SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ____________.
Commission file number: 1-12619
RALCORP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1766315
(State of Incorporation) (I.R.S. Employer
Identification No.)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding Shares at
par value $.01 per share February 10, 2000
30,546,093
<PAGE>
RALCORP HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Consolidated Statement of Earnings 1
Consolidated Balance Sheet 2
Consolidated Statement of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
Other Information 12
(i)
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<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data, shares in thousands)
Three Months Ended
December 31,
-------------------
1999 1998
------- --------
<S> <C> <C>
Net Sales $ 204.9 $ 154.9
-------- --------
Costs and Expenses
Cost of products sold 155.5 112.0
Selling, general and administrative 25.6 22.3
Advertising and promotion 6.2 6.5
Interest expense, net 1.1 -
Equity in loss of
Vail Resorts, Inc. 4.4 4.0
-------- --------
192.8 144.8
-------- --------
Earnings before Income Taxes 12.1 10.1
Income Taxes 4.5 3.8
-------- --------
Net Earnings $ 7.6 $ 6.3
======== ========
Basic Earnings per Share $ .25 $ .20
======== ========
Diluted Earnings per Share $ .24 $ .20
======== ========
Weighted average shares for
basic earnings per share 30,537 31,418
Dilutive effect of:
Stock options 453 268
Deferred compensation awards 194 224
-------- --------
Weighted average shares for
diluted earnings per share 31,184 31,910
======== ========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
1
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<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Condensed)
(Dollars in millions)
Dec. 31, Sept. 30,
1999 1999
-------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3.8 $ 1.9
Receivables, net 64.2 59.9
Inventories -
Raw materials and supplies 38.1 31.9
Finished products 42.8 43.4
Prepaid expenses 3.1 2.8
Other current assets 5.6 5.5
-------- ---------
Total Current Assets 157.6 145.4
Investment in Vail Resorts, Inc. 66.3 70.7
Intangible Assets, Net 121.2 100.7
Property, Net 185.1 165.5
Other Assets .5 1.5
-------- ---------
Total Assets $ 530.7 $ 483.8
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 49.1 $ 53.4
Other current liabilities 36.6 23.7
-------- ---------
Total Current Liabilities 85.7 77.1
-------- ---------
Long-term Debt 69.8 42.8
-------- ---------
Deferred Income Taxes 9.0 6.9
-------- ---------
Other Liabilities 34.5 32.9
-------- ---------
Shareholders' Equity
Common stock .3 .3
Capital in excess of par value 110.1 110.1
Retained earnings 263.9 256.3
Common stock in treasury, at cost (42.6) (42.6)
-------- ---------
Total Shareholders' Equity 331.7 324.1
-------- ---------
Total Liabilities and
Shareholders' Equity $ 530.7 $ 483.8
======== =========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
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<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
Three Months Ended
December 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operations
Net earnings $ 7.6 $ 6.3
Non-cash items included in net earnings 11.4 9.6
Changes in assets and liabilities, net of
effects of acquisitions (2.1) (23.5)
Other, net 2.1 1.5
--------- ---------
Net cash provided (used) by operations 19.0 (6.1)
--------- ---------
Cash Flows from Investing Activities
Business acquisitions, net of cash acquired (37.7) (2.7)
Additions to property and intangible assets (6.4) (5.3)
--------- ---------
Net cash used by investing activities (44.1) (8.0)
--------- ---------
Cash Flows from Financing Activities
Net proceeds under credit arrangements 27.0 13.3
Purchase of treasury stock - (10.0)
--------- ---------
Net cash provided by financing activities 27.0 3.3
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 1.9 (10.8)
Cash and Cash Equivalents, Beginning of Period 1.9 12.3
--------- ---------
Cash and Cash Equivalents, End of Period $ 3.8 $ 1.5
========= =========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
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RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Dollars in millions)
NOTE 1 - PRESENTATION OF CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited historical financial statements of the Company have
been prepared in accordance with the instructions for Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments
considered necessary for a fair presentation, have been included. Operating
results for any quarter are not necessarily indicative of the results for any
other quarter or for the full year. These statements should be read in
connection with the financial statements and notes included in the Company's
Annual Report to Shareholders for the year ended September 30, 1999.
NOTE 2 - ACQUISITIONS
On October 4, 1999, the Company completed the purchase of Ripon Foods, Inc.,
which manufactures a wide variety of high quality private label and branded
cookie products, including sugar wafers and wire cut and enrobed cookies. Ripon
Foods is located in Ripon, WI and has annual sales of approximately $64.
NOTE 3 - RECEIVABLES, NET consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1999 1999
-------- --------
<S> <C> <C>
Receivables $ 66.6 $ 62.0
Allowance for doubtful accounts (2.4) (2.1)
-------- --------
$ 64.2 $ 59.9
======== ========
</TABLE>
NOTE 4 - INTANGIBLE ASSETS, NET consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1999 1999
-------- --------
<S> <C> <C>
Intangible assets at cost $ 133.6 $ 110.8
Accumulated amortization (12.4) (10.1)
-------- --------
$ 121.2 $ 100.7
======== ========
</TABLE>
NOTE 5 - PROPERTY, NET consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1999 1999
-------- --------
<S> <C> <C>
Property at cost $ 304.9 $ 280.4
Accumulated depreciation (119.8) (114.9)
-------- --------
$ 185.1 $ 165.5
======== ========
</TABLE>
4
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NOTE 6 - LONG-TERM DEBT
The Company had outstanding borrowings of $69.8 and $42.8 as of December 31,
1999 and September 30, 1999, respectively. The balance of this debt was made
available through uncommitted credit arrangements with banks and was classified
as long-term debt based on management's ability and intent to refinance it on a
long-term basis. The additional borrowings during the period were used to help
fund the October acquisition of Ripon Foods.
NOTE 7 - SEGMENT INFORMATION
The tables below present information about the Company's reportable segments:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net Sales
Cereals, Crackers & Cookies $ 133.9 $ 117.5
Snack Nuts 54.6 37.4
Mayonnaise & Dressings 16.4 -
-------- --------
Total $ 204.9 $ 154.9
======== ========
Operating Profit
Cereals, Crackers & Cookies $ 16.2 $ 13.0
Snack Nuts 3.9 3.7
Mayonnaise & Dressings .6 -
-------- --------
Total segment operating profit 20.7 16.7
Equity earnings (4.4) (4.0)
Unallocated corporate expenses (4.2) (2.6)
-------- --------
Earnings before income taxes $ 12.1 $ 10.1
======== ========
</TABLE>
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1999 1999
-------- --------
<S> <C> <C>
Total Assets
Cereals, Crackers & Cookies $ 317.3 $ 272.2
Snack Nuts 93.4 87.1
Mayonnaise & Dressings 40.8 41.7
Corporate 79.2 82.8
-------- --------
Total $ 530.7 $ 483.8
======== ========
</TABLE>
NOTE 8 - SUBSEQUENT EVENT
On January 31, 2000, the Company completed the purchase of Cascade Cookie
Company, Inc. (Cascade), which is located in Kent, Washington. Cascade is a
leading manufacturer and marketer of high quality cookies that are sold to the
in-store bakeries of major U.S. grocery chains and selected mass merchandisers.
Cascade's annual sales are approximately $19 million.
5
<PAGE>
RALCORP HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HIGHLIGHTS
For the quarter ended December 31, 1999, sales and net earnings were $204.9
million and $7.6 million compared to $154.9 million and $6.3 million for the
comparative prior year period. These figures represent a 32.3 percent increase
in sales and a 20.6 percent improvement in net earnings.
On an earnings per share basis, the Company recorded basic and diluted earnings
per share for the current year's first quarter of $.25 and $.24, respectively,
compared to last year's first quarter basic and diluted earnings per share of
$.20.
<TABLE>
<CAPTION>
NET SALES BY SEGMENT
Three Months Ended
December 31,
-----------------------
1999 1998
------- -------
<S> <C> <C>
Ralston Foods $ 73.8 $ 73.0
Bremner 60.1 44.5
------- -------
CEREALS, CRACKERS & COOKIES 133.9 117.5
SNACK NUTS 54.6 37.4
MAYONNAISE & DRESSINGS 16.4 -
------- -------
Total Net Sales $ 204.9 $ 154.9
======= =======
</TABLE>
In addition to the Company's food businesses, Ralcorp holds an approximate 21.9
percent equity ownership interest in Vail Resorts, Inc. The impact on operating
results of the Company's equity stake in Vail Resorts is discussed later in this
document.
DISCUSSION OF SEGMENT RESULTS
CEREALS, CRACKERS & COOKIES
A comparison of current year quarter sales to prior year quarter sales for the
Cereals, Crackers & Cookies segment reflects an improvement of $16.4 million.
This significant sales dollar increase can be attributed primarily to the
Company's cracker and cookie business, Bremner, which benefited in the current
year from a nearly full quarter of results of Ripon Foods, Inc. Ripon Foods, a
cookie, sugar wafer and breakfast bar producer, was acquired by Ralcorp on
October 4, 1999. In addition to the increase provided by the acquisition,
Bremner also recorded improved sales over the prior year's first quarter on the
strength of volume gains from the cracker side of its business. Cracker volume
increased 7.9 percent. It should be noted that volume gains made in the cracker
business were not aided by any acquisition activity.
The Company's ready-to-eat and hot cereal division, Ralston Foods, also showed
modest top line growth in the current quarter compared to the same prior year
period. The sales improvement recorded in the first quarter of fiscal 2000 is
primarily the result of 4.0 percent higher volume in store brand ready-to-eat
cereal and a slightly improved product mix. The Company's hot cereal business
was basically flat on a sales dollar basis despite volume declines of 1.2
percent. The current year quarter faced a difficult comparison, as the prior
year first quarter benefited significantly from volume improvement in hot
cereals (+30.0 percent) as well as increased volume requirements of certain
copacking arrangements. The primary offset to the improved ready-to-eat volume
in the current year's first quarter was a significant decline in volume related
to current year copacking activity. Copacking volume declined 40.8 percent when
comparing current and prior year first quarters.
6
<PAGE>
From an operating results perspective, the Cereals, Crackers & Cookies segment
recorded an operating profit of $16.2 million, a 24.6 percent improvement over
the prior year's first quarter. The cereal business recorded operating profit
improvement in the current quarter on volume increases in ready-to-eat cereal.
Also contributing to the improved operating profit at the Company's cereal
division were efforts to aggressively contain, and where possible reduce, the
operation's cost structure, while improving production efficiencies. Offsetting
a portion of the cereal business operating profit improvement was the previously
referenced decline in business related to a specific copacking contract. Bremner
made year-over-year operating profit gains on the addition of its Ripon Foods
cookie operation, which was not in prior year results. In addition, the
pre-existing Bremner operation improved on cracker volume gains in both
specialty crackers and saltines, and favorable raw material and packaging supply
costs.
Previously, Company management disclosed that a cereal copacking arrangement was
terminated effective December 31, 1999 and that short-term results for the
Company's cereal operation could be negatively impacted. Management believes it
can replace the lost business through new copacking arrangements or organic
volume growth. However, any replacement of the lost business may not be
immediate and will likely take time to cultivate. Therefore, in assessing the
magnitude of the lost copacking business on the current state of operations, it
is estimated that diluted earnings per share for the remainder of fiscal 2000
may be negatively impacted in the range of $.08 to $.10 per share. It should be
noted, however, that although the level of cereal copacking activity for the
Cereals, Crackers & Cookies segment had significantly declined in the current
quarter from the same period of the prior year, cereal sales increased modestly
and operating profit improved significantly - factors that highlight the sound
fundamentals of the Company's on-going, core cereal business.
SNACK NUTS
First quarter fiscal 2000 Snack Nut sales increased $17.2 million to $54.6
million. This nearly 46 percent net sales improvement reflects significantly
improved organic volumes, as well as a full quarter of operations of Southern
Roasted Nuts of Georgia. Southern Roasted, the Company's third snack nut
operation, was acquired in late March 1999.
Ralcorp's Snack Nut segment recorded $3.9 million in operating profit for the
first fiscal quarter of 2000, compared to $3.7 million in the prior year. This
5.4 percent improvement in operating profit can be attributed to sharply
improved volumes. Unfortunately, the full profit potential of the increased
volume was again mitigated by the negative impact of the high cost of cashews -
a key commodity ingredient.
Operations in the Snack Nuts segment are somewhat seasonal, with a higher
percentage of sales and operating profits expected to be recorded in the first
fiscal quarter.
MAYONNAISE & DRESSINGS
Fiscal 2000's first quarter includes $16.4 million in net sales revenue from the
Company's March 1999 acquisition of Martin Gillet, a maker of private label
mayonnaise and salad dressings.
The acquisition of Martin Gillet in mid-fiscal 1999 represented the Company's
first foray into "wet" foods - mayonnaise and salad dressings. For the first
fiscal quarter of 2000, this segment recorded $600 thousand in operating profit.
There are no prior year comparisons for this business.
EQUITY INTEREST IN VAIL RESORTS, INC.
Ralcorp continues to hold an approximate 21.9 percent equity ownership interest
in Vail Resorts, Inc., as of December 31, 1999. For the first fiscal quarter
ended December 31, 1999, the Company's equity stake in Vail Resorts resulted in
non-cash, pre-tax losses of $4.4 million. Through the first quarter ended
December 31, 1998, the Company recorded non-cash, pre-tax equity losses of $4.0
million. Vail Resorts operates on a fiscal year ending July 31; therefore,
Ralcorp reports its portion of Vail Resorts' operating results on a two-month
time lag. The current and prior year quarter equity losses are based on results
involving the historically unprofitable ski months of August through October.
7
<PAGE>
While the current year's equity loss exceeds losses recorded in the prior year,
it should also be noted that on January 14, 2000 the management of Vail Resorts
announced that anticipated operating results for their second fiscal quarter
ending January 31, 2000 and full year ending July 31, 2000 will fall below
current consensus analyst expectations. Vail Resorts management attributed this
unfavorable outlook to slow millennium period travel patterns across the U.S.
and soft pre-Christmas activity caused by poor early season snow conditions.
For the fiscal year ended September 30, 1999, the Company's equity investment in
Vail Resorts resulted in non-cash, pre-tax earnings of $4.7 million.
RESULTS OF OPERATIONS
Cost of products sold as a percentage of sales for the quarters ended December
31, 1999 and 1998 were 75.9 percent and 72.3 percent, respectively. This
increase can be attributed to having both the snack nut and the mayonnaise and
dressings businesses in the current year's first quarter. Both of these
operations are very commodity-driven businesses with higher cost of sales. The
prior year first quarter did not include the mayonnaise and dressings business.
The commodity aspect, with regard to the snack nut operation, was further
exacerbated in the current year's first quarter due to the previously referenced
high cashew costs. Selling, general and administrative expense as a percent of
sales decreased to 12.5 percent in the first quarter of the current year
compared to 14.4 percent in the prior period. Factors affecting this decrease
again involve the Company's business mix. The first quarter of fiscal 2000
includes a third snack nut business and the mayonnaise and dressings business
that were not in the first quarter of the prior year and both of these
operations operate on a lower administrative cost base. In addition, both the
cereal and cracker and cookie operations have been able to keep costs contained
on higher sales revenue. Advertising and promotion expenses decreased to 3.0
percent of sales from 4.2 percent in the prior year period reflecting the
Company's ability to improve its sales revenue while reducing its promotional
spending as a percent of sales. As a predominantly store brand company the
level of advertising and promotional support will likely remain minor. Income
taxes were 37.0 percent of earnings before income taxes in the current quarter
compared to 38.0 percent in the year ago period.
FINANCIAL CONDITION
At December 31, 1999, the Company continued to show substantial liquidity with
net working capital (excluding cash and cash equivalents) of $68.1 million, up
slightly from $66.4 million at September 30, 1999. Capital resources remained
strong with net worth of $331.7 million and a long-term debt to total capital
ratio of approximately 17 percent at December 31, 1999.
The Company's primary source of liquidity is cash flows from operations, which
provided $19.0 million in the quarter ended December 31, 1999, primarily through
net earnings (excluding noncash expenses and losses). Net cash used by
investing activities in the quarter ended December 31, 1999 included $37.7
million of cash outflows related to the acquisition of Ripon Foods, Inc. on
October 4, 1999. Capital expenditures were $6.4 million for the quarter ended
December 31, 1999, up from $5.3 million in the first quarter of the prior year,
a trend which is expected to continue. During the quarter ended December 31,
1999, long-term debt increased $27.0 as a result of additional borrowings under
uncommitted credit arrangements with banks. These borrowings were used to fund
the majority of the acquisition costs of Ripon.
Management believes the Company will be able to generate positive operating cash
flows through its mix of businesses and expects that future liquidity
requirements will be met through a combination of existing cash balances,
operating cash flow and, as necessary, borrowings under its $125 million,
three-year revolving credit agreement or uncommitted credit arrangements.
During the first quarter of the prior fiscal year, the Company's Board of
Directors approved an authorization to buy back up to two million shares of the
Company's Common Stock from time to time as management determines. As of
February 11, 2000, the Company had approximately 1.3 million shares available
for repurchase pursuant to such authorization.
8
<PAGE>
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
solid results recorded by the Company's core store brand food businesses for the
first fiscal quarter of 2000 further support this belief.
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 volume 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. The
cereal category has not recorded any meaningful growth recently, which has added
to the competitive nature. When the competition focuses on gaining volume
through price/promotion, as has been the case with other cereal manufacturers,
the environment for a private label producer becomes more challenging, while the
profitability of the category itself is diminished. Currently, the category
shows some signs of an increased focus on brand-building initiatives such as new
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 - and where possible, cost
reductions - will remain an important focus of the organization. Finally, the
cereal division hopes to further its private label leading position through
expanded distribution, garnering additional volume with the consolidating retail
base and new product development/emulations.
As referred to earlier, a copacking partner notified the Company that their
cereal copacking contract would not be renewed after December 31, 1999. The
loss of this contract will likely have a negative affect on the short-term
outlook for Ralston Foods (as quantified above). The cereal division
management, however, 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 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. Fiscal 2000 will bring the challenge of integrating the acquisition of
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, an emphasis on improving its product mix, where possible, and organic
volume growth, will be important to its future.
The outlook for the overall snack nut category remains favorable, as the
category leader continues to drive growth in this snack food segment. As
referred to above, the current year's first quarter results for this segment
were negatively impacted by the high cost of cashews - a key commodity
ingredient - due to a worldwide shortage. Recently, however, there appears to
be evidence of improved availability and affordability of cashews. Any easing
9
<PAGE>
of cashew prices should improve the profitability outlook for the Company's
snack nut operation. The financial outlook for Ralcorp's snack nut business is
also aided by continued strong volume demands moving into and through the first
fiscal quarter of 2000. In addition, the Company's snack nut business is in the
process of consolidating its three plant operation down to two plants (the third
snack nut operation came via the acquisition of Southern Roasted Nuts of
Georgia, Inc., on March 24, 1999). Such consolidation should improve the cost
structure and efficiency of the Company's overall snack nut operation going
forward. From an operational perspective, Nutcracker Brands will continue to
focus on fully leveraging the combined strengths of its 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 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 opportunities exist to increase private label penetration in
this category, remove costs from this operation, as well as potentially be a
consolidator in a fragmented segment. Ultimately, the key opportunity is to
benefit from a more diversified portfolio of product offerings.
As part of the effort to integrate Martin Gillet in the Ralcorp business
portfolio, an extensive cost reduction program has been initiated. As
referenced in previous documents issued by the Company, it is anticipated that
the benefits of this program will be realized throughout a total estimated time
period of 12 to 18 months.
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 underleveraged
balance sheet should provide the Company flexibility to act upon any such
opportunities.
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 "Management's Discussion and Analysis of Financial Condition and Results
of Operations," 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 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;
10
<PAGE>
(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, various 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; and
(vi) The Company's businesses compete in mature segments with competitors having
large percentages of segment sales.
11
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PART II. OTHER INFORMATION
There is no information required to be reported under any items except those
indicated below.
Item 4. Submission of Matters to a Vote of Security Holders.
On January 28, 2000, the Registrant held its Annual Meeting of Shareholders at
which the following two Directors were elected Directors of the Registrant, for
a term of three years expiring at the Annual Meeting of Shareholders to be held
in 2003, or when their successors are elected:
Abstentions/
Votes For Votes Against Broker Nonvotes
---------- ------------- ---------------
Jack W. Goodall 26,574,115 N/A 465,715
Joe R. Micheletto 26,401,216 N/A 638,614
Item 5. Other Information.
On January 31, 2000 the Registrant announced that it completed the purchase of
Cascade Cookie Company, Inc., a leading manufacturer of high quality cookies
that are sold to the in-store bakeries of major U. S. grocery chains and
selected mass merchandisers. Annual sales for Cascade total approximately $19
million.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
By: /s/ T. G. GRANNEMAN
------------------------
T. G. Granneman
Duly Authorized Signatory and
Chief Accounting Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<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 THREE MONTHS ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,800
<SECURITIES> 0
<RECEIVABLES> 66,600
<ALLOWANCES> 2,400
<INVENTORY> 80,900
<CURRENT-ASSETS> 157,600
<PP&E> 304,900
<DEPRECIATION> 119,800
<TOTAL-ASSETS> 530,700
<CURRENT-LIABILITIES> 85,700
<BONDS> 0
<COMMON> 300
0
0
<OTHER-SE> 331,400
<TOTAL-LIABILITY-AND-EQUITY> 530,700
<SALES> 204,900
<TOTAL-REVENUES> 204,900
<CGS> 155,500
<TOTAL-COSTS> 155,500
<OTHER-EXPENSES> 37,300
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 1,100
<INCOME-PRETAX> 12,100
<INCOME-TAX> 4,500
<INCOME-CONTINUING> 7,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,600
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.24
</TABLE>
