results of operations
and cash flows.
LEASE COMMITMENTS
Future minimum rental payments (receipts) under noncancellable
operating leases and subleases in effect as of September 30, 1999 were:
<TABLE>
<CAPTION> After
2000 2001 2002 2003 2004 2004 Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leases $4.0 $3.6 $3.0 $2.9 $2.8 $3.3 $ 19.6
Subleases (.4) (.5) (.6) (.6) (.6) (.6) (3.3)
</TABLE>
Total rental expense for all operating leases was $4.9 in 1999,
$3.9 in 1998, and $4.0 in 1997.
OTHER CONTINGENCIES
In connection with the sale of the Company's Resort Operations in
1997, Vail assumed the obligation to repay, when due, certain
indebtedness of Resort Operations consisting of the following: Series
1990 Sports Facilities Refunding Revenue Bonds in the aggregate
principal amount of $20.4, bearing interest at rates ranging from 7.2%
to 7.875% and maturing in installments in 1998, 2006 and 2008; and
Series 1991 Sports Facilities Refunding Revenue Bonds in the aggregate
principal amount of $3.0, bearing interest at 7.125% for the portion
maturing in 2002 and 7.375% for the portion maturing in 2010
(collectively, "Resort Operations Debt"). The Resort Operations Debt is
guaranteed by Ralston Purina Company (Ralston). Pursuant to an
Agreement and Plan of Reorganization signed when the Company was spun-
off from Ralston in 1994, the Company agreed to indemnify Ralston for
any liabilities associated with the guarantees. To facilitate the sale
of the Branded Business, General Mills acquired the legal entity
originally obligated to so indemnify Ralston. Pursuant to the
Reorganization Agreement with General Mills, however, the Company has
agreed to indemnify General Mills for any liabilities it may incur with
respect to indemnifying Ralston relating to aforementioned guarantees.
Presently, management believes that there is not a significant
likelihood that Vail will default on its repayment obligations with
respect to the Resort Operations Debt.
In the opinion of management, the sale of the Resort Operations
(see Note 3) qualified as a non-taxable exchange of stock under Section
368(a)(1)(B) of the Internal Revenue Code. Therefore, the Company's tax
basis in Resort Operations stock was carried over to its investment in
the 7,554,406 shares of Vail stock (approximately $3 per share).
Accordingly, no deferred tax (or interest, if any) has been provided on
this transaction.
<PAGE>
<PAGE>
32 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
NOTE 14 - PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors qualified and supplemental noncontributory
defined benefit pension plans and other postretirement benefit plans for
its employees. The following tables provide a reconciliation of the
changes in the plans' benefit obligations and fair value of assets over
the two-year period ending September 30, 1999, and a statement of the
funded status as of September 30 of both years.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------- -----------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at
beginning of year $ 84.1 $ 65.6 $ 15.2 $ 14.8
Service cost 2.4 3.4 .1 .1
Interest cost 5.7 5.3 1.0 1.0
Plan amendments .1 - - (.2)
Executive Life Plan - - - .2
Actuarial (gain) loss .4 16.1 (.6) .3
Acquisitions (divestitures) - 3.2 - (.1)
Benefit payments (4.4) (4.6) (.8) (.9)
Curtailments - (2.1) - -
Settlements - (2.8) - -
-----------------------------------------------------
Benefit obligation at end of year $ 88.3 $ 84.1 $ 14.9 $ 15.2
-----------------------------------------------------
CHANGE IN FAIR VALUE OF PLAN ASSETS
Fair value of plan assets at
beginning of year $ 95.3 $ 98.2 $ - $ -
Actual return on plan assets 19.9 4.2 - -
Acquisitions - 2.2 - -
Employer contributions - .5 - -
Benefit payments (4.4) (4.6) - -
Settlements (.1) (5.2) - -
-----------------------------------------------------
Fair value of plan assets at end of year $110.7 $ 95.3 $ - $ -
-----------------------------------------------------
FUNDED STATUS $ 22.4 $ 11.2 $(14.9) $(15.2)
Unrecognized net (gain) loss (26.7) (15.2) (.4) .2
Unrecognized prior service cost .7 1.0 .2 .3
Unrecognized transition asset (.3) (.4) - -
-----------------------------------------------------
ACCRUED BENEFIT LIABILITY $ (3.9) $ (3.4) $(15.1) $(14.7)
=====================================================
</TABLE>
The following table provides the components of net periodic
benefit cost for the plans for fiscal years 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2.4 $ 3.4 $ 4.3 $ .1 $ .1 $ .2
Interest cost 5.7 5.3 5.8 1.0 1.0 1.1
Expected return
on plan assets (7.8) (7.7) (7.4) - - -
Amortization of:
Net loss (gain) .1 (1.0) (.3) - (.1) -
Prior service cost .3 .4 .5 .1 .1 .1
Transition asset (.1) (.1) (.1) - - -
----------------------------------------------------------------------------------
Net periodic benefit cost .6 .3 2.8 1.2 1.1 1.4
Curtailment gain - (2.1) (2.9) - - (1.8)
Settlement loss (gain) - .6 (1.2) - - -
Special termination
benefits - - .6 - - -
----------------------------------------------------------------------------------
Net periodic benefit cost
after curtailments
and settlements $ .6 $(1.2) $ (.7) $1.2 $1.1 $ (.4)
==================================================================================
</TABLE>
The Company recognized a curtailment gain and a settlement loss in
1998 resulting from the reduction of employees and asset transfers
related to the Beech-Nut sale. The Company recognized curtailment and
settlement gains in 1997 resulting from the reduction of employees
through the Branded Business sale and restructuring initiatives. See
Note 7 for further discussion of restructuring activities.
<PAGE>
The assumptions used in the measurement of the Company's benefit
obligation as of September 30 were:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------- ---------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.50% 7.00% 7.50% 7.00%
Rate of compensation increase 5.25% 5.25% N/A N/A
Expected return on plan assets 9.50% 9.50% N/A N/A
</TABLE>
For September 30, 1999 measurement purposes, the assumed annual
rate of increase in the future per capita cost of covered health care
benefits was 7% for 2000, declining gradually to an ultimate rate of 5%
by 2004. For September 30, 1998 measurement purposes, the assumed
annual rate of increase was 6% for 1999 and thereafter.
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 33
1999 ANNUAL REPORT
A 1% change in assumed health care cost trend rates would have the
following effects:
<TABLE>
<CAPTION>
1% 1%
Increase Decrease
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on 1999 service and interest costs $ .1 $ (.1)
Effect on benefit obligation at September 30, 1999 1.8 (1.3)
</TABLE>
In addition to the above plans, the Company sponsors defined
contribution plans under which the Company makes matching contributions.
The costs of these plans for the years ended September 30, 1999, 1998
and 1997 were $1.5, $1.5 and $2.8, respectively. During fiscal 1997,
the Company revised its defined contribution plan whereby, effective on
April 1, 1997 and depending on years of service, for each dollar
contributed by participants, up to 6% of pre-tax earnings, the Company
will contribute fifty cents. Prior to this modification the Company
made "dollar-for-dollar" matching contributions up to 6% of pre-tax
earnings.
NOTE 15 - SHAREHOLDERS' EQUITY
On December 18, 1996, the Company's Board of Directors declared a
dividend distribution of one share purchase right (Right) for each
outstanding share of the Company's common stock. Each Right entitles a
shareholder to purchase from the Company one common share at an exercise
price of $30 per share subject to antidilution adjustments. The Rights,
however, become exercisable only at the time a person or group acquires,
or commences a public tender offer for, 20% or more of the Company's
common stock. If an acquiring person or group acquires 20% or more of
the Company's common stock, the price will be further adjusted so that
each Right (other than those held by the acquiring person or group)
would entitle the holder to acquire for the exercise price a number of
shares of the Company's common stock found by dividing the then current
exercise price by the number of shares of the Company's common stock for
which a Right is then exercisable and dividing that amount by 50% of the
then current per share market price of the Company's common stock. In
the event that the Company merges with, or transfers 50% or more of its
assets or earning power to, any person or group after the Rights become
exercisable, holders of the Rights may purchase, at the exercise price,
common stock of the acquiring entity having a value equal to twice the
exercise price. The Rights can be redeemed by the Board of Directors at
$.01 per Right only up to the tenth business day after a person or group
acquires 20% or more of the Company's common stock. Also, following the
acquisition by a person or group of beneficial ownership of at least 20%
but less than 50% of the Company's common stock, the Board may exchange
the Rights for common stock at a ratio of one share of common stock per
Right. The Rights expire on January 31, 2007. The Rights replaced
similar rights that were redeemed on January 31, 1997 by payment of a
redemption price of $.05 per Right in connection with the sale of the
Branded Business to General Mills, Inc. The total payment made by the
Company as a result of this redemption was approximately $1.7.
At September 30, 1999, 2,855,986 shares of the Company's common
stock were reserved under various employee incentive compensation and
benefit plans.
The Company has not issued any shares of preferred stock. The
terms of any series of preferred stock (including but not limited to the
dividend rate, voting rights, convertibility into other Company
securities and redemption) may be set by the Company's Board of
Directors.
NOTE 16 - INCENTIVE COMPENSATION
During fiscal 1997 and shortly before the Spin-Off, the Board of
Directors adopted the Incentive Stock Plan (Plan), which reserves shares
to be used for various stock-based compensation awards. The Plan
provides that eligible employees may receive stock option awards and
other stock awards payable in whole or part by the issuance of stock.
In connection with the Spin-Off, all previous outstanding stock-based
compensation awards and the Old Ralcorp plan were terminated. To effect
this termination, the Company's Board of Directors accelerated the
vesting of the outstanding stock options and the value of those "in-the-
money" options were paid to the recipients in cash. Stock options that
had an exercise price higher than the market price of the Company's
common stock were valued at $.50 per share. As a result, included in
the Consolidated Statement of Earnings for the year ended September 30,
1997, was a stock option settlement expense of $2.8. In addition, the
Company's Board of Directors accelerated the vesting of all outstanding
restricted stock awards.
Under the provisions of the Plan, 455,500, 424,500 and 850,000
stock option awards were issued in 1999, 1998 and 1997, respectively, at
an option price equal to the fair market value of the shares at the
grant date and accordingly, no charge against earnings was made.
Generally, options are exercisable beginning from three to nine years
after date of grant and have a maximum term of ten years. For options
outstanding at September 30, 1999, the weighted average remaining
contractual life was 8.6 years and the range of exercise prices was
$12.00 to $17.19.
<PAGE>
<PAGE>
34 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
Changes in incentive and nonqualified stock options outstanding
are summarized as follows:
<TABLE>
<CAPTION>
Shares Weighted Average
Under Option Exercise Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at September 30, 1996 1,225,881 $17.93
------------
Granted 850,000 12.00
Exercised (186,271) 15.46
Spin-Off Termination/Canceled (1,039,610) 18.38
------------
Outstanding at September 30, 1997 850,000 12.00
------------
Granted 424,500 14.63
Exercised - -
Canceled (24,000) 12.00
------------
Outstanding at September 30, 1998 1,250,500 12.89
------------
Granted 455,500 17.18
Exercised (16,000) 12.00
Canceled (2,500) 14.63
------------
Outstanding at September 30, 1999 1,687,500 14.05
============
Exercisable at September 30, 1997 - -
============
Exercisable at September 30, 1998 16,000 12.00
============
Exercisable at September 30, 1999 31,000 12.00
============
</TABLE>
At September 30, 1999, 1,034,186 shares were available for future
awards under the Plan.
The Company accounts for stock-based compensation using the
intrinsic value method. Accordingly, as previously discussed, no
compensation expense has been recognized for the stock options granted.
If the Company had accounted for the Plan using the fair value method,
which requires recognition of compensation cost ratably over the vesting
period of the options, net earnings and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Net Earnings Diluted Earnings Per Share
----------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
As reported $36.4 $43.6 $531.5 $1.15 $1.32 $16.01
Pro forma 35.4 43.1 531.0 1.12 1.31 15.99
</TABLE>
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model as follows:
<TABLE>
<CAPTION>
1999 1998 1997
==========================================================================================================
<S> <C> <C> <C>
Expected stock price volatility 41.35% 43.37% 30.00%
Risk-free interest rate 5.7% 4.5% 6.67%
Expected option lives 5.6 - 8 yrs 6.5 - 8 yrs 5 - 9.5 yrs
Estimated fair value of options granted (per share) $9.29 $7.77 $6.05
</TABLE>
NOTE 17 - SUPPLEMENTAL CASH FLOW INFORMATION
As of September 30, 1998, $1.2 of the agreed upon purchase price
of Nutcracker Brands, Inc. had not been paid and was treated as a
noncash transaction for 1998 cash flow purposes. There were no material
noncash transactions in 1999 and 1997. Other cash flow information is
shown in the following table:
<TABLE>
<CAPTION>
1999 1998 1997
========================================================================================================
<S> <C> <C> <C>
Interest paid $ 1.6 $ .2 $4.5
Income taxes paid, net of refunds 17.1 8.1 4.6
</TABLE>
<PAGE>
NOTE 18 - SEGMENT INFORMATION
The Company adopted FAS 131 in 1999. The prior years' segment
information has been restated accordingly.
The Company's operating segments offer different products and
services and are managed separately. These operating segments have been
aggregated to present the Company's reportable segments - cereals,
crackers & cookies; snack nuts; mayonnaise & dressings; baby foods; and
resort operations. The Company evaluates segment performance based on
profit or loss from operations before interest and income taxes
(operating profit).
The accounting policies of the segments are the same as those
described in Note 2. The Company's revenues are primarily generated by
sales within the United States; foreign sales are immaterial. There are
no intersegment revenues and no single customer accounted for 10% or
more of sales.
The table below presents information about reportable segments as
of and for the years ending September 30 (see notes following table):
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 35
1999 ANNUAL REPORT
<TABLE>
<CAPTION>
1999 1998 1997
=============================================================================================================================
<S> <C> <C> <C>
NET SALES
Cereals $297.1 $278.2 $437.0
Crackers & Cookies 173.7 157.6 118.5
Snack Nuts 124.2 24.7 -
Mayonnaise & Dressings 41.6 - -
Baby Foods - 122.4 151.1
Resort Operations - - 33.1
- -----------------------------------------------------------------------------------------------------------------------------
Total $636.6 $582.9 $739.7
=============================================================================================================================
OPERATING PROFIT (LOSS)
Cereals, Crackers & Cookies <Fa> $ 53.8 $ 46.7 $ 33.3
Snack Nuts 8.2 .9 -
Mayonnaise & Dressings 1.7 - -
Baby Foods - (1.1) 7.2
Resort Operations - - .3
- -----------------------------------------------------------------------------------------------------------------------------
Total segment operating profit 63.7 46.5 40.8
Gain on sale of business - 18.7 515.4
Equity earnings 4.7 10.6 4.7
Unallocated corporate expenses (10.1) (5.4) (19.0)
- -----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 58.3 $ 70.4 $541.9
=============================================================================================================================
ADDITIONS TO PROPERTY AND INTANGIBLES <Fb>
Cereals, Crackers & Cookies $ 17.8 $ 21.6 $ 15.1
Snack Nuts 1.5 .5 -
Mayonnaise & Dressings 1.2 - -
Baby Foods - 2.5 2.0
Resort Operations - - 7.8
Corporate - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 20.5 $ 24.6 $ 24.9
=============================================================================================================================
DEPRECIATION AND AMORTIZATION
Cereals, Crackers & Cookies $ 19.0 $ 15.0 $ 15.8
Snack Nuts 2.6 .6 -
Mayonnaise & Dressings 1.0 - -
Baby Foods - 2.2 3.5
Resort Operations - - 4.5
Corporate .5 .4 -
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 23.1 $ 18.2 $ 23.8
=============================================================================================================================
ASSETS AT END OF THE YEAR
Cereals, Crackers & Cookies $272.2 $270.5 $242.7
Snack Nuts 87.1 55.1 -
Mayonnaise & Dressings 41.7 - -
Baby Foods - - 61.5
Resort Operations - - -
Corporate <Fc> 82.8 92.3 96.1
- -----------------------------------------------------------------------------------------------------------------------------
Total $483.8 $417.9 $400.3
=============================================================================================================================
<FN>
<Fa> Includes $19.7 of restructuring charges in 1997 (see Note 7).
<Fb> Excludes additions through business acquisitions (see Note 4).
<Fc> Includes the equity investment in Vail of $70.7, $66.0 and $55.4
as of September 30, 1999, 1998 and 1997, respectively (see Note 6).
</TABLE>
NOTE 19 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The results of any single quarter are not necessarily indicative
of the Company's results for the full year. Due to the Company's equity
interest in Vail (see Note 6), which typically yields more than the
entire year's equity income during the Company's second and third fiscal
quarters, net earnings of the Company are seasonal. Fourth quarter 1998
net earnings and earnings per share include an $18.7 pre-tax ($11.6
after taxes, or $.35 per diluted share) gain on the sale of Beech-Nut
(see Note 3).
<PAGE>
<TABLE>
<CAPTION>
First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
1999 $154.9 $150.3 $154.4 $177.0 $636.6
1998 137.2 147.1 143.3 155.3 582.9
- -----------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT
1999 $ 42.9 $ 41.7 $ 39.8 $ 44.7 $169.1
1998 47.0 54.2 48.5 47.2 196.9
- -----------------------------------------------------------------------------------------------------------------------------
NET EARNINGS
1999 $ 6.3 $ 10.9 $ 12.1 $ 7.1 $ 36.4
1998 4.8 10.5 13.2 15.1 43.6
- -----------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
1999 $ .20 $ .34 $ .38 $ .23 $ 1.15
1998 .14 .32 .40 .46 1.32
- -----------------------------------------------------------------------------------------------------------------------------
MARKET PRICE PER SHARE
1999 HIGH $18.38 $20.81 $20.88 $17.69 $20.88
1999 LOW 13.00 16.50 16.06 15.75 13.00
1998 High 19.69 20.94 21.69 21.25 21.69
1998 Low 15.81 15.94 18.88 14.00 14.00
</TABLE>
NOTE 20 - SUBSEQUENT EVENT
On October 4, 1999, Ralcorp completed the purchase of Ripon Foods,
Inc., a privately held cookie manufacturer located in Ripon, WI. Ripon
Foods, which manufactures a wide variety of high quality private label
and branded cookie products, including wire cut and enrobed cookies, and
sugar wafers, will be operated as an integral part of Ralcorp's cracker
and cookie division. Ripon Foods' products are sold to other cookie
manufacturers through co-manufacturing arrangements and to various
grocery and mass merchandise retailers under their store brand, as well
as the "Rippin Good" and "Golden Batch" brands. Important to Ralcorp
are the product variety, the production capacity and the expertise of
Ripon Foods' two operating facilities. In addition, Ripon Foods
produces a high quality fruit filled breakfast bar, which allows Ralcorp
to effectively enter the fast-growing breakfast/meal bar segment.
Annual sales for Ripon Foods are approximately $64.
<PAGE>
<PAGE>
36 --------------------------------------------------------------------
RALCORP HOLDINGS, INC.
REPORTS ON FINANCIAL STATEMENTS
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The preparation and integrity of the financial statements of
Ralcorp Holdings, Inc. are the responsibility of its management. These
statements have been prepared in accordance with generally accepted
accounting principles and in the opinion of management fairly present
the Company's financial position, results of operations and cash flow.
The Company maintains accounting and internal control systems
which it believes are adequate to provide reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition
and that the financial records are reliable for preparing financial
statements. The selection and training of qualified personnel, the
establishment and communication of accounting and administrative
policies and procedures, and an extensive program of internal audits are
important elements of these control systems.
The report of PricewaterhouseCoopers LLP, independent accountants,
on their audits of the accompanying financial statements follows. This
report states that their audits were performed in accordance with
generally accepted auditing standards. These standards include an
evaluation of internal control for the purpose of establishing a basis
for reliance thereon relative to the scope of their audits of the
financial statements.
The Board of Directors, through its Audit Committee consisting
solely of nonmanagement directors, meets periodically with management
and the independent accountants to discuss audit and financial reporting
matters. To ensure independence, PricewaterhouseCoopers LLP has direct
access to the Audit Committee.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
RALCORP HOLDINGS, INC.
In our opinion, based upon our audits and the report of other
auditors, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholders' equity and of cash
flows present fairly, in all material respects, the financial position
of Ralcorp Holdings, Inc. and its subsidiaries at September 30, 1999 and
1998, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1999, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits.
We did not audit the financial statements of Vail Resorts, Inc.,
an investment which is reflected in the accompanying financial
statements using the equity method of accounting. The Company's
investment in Vail Resorts, Inc. at September 30, 1999 and 1998 was
$70,700,000 and $66,000,000, respectively, and the equity in its net
income was $4,700,000, $10,600,000 and $4,700,000 for each of the three
years in the period ended September 30, 1999. Those statements were
audited by other auditors whose report thereon has been furnished to us,
and our opinion expressed herein, insofar as it relates to the amounts
included for Vail Resorts, Inc., is based solely on the report of the
other auditors.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
November 1, 1999
<PAGE>
<PAGE>
- -------------------------------------------------------------------- 37
1999 ANNUAL REPORT
CORPORATE AND SHAREHOLDER INFORMATION
GENERAL OFFICE
Ralcorp Holdings, Inc.
P.O. Box 618
St. Louis, MO 63188-0618
Telephone: 314/877-7000
Internet: www.ralcorp.com
DATE AND STATE OF INCORPORATION
Ralcorp: October 23, 1996 - Missouri
Old Ralcorp: January 19, 1994 - Missouri
NUMBER OF RECORD SHAREHOLDERS
15,517 at September 30, 1999
NUMBER OF EMPLOYEES
Approximately 2,800 at September 30, 1999
NOTICE OF ANNUAL MEETING
The 2000 Annual Meeting of Shareholders will be held at the Gateway
Center, One Gateway Drive, Collinsville, Illinois at 10:00 a.m., Friday,
January 28, 2000.
Proxy material for the Meeting is enclosed.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, St. Louis, MO
FISCAL YEAR END
September 30
FORM 10-K INFORMATION AND
INVESTOR INQUIRIES
Shareholders may obtain, without charge, a copy of the Company's most
recent Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, by directing inquiries to:
Ralcorp Holdings, Inc.
Attn: Shareholder Services
P.O. Box 618
St. Louis, MO 63188-0618
Telephone: 314/877-7046
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
(First Chicago Trust division)
SHAREHOLDER TELEPHONE CALLS:
(Operators are available Monday - Friday, 8:30 a.m. to 7:00 p.m. Eastern
time.
An interactive automated system is available around the clock everyday.)
Inside the U.S.: 1-800-446-2617
Outside the U.S.: 1-201-324-0498
TDD/TTY for
hearing impaired: 1-201-222-4955
INTERNET: www.equiserve.com
ADDRESSES:
For Questions Regarding Stock Transfers, Change of Address or Lost
Certificates:
EquiServe Trust Company
P.O. Box 2500
Jersey City, NJ 07303-2500
To Send Stock Certificates for Transfer Via Regular Mail:
EquiServe Trust Company
P.O. Box 2506
Jersey City, NJ 07303-2506
To Send Stock Certificates by Messenger or Drop Off by Shareholder:
EquiServe Trust Company
c/o Securities Transfer and
Reporting Service, Inc.
100 William Street, Galleria
New York, NY 10038
To Send Stock Certificates Via Express Courier:
EquiServe Trust Company
14 Wall Street, Suite 4680 - 8th Floor
New York, NY 10005
EXCHANGE LISTING [LOGO]
New York Stock Exchange, Inc.
Ticker Symbol: RAH
<PAGE>
BOARD OF DIRECTORS
William D. George, Jr. <F1>,<F2>
Retired President and Chief Executive Officer,
S.C. Johnson & Son, Inc. (consumer products)
Jack W. Goodall <F1>,<F2>
Chairman of the Board, Jack in the Box Inc.
(restaurants)
David W. Kemper <F1>,<F2>
Chairman, President and Chief Executive Officer,
Commerce Bancshares, Inc. (bank holding company)
Joe R. Micheletto
Chief Executive Officer and
President, Ralcorp Holdings, Inc.
William P. Stiritz <F1>,<F2>,<F3>
Chairman of the Board, Chief Executive Officer and
President, Agribrands International, Inc. (animal
feed and agricultural products)
[FN]
<F1> Member of Audit Committee
<F2> Member of Nominating and
Compensation Committee
<F3> Chairman of the Board
CORPORATE OFFICERS
Joe R. Micheletto
Chief Executive Officer and President
Thomas G. Granneman
Vice President and Controller
Kevin J. Hunt
Vice President; and President, Bremner, Inc.
Robert W. Lockwood
Vice President, General Counsel and Secretary
James A. Nichols
Vice President; and President, Ralston Foods
Daniel J. Sescleifer
Vice President and Treasurer
David P. Skarie
Vice President and Director of
Customer Development
Ronald D. Wilkinson
Vice President and Director of Product Supply
LIST OF RALCORP HOLDINGS, INC. SUBSIDIARIES
Bremner, Inc.
State of Incorporation: Nevada
Flavor House Products, Inc.
State of Incorporation: Delaware
Heritage Wafers, LLC *
State of Organization: Wisconsin
Martin Gillet & Co., Inc.
State of Incorporation: Maryland
National Oats Company
State of Incorporation: Nevada
Nutcracker Brands, Inc.
State of Incorporation: Georgia
RH Financial Corporation
State of Incorporation: Nevada
Ralston Foods Sales, Inc.
State of Incorporation: Nevada
Ripon Foods, Inc. *
State of Incorporation: Wisconsin
Sugar Kake Cookie Inc.
State of Incorporation: New York
Sugar Kake Cookie of Canada Ltd.
Province of Incorporation: Ontario
Wortz Company
State of Incorporation: Arkansas
* Ralcorp Holdings, Inc. acquired this company on October 4, 1999, after
Ralcorp's fiscal year end of September 30, 1999.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-20879 and No. 333-20881) of Ralcorp Holdings,
Inc. of our report dated November 1, 1999, appearing on page 36 of the 1999
Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K.
/s/ PricewaterhouseCoopers LLP
--------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
December 23, 1999
On Arthur Andersen LLP Letterhead
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Ralcorp Holdings, Inc. Form 10-K and into the Ralcorp
Holdings, Inc. previously filed Registration Statements on Form S-8, File Nos.
333-20879 and 333-20881, of our report dated October 14, 1999 related to the
consolidated financial statements of Vail Resorts, Inc. and subsidiaries for
the year ended July 31, 1999, not presented separately herein. It should be
noted that we have not audited any financial statements of Vail Resorts, Inc.
subsequent to July 31, 1999 or performed any audit procedures subsequent to
the date of our report.
/s/ Arthur Andersen LLP
Denver, Colorado
December 23, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RALCORP
HOLDINGS, INC.'S FINANCIAL STATEMENTS AS OF AND FOR THE TWELVE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 62
<ALLOWANCES> 2
<INVENTORY> 75
<CURRENT-ASSETS> 145
<PP&E> 280
<DEPRECIATION> 115
<TOTAL-ASSETS> 484
<CURRENT-LIABILITIES> 77
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 324
<TOTAL-LIABILITY-AND-EQUITY> 484
<SALES> 637
<TOTAL-REVENUES> 637
<CGS> 468
<TOTAL-COSTS> 468
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 58
<INCOME-TAX> 22
<INCOME-CONTINUING> 36
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36
<EPS-BASIC> 1.17
<EPS-DILUTED> 1.15
</TABLE>
On Arthur Anderson LLP Letterhead
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Vail Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of VAIL RESORTS,
INC. (a Delaware corporation) and subsidiaries as of July 31, 1999 and 1998 and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended July 31, 1999, the ten-month period ended July 31, 1998
and the year ended September 30, 1997 (not included herein). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vail Resorts, Inc. and
subsidiaries as of July 31, 1999 and 1998 and the results of their operations
and their cash flows for the year ended July 31, 1999, the ten-month period
ended July 31, 1998 and the year ended September 30, 1997, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
--------------------------
ARTHUR ANDERSEN LLP
Denver, Colorado
October 14, 1999
