SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 21, 2000
(Date of earliest event reported): July 14, 2000
Ralcorp Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri 1-12619 43-1766315
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
<PAGE>
The Registrant, Ralcorp Holdings, Inc. hereby amends Item 7 "Financial
Statements, Pro Forma Information and Exhibits" of Ralcorp's Current Report on
Form 8-K filed on July 27, 2000 in full to read as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The financial statements
required by this item 7(a) are filed on pages F-1 to F-13 of this report.
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
are presented to illustrate the effects of the acquisition of RHM Holdings
(USA), Inc. (Red Wing) on the historical financial position (assuming the
acquisition occurred at the balance sheet date presented) and operating results
(assuming the acquisition occurred at the beginning of each of the periods
presented) of Ralcorp using the purchase method of accounting for business
combinations. Under the purchase method, the acquiring corporation records at
its cost the acquired assets less liabilities assumed. Any difference between
the cost of the acquired enterprise and the sum of the fair values of tangible
and identifiable intangible assets less liabilities assumed is recorded as
goodwill. The reported income of the acquiring corporation includes the
operations of the acquired enterprise after acquisition, based on the cost to
the acquiring corporation.
The unaudited pro forma combined condensed financial statements have been
derived from, and should be read in conjunction with, the historical
consolidated financial statements and related notes contained in the annual and
quarterly reports of Ralcorp, which have been incorporated by reference into
this Current Report on Form 8-K.
The unaudited pro forma combined condensed financial statements are
presented for informational purposes only and are not necessarily indicative of
the financial position or results of operations of Ralcorp that would have
occurred had the acquisition been consummated as of the dates indicated. In
addition, the unaudited pro forma combined condensed financial statements are
not necessarily indicative of the future financial condition or operating
results of Ralcorp.
1
<PAGE>
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 2000
(IN MILLIONS, UNAUDITED)
PRO FORMA RALCORP
RALCORP (a) RED WING (b) ADJUSTMENTS PRO FORMA
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ .9 $ 3.6 $ 23.8 (c) $ 28.3
Receivables, net 58.0 83.6 (64.7) (c) 76.9
Inventories 86.1 44.4 - 130.5
Other current assets 8.5 1.0 - 9.5
------------ ------------- ------------- -----------
Total Current Assets 153.5 132.6 (40.9) 245.2
Investment in Vail Resorts, Inc. 78.9 - - 78.9
Intangible Assets, Net 155.7 18.4 40.7 (d) 214.8
Property and Equipment, Net 197.0 37.8 - 234.8
Other Assets 1.7 - 2.3 (e) 4.0
------------ ------------- ------------- -----------
Total Assets $ 586.8 $ 188.8 $ 2.1 $ 777.7
============ ============= ============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable $ 40.3 $ 69.6 $ (40.9) (c) $ 69.0
Other current liabilities 34.5 10.6 - 45.1
------------ ------------- ------------- -----------
Total Current Liabilities 74.8 80.2 (40.9) 114.1
------------ ------------- ------------- -----------
Long-term Debt 119.3 5.6 145.3 (f) 270.2
------------ ------------- ------------- ---- -----------
Deferred Income Taxes and Other Liabilities 47.7 2.2 (1.5) (e) 48.4
------------ ------------- ------------- ---- -----------
Shareholders' Equity
Common stock .3 - - .3
Capital in excess of par value 110.0 34.2 (34.2) (g) 110.0
Retained earnings 287.4 66.6 (66.6) (g) 287.4
Common stock in treasury (52.7) - - (52.7)
------------ ------------- ------------- -----------
Total Shareholders' Equity 345.0 100.8 (100.8) 345.0
------------ ------------- ------------- -----------
Total Liabilities and
Shareholders' Equity $ 586.8 $ 188.8 $ 2.1 $ 777.7
============ ============= ============= ===========
<FN>
NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(a) Reflects the historical financial position of Ralcorp at June 30, 2000.
(b) Reflects the historical financial position of Red Wing at April 29, 2000.
(c) Reflects the settlement of a $64.7 million receivable from, and a $40.9 million note payable to, Red
Wing's former parent.
(d) Reflects the excess of the purchase price, including an estimated net working capital adjustment
and transaction costs over the estimated fair value of the net assets acquired, based on a
preliminary allocation. At this time, the work needed to determine the fair values of the net
assets of Red Wing has not been completed. When that work is completed (appraisals, etc.),
some portion of the excess purchase price is expected to be allocated to property and to
deferred taxes.
(e) Reflects the adjustment of Red Wing's recorded accrued pension benefit liability of $1.5 million to
a prepaid benefit cost of $2.3 million for plan assets in excess of the projected benefit obligation.
(f) Reflects additional debt incurred for the purchase price, including an estimated net working
capital adjustment and transaction costs.
(g) Reflects the elimination of Red Wing's historical shareholders' equity.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
NINE MONTHS ENDED JUNE 30, 2000
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA RALCORP
RALCORP (a) RED WING (b) ADJUSTMENTS PRO FORMA
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 550.2 $ 232.1 $ - $ 782.3
------------ ------------- ------------- -----------
Costs and Expenses
Cost of products sold 417.8 191.6 - 609.4
Selling, general and administrative 69.5 15.2 .9 (c) 85.6
Advertising and promotion 17.4 13.5 - 30.9
Interest expense, net 4.3 .2 6.6 (d) 11.1
Equity earnings in Vail Resorts, Inc. (8.2) - - (8.2)
------------ ------------- ------------- -----------
500.8 220.5 7.5 728.8
------------ ------------- ------------- -----------
Earnings before Income Taxes 49.4 11.6 (7.5) 53.5
Income Taxes (e) 18.3 4.3 (2.4) 20.2
------------ ------------- ------------- -----------
Net Earnings $ 31.1 $ 7.3 $ (5.1) $ 33.3
============ ============= ============= ===========
Earnings per Share:
Basic $ 1.03 $ 1.10
============ ===========
Diluted $ 1.01 $ 1.08
============ ===========
Weighted Average Shares:
Basic 30.2 30.2
============ ===========
Diluted 30.7 30.7
============ ===========
<FN>
NOTES TO UNAUDITED PRO FORMA COMBINEDED STATEMENT OF EARNINGS
(a) Reflects historical operating results of Ralcorp for the nine months ended June 30, 2000.
(b) Reflects historical operating results of Red Wing for the nine months ended June 30, 2000.
(c) Reflects the amount of excess purchase price amortization that would have been recorded
for Red Wing for the nine months ended June 30, 2000 assuming the acquisition occurred on
October 1, 1999. Excess purchase price is amortized on a straight-line basis over 25 years.
(d) Reflects additional interest expense that would have been incurred if the acquisition of
Red Wing had occurred on October 1, 1999 with an assumed interest rate of 90 day LIBOR
plus 1% commensurate with Ralcorp's new credit facility. A 1/8% variance in the assumed
interest rates would have a $.2 million effect on this adjustment.
(e) Reflects an estimated effective income tax rate of 37% based on pretax income before
nondeductible amortization of excess purchase price.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
YEAR ENDED SEPTEMBER 30, 1999
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA RALCORP
RALCORP (a) RED WING (b) ADJUSTMENTS PRO FORMA
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 636.6 $ 341.6 $ - $ 978.2
------------ ------------- ------------- -----------
Costs and Expenses
Cost of products sold 467.5 285.1 - 752.6
Selling, general and administrative 89.3 21.4 1.2 (c) 111.9
Advertising and promotion 24.8 19.6 - 44.4
Interest expense, net 1.4 .2 6.6 (d) 8.2
Equity earnings in Vail Resorts, Inc. (4.7) - - (4.7)
------------ ------------- ------------- -----------
578.3 326.3 7.8 912.4
------------ ------------- ------------- -----------
Earnings before Income Taxes 58.3 15.3 (7.8) 65.8
Income Taxes (e) 21.9 5.7 (2.5) 25.1
------------ ------------- ------------- -----------
Net Earnings $ 36.4 $ 9.6 $ (5.3) $ 40.7
============ ============= ============= ===========
Earnings per Share:
Basic $ 1.17 $ 1.31
============ ===========
Diluted $ 1.15 $ 1.28
============ ===========
Weighted Average Shares:
Basic 31.1 31.1
============ ===========
Diluted 31.7 31.7
============ ===========
<FN>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(a) Reflects historical operating results of Ralcorp for the year ended September 30, 1999.
(b) Reflects historical operating results of Red Wing for the year ended September 30, 1999.
(c) Reflects the amount of excess purchase price amortization that would have been recorded
for Red Wing for the year ended September 30, 1999 assuming the acquisition occurred on
October 1, 1998. Excess purchase price is amortized on a straight-line basis over 25 years.
(d) Reflects additional interest expense that would have been incurred if the acquisition of
Red Wing had occurred on October 1, 1998 with an assumed interest rate of 90 day LIBOR
plus 1% commensurate with Ralcorp's new credit facility. A 1/8% variance in the assumed
interest rates would have a $.3 million effect on this adjustment.
(e) Reflects an estimated effective income tax rate of 37% based on pretax income before
nondeductible amortization of excess purchase price.
</TABLE>
4
(c) Exhibits
Exhibit 2.1(a) Stock Purchase Agreement between Tomkins Overseas
Holdings S.A. and RH Financial Corporation dated as of June 16, 2000
(incorporated by reference to Exhibit 2.1(a) of Ralcorp's Current Report on Form
8-K filed on July 27, 2000).
Exhibit 2.1(b) Amendment No. 1 to Stock Purchase Agreement between
Tomkins Overseas Holdings S.A. and RH Financial Corporation dated as of July 14,
2000 (incorporated by reference to Exhibit 2.1(b) of Ralcorp's Current Report on
Form 8-K filed on July 27, 2000).
Exhibit 2.1(c) Amendment No. 2 to Stock Purchase Agreement between
Tomkins Overseas Holdings S.A. and RH Financial Corporation dated as of July 14,
2000 (incorporated by reference to Exhibit 2.1(c) of Ralcorp's Current Report on
Form 8-K filed on July 27, 2000).
Exhibit 2.2 Credit Agreement among Ralcorp Holdings, the lenders
named herein, and Bank One, N.A., as Agent dated as of July 10, 2000
(incorporated by reference to Exhibit 2.2 of Ralcorp's Current Report on Form
8-K filed on July 27, 2000).
Exhibit 23 Consent of Arthur Andersen LLP dated September 15, 2000.
Exhibit 99.1 Press Release dated July 16, 2000 announcing the
consummation of the purchase of The Red Wing Company, Inc (incorporated by
reference to Exhibit 99.1 of Ralcorp's Current Report on Form 8-K filed on July
27, 2000).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
(Registrant)
Date: September 21, 2000 By: /s/ T. G. Granneman
-------------------------------
T. G. Granneman
Duly Authorized Signatory and
Chief Accounting Officer
5
<PAGE
INDEX TO
RHM HOLDINGS (USA), INC.
Financial Statements
As of April 29, 2000
Together With Report of Independent Public Accountants
Page
----
Report of Independent Public Accountants F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Net Income F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
RHM Holdings (USA) Inc.:
We have audited the accompanying consolidated balance sheet of RHM Holdings
(USA), Inc. (a Delaware corporation and a wholly-owned indirect subsidiary of
Tomkins PLC), as of April 29, 2000 and the related consolidated statements of
net income, stockholder's equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 RHM Holdings (USA), Inc. at
April 29, 2000, and the results of their operations and their cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
/s/ Arthur Andersen LLP
--------------------------
Arthur Andersen LLP
Cleveland, Ohio,
May 19, 2000
(except with respect to the matter discussed in Note 10, as to which
the date is June 16, 2000).
F-2
<PAGE>
<TABLE>
<CAPTION>
RHM HOLDINGS (USA), INC.
Consolidated Balance Sheet
April 29, 2000
<S> <C>
ASSETS
-----------------------------------------------
CURRENT ASSETS:
Cash $ 3,555,654
Accounts receivable, less allowance for credit
memos and discounts of $1,373,064 18,914,014
Receivable from parent 64,734,880
Inventories, net 44,387,182
Prepaid expenses and other current assets 976,329
------------
Total current assets 132,568,059
------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements 3,474,619
Buildings 21,854,696
Machinery and equipment 77,314,364
Transportation equipment 3,712,374
Furniture, fixtures, and other 3,342,805
Construction in progress 402,703
------------
110,101,561
Less- Accumulated depreciation 72,261,505
------------
37,840,056
------------
OTHER ASSETS:
Deferred tax assets 41,766
Goodwill 18,345,501
------------
18,387,267
------------
Total assets $188,795,382
============
<FN>
The accompanying notes to consolidated financial statements are an integral part
of this consolidated balance sheet.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
RHM HOLDINGS (USA), INC.
Consolidated Balance Sheet
April 29, 2000
<S> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
---------------------------------------------------
CURRENT LIABILITIES:
Bank overdrafts $ 501,208
Note payable to parent 40,850,000
Accounts payable 28,243,791
Accrued salaries and benefits 2,179,212
Accrued promotional programs 2,894,224
Accrued income taxes 275,766
Deferred revenue 1,864,627
Current portion of capital lease obligation 207,746
Other accrued expenses 3,201,273
------------
Total current liabilities . . . . . . . . . . . . . 80,217,847
------------
LONG-TERM LIABILITIES:
Capital lease obligation 598,123
Accrued pension liability 1,463,103
Industrial revenue bond 5,600,000
Other long-term liabilities 135,326
------------
Total long-term liabilities 7,796,552
------------
STOCKHOLDER'S EQUITY:
Common stock, 1,103 shares issued
and outstanding 1,103
Additional paid-in capital 34,204,166
Retained earnings 66,575,714
------------
100,780,983
------------
Total liabilities and stockholder's equity $188,795,382
============
<FN>
The accompanying notes to consolidated financial statements are an integral part
of this consolidated balance sheet.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
RHM HOLDINGS (USA), INC.
Consolidated Statement of Net Income
For the Year Ended April 29, 2000
<S> <C>
NET SALES $348,225,874
COST OF GOODS SOLD 268,552,801
------------
Gross profit 79,673,073
------------
OPERATING EXPENSES:
Distribution 59,850,912
Selling, general and administrative 5,489,665
Goodwill amortization 757,483
------------
66,098,060
------------
OPERATING INCOME 13,575,013
OTHER EXPENSES, principally interest, net 1,454,288
------------
INCOME BEFORE INCOME TAXES 12,120,725
INCOME TAXES 5,048,218
------------
NET INCOME $ 7,072,507
============
<FN>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
<TABLE>
<CAPTION>
RHM HOLDINGS (USA), INC.
Consolidated Statement of Stockholder's Equity
For the Year Ended April 29, 2000
Additional
Common Paid-In Retained
Stock Capital Earnings
------- ----------- -----------
<S> <C> <C> <C>
BALANCE, MAY 1, 1999 $ 1,103 $34,204,166 $59,503,207
Net income - - 7,072,507
------- ----------- -----------
BALANCE, APRIL 29, 2000 $ 1,103 $34,204,166 $66,575,714
======= =========== ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
RHM HOLDINGS (USA), INC.
Consolidated Statement of Cash Flows
For the Year Ended April 29, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,072,507
Adjustments to reconcile net income to net cash
from operating activities-
Depreciation and amortization 7,593,213
Loss on sale of assets 27,315
Deferred taxes (625,026)
Changes in operating assets and liabilities-
Accounts receivable 6,034,381
Inventories (5,885,533)
Prepaid expenses and other current assets 548,954
Deferred revenue 1,864,627
Bank overdrafts, accounts payable and
accrued expenses (9,926,995)
Pension liability and other long-term liabilities 498,308
------------
Net cash from operating activities 7,201,751
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receivable from parent (2,546,695)
Additions to property, plant and equipment (3,300,318)
Proceeds from the sale of property, plant, and
equipment 68,971
------------
Net cash for investing activities (5,778,042)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease payments (328,627)
------------
Net cash for financing activities (328,627)
------------
NET CHANGE IN CASH 1,095,082
CASH AT BEGINNING OF YEAR 2,460,572
------------
CASH AT END OF YEAR $ 3,555,654
============
<FN>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
F-6
<PAGE>
RHM HOLDINGS (USA), INC.
Notes to Consolidated Financial Statements
April 29, 2000
1. ORGANIZATION AND NATURE OF BUSINESS:
----------------------------------------
RHM Holdings (USA), Inc. (the Company) is an indirect wholly-owned subsidiary of
Tomkins PLC (Tomkins). The Company is engaged principally in processing,
packaging and marketing a variety of food products including catsup, preserves,
jellies, peanut butter, and table syrup. The Company's manufacturing facilities
are located in New York, Illinois and California.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
----------------------------------------------
Basis of Presentation
-----------------------
For the year ended April 29, 2000, the Company's year-end was the Saturday
closest to April 30, which represented a 52-week operational period.
Basis of Consolidation
------------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries after elimination of material intercompany
accounts and transactions.
Inventories
-----------
Inventory cost includes material, labor, and overhead. The Company's inventory
is recorded at the lower of cost, using the last-in, first-out (LIFO) method, or
market.
Inventories consisted of the following at April 29, 2000:
<TABLE>
<CAPTION>
<S> <C>
Raw materials. $18,025,000
Finished goods 25,593,024
Labels . . . . 2,977,805
------------
46,595,829
LIFO Reserve . (1,257,071)
Other Reserves (951,576)
------------
$44,387,182
============
</TABLE>
Property, Plant and Equipment
--------------------------------
Property, plant and equipment are stated at cost. All normal maintenance and
repairs are expensed as incurred. Depreciation is calculated on a straight-line
basis over the estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Land improvements . . 10 to 20 years
Building. . . . . . . 20 to 30 years
Machinery & equipment 3 to 13 years
Other . . . . . . . . 3 to 13 years
</TABLE>
F-7
<PAGE>
The Company periodically reviews the recorded value of its property, plant and
equipment for impairment in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets," and
reduces the carrying values to realizable value when circumstances warrant.
Goodwill
--------
Goodwill represents the excess purchase price paid over the fair value of the
net assets acquired. The amortization of goodwill is provided on a
straight-line basis over a 40-year period. Accumulated amortization of goodwill
was $11,511,328 at April 29, 2000. Management regularly evaluates its
accounting for goodwill, considering such factors as historical and future
profitability, and believes that the asset is realizable and the amortization
period remains appropriate.
Self-Insurance Reserves
------------------------
The Company is generally self-insured for general liability, auto liability,
product liability, environmental liability, medical and workers' compensation
claims. Catastrophic coverage is retained for potentially significant
individual claims. An estimated provision for claims under the self-insurance
programs is recorded and revised annually based on industry trends, historical
experience and management judgement. Changes in assumptions for such matters as
legal actions, medical costs and actual experience could cause estimates to
change in the near term.
Revenue Recognition
--------------------
Revenues are recognized when customer orders are completed and shipped. Revenue
recognition is deferred for orders which have been invoiced but have not been
shipped.
Advertising
-----------
Advertising and promotion costs are expensed as incurred.
Use of Estimates
------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Since actual results could differ from those estimates, the Company revises its
estimates and assumptions as new or improved information becomes available.
Segment Reporting
------------------
In 1997, the Financial Accounting Standards Board (FASB) issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information".
This statement, which is based on the management approach to segment reporting,
required public companies disclose information about their products and
services, operating segments, the geographic area they operate in and their
major customers. The Company operates in one business segment, the processing
and packaging of food products. The Company does not engage in material
operations in other countries and no significant portion of its revenues are
derived from any single customer.
F-8
<PAGE>
Derivatives and Hedging
-------------------------
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires companies to recognize all
derivative contracts at their fair values, as either assets or liabilities on
the balance sheet. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the type of
hedge transaction. The Company does not expect the adoption of SFAS No. 133 to
have a material impact on the consolidated financial statements.
Comprehensive Income
---------------------
In 1998, the FASB issued Statement No. 130, "Reporting Comprehensive Income",
which requires companies to report all changes in equity during a period in a
financial statement for the period in which they are recognized. This Statement
does not apply to an enterprise that has no items of other comprehensive income
in any period presented. The Company does not have any items of other
comprehensive income.
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
------------------------------------------
During the year, the Company paid $4,100,000 for Federal income taxes and
$280,000 for interest.
4. FINANCING ARRANGEMENTS:
--------------------------
Financing arrangements at April 29, 2000 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
LONG-TERM DEBT:
Industrial revenue bond due on April 1, 2005 $ 5,600,000
===========
RELATED PARTY NOTES PAYABLE:
Demand note payable to parent. . . . . . . . $40,850,000
===========
CAPITAL LEASES:
Capital leases . . . . . . . . . . . . . . . $ 805,869
===========
</TABLE>
The Industrial Revenue Bond bears interest at a variable rate which was
approximately 5.15% at April 29, 2000.
The note payable to parent bears interest at a rate of 10%.
In management's opinion, the estimated fair value of the Company's long-term
debt and line of credit approximates book value due to most of the outstanding
borrowings having fluctuating market rates which can be settled at their face
amount.
F-9
<PAGE>
The Company leases certain transportation equipment under capital lease
agreements. Future minimum lease commitments under these lease agreements are
as follows:
<TABLE>
<CAPTION>
<S> <C>
2001. . . . . . . . . . . . . . . . . $265,172
2002. . . . . . . . . . . . . . . . . 236,542
2003. . . . . . . . . . . . . . . . . 188,915
2004. . . . . . . . . . . . . . . . . 106,294
2005. . . . . . . . . . . . . . . . . 97,547
Thereafter. . . . . . . . . . . . . . 32,123
--------
Total minimum lease payments. . . . . $926,593
========
Less- Amount representing interest. . 120,724
--------
Total obligation under capital leases $805,869
========
</TABLE>
5. LEASES:
------
The Company leases certain equipment under long-term operating lease agreements.
The Company had rental expenses of approximately $468,000 for the year ended
April 29, 2000.
Future minimum lease commitments under non-cancelable operating leases are as
follows at April 29, 2000:
<TABLE>
<CAPTION>
<C> <S>
2001 $223,217
2002 11,970
--------
$235,187
=========
</TABLE>
6. RETIREMENT PLANS:
-----------------
Defined Benefit Plan
----------------------
The Company maintains a defined benefit pension plan covering most of its
employees. This plan provides benefits based on years of service and average
compensation during certain periods. The Company's policy is to make
contributions to fund this plan within the range allowed by the applicable
regulations. Plan assets consist primarily of publicly traded stocks,
investment contracts, and government and corporate bonds.
Set forth here is a detail of the net periodic pension expense and the
assumptions used in accounting for the plans for the year ended April 29, 2000.
F-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Service cost. . . . . . . . . . . . . . . . $ 1,006,700
Interest cost . . . . . . . . . . . . . . . 1,175,300
Expected return on plan assets. . . . . . . (1,322,700)
Amortization of transition asset. . . . . . (23,600)
Amortization of prior service cost. . . . . (6,600)
------------
Net periodic pension expense. . . . . . . . $ 829,100
============
ASSUMPTIONS:
Weighted average discount rates . . . . . . 8.25%
Rate of increase in compensation levels . . 5.00%
Expected long-term rate of return on assets 9.00%
</TABLE>
The following sets forth the changes in the benefit obligation and the plan
assets during the year and reconciles the funded status of the defined benefit
plan with the amounts recognized in the balance sheet at April 29, 2000:
<TABLE>
<CAPTION>
<S> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year $16,301,200
Service cost. . . . . . . . . . . . . . 1,006,700
Interest cost . . . . . . . . . . . . . 1,175,300
Actuarial gain. . . . . . . . . . . . . (2,547,318)
Benefits paid . . . . . . . . . . . . . (1,035,669)
------------
Benefit obligation at end of year . . . $14,900,213
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year . . . $17,196,000
Actual return on plan assets . . . . . . . . . . . . 1,019,754
Benefits paid. . . . . . . . . . . . . . . . . . . . (1,035,669)
------------
Fair value of plan assets at end of year . . . . . . $17,180,085
============
NET AMOUNT RECOGNIZED:
Plan assets in excess of (less than) obligation. . . $ 2,279,872
Unrecognized prior service cost. . . . . . . . . . . (63,656)
Unrecognized actuarial (gain) loss . . . . . . . . . (3,638,268)
Unrecognized net transition asset. . . . . . . . . . (41,051)
------------
Net amount recognized. . . . . . . . . . . . . . . . $(1,463,103)
============
AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSISTS OF:
Accrued benefit liability. . . . . . . . . . . . . . $(1,463,103)
------------
Net amount recognized. . . . . . . . . . . . . . . . $(1,463,103)
============
</TABLE>
F-11
<PAGE>
Defined Contribution Plan
---------------------------
In addition to the defined benefit plan noted above, the company maintains a
defined contribution benefit plan which covers most of its employees. Employees
are eligible to contribute up to 14% of eligible income to the plan. The
Company makes a contribution to the plan which is equal to 25% of the employee's
contribution, up to a maximum contribution of 1.5% of the employee's eligible
compensation. The Company contributed approximately $188,000 to the plan during
the year. Included in the balance sheet at April 29, 2000 is a liability of
$16,000 for unremitted employer contributions to the plan.
7. INCOME TAXES:
--------------
The Company is a member of an affiliated group of companies which files a
consolidated Federal income tax return. The Company follows the policy,
established for the group, of providing for Federal income taxes which would be
payable on a separate company basis.
The components of provision for income taxes for the year ended April 29, 2000
are as follows:
<TABLE>
<CAPTION>
<S> <C>
PROVISION FOR INCOME TAXES:
Federal - Current . . . . . $3,995,152
State . . . . . . . . . . . 428,040
Deferred. . . . . . . . . . 625,026
----------
$5,048,218
==========
</TABLE>
A reconciliation of federal statutory and effective income tax for the year
ended April 29, 2000 follows:
<TABLE>
<CAPTION>
<S> <C>
Income before taxes . . . . $12,120,725
============
Statutory taxes at 35.0%. . 4,242,254
State income taxes. . . . . 428,040
Amortization of goodwill. . 265,119
Other-net . . . . . . . . . 112,805
------------
Provision for income taxes. $ 5,048,218
Effective rate. . . . . . . 41.6%
============
</TABLE>
Significant items making up deferred tax liabilities and deferred tax assets
including amounts classified as current, are as follows:
F-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Assets:
Inventory reserves. . . . . . . . . $1,018,343
Uniform cost capitalization . . . . 174,991
Package design costs. . . . . . . . 575,119
Pension accruals. . . . . . . . . . 601,344
Worker's compensation accruals. . . 714,904
Other . . . . . . . . . . . . . . . 1,655,976
----------
Total deferred tax assets. . . 4,740,677
Liabilities:
Accelerated depreciation. . . . . . 4,493,700
Other . . . . . . . . . . . . . . . 205,211
----------
Total deferred tax liabilities 4,698,911
----------
Net deferred tax asset . . $ 41,766
==========
</TABLE>
8. RELATED PARTY TRANSACTIONS:
----------------------------
As part of the Tomkins cash management program, the Company has historically
deposited all excess cash with Tomkins and satisfied working capital needs
through transfers from Tomkins. Tomkins pays the Company interest on deposits
at a rate of LIBOR plus 1/4%. The Company also receives centralized services
from Tomkins and its affiliates for treasury, insurances, utilitites, audit fees
and other matters for which it is charged fees which management believe are
comparable to the fees that the Company would incur on a stand-alone basis. The
receivable from parent on the balance sheet represents the net amount due to the
Company from Tomkins due to cash transfers and intercompany changes.
9. CONTINGENCIES:
-------------
In the ordinary course of business, the Company is involved in various legal
proceedings and disputes incidental to its business. The Company is of the
opinion that the ultimate resolution of these matters will not have a material
adverse effect on the results of operations or the financial position of the
Company.
10. SUBSEQUENT EVENT:
-----------------
On June 16, 2000, Tomkins Overseas Holdings S.A. (an indirect wholly-owned
subsidiary of Tomkins) entered an agreement with RH Financial Corporation (a
wholly-owned subsidiary of Ralcorp Holdings, Inc.) for the sale of all of the
Company's stock.
F-13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
Exhibit 2.1(a) Stock Purchase Agreement between Tomkins Overseas Holdings
S.A. and RH Financial Corporation dated as of June 16,
2000 (incorporated by reference to Exhibit 2.1(a) of Ralcorp's
Current Report on Form 8-K filed on July 27, 2000).
Exhibit 2.1(b) Amendment No. 1 to Stock Purchase Agreement between Tomkins
Overseas Holdings S.A. and RH Financial Corporation dated as
of July 14, 2000 (incorporated by reference to Exhibit 2.1(b)
of Ralcorp's Current Report on Form 8-K filed on July 27,
2000).
Exhibit 2.1(c) Amendment No. 2 to Stock Purchase Agreement between Tomkins
Overseas Holdings S.A. and RH Financial Corporation dated as of
July 14, 2000 (incorporated by reference to Exhibit 2.1(c) of
Ralcorp's Current Report on Form 8-K filed on July 27, 2000).
Exhibit 2.2 Credit Agreement among Ralcorp Holdings, the lenders named
herein, and Bank One, N.A., as Agent dated as of July
10, 2000 (incorporated by reference to Exhibit 2.2 of Ralcorp's
Current Report on Form 8-K filed on July 27, 2000).
Exhibit 23 Consent of Arthur Andersen LLP dated September 15, 2000.
Exhibit 99.1 Press Release dated uly 16, 2000 announcing the consummation
of the purchase of The Red Wing Company, Inc (incorporated
by reference to Exhibit 99.1 of Ralcorp's Current Report on
Form 8-K filed on July 27, 2000).
