ST. LOUIS, Nov. 10 /PRNewswire-FirstCall/ -- Ralcorp Holdings, Inc.
(NYSE: RAH) today reported results for the fourth quarter and full
fiscal year ended September 30, 2009. Reported diluted earnings per
share were $1.40 for the quarter and $5.09 for the year ended
September 30, 2009 compared to $.90 and $5.38 for the corresponding
periods last year, including the effects of certain special items
related to Ralcorp's investment in Vail Resorts, Inc. (NYSE:MTN)
and the Post Foods acquisition as follows: Three Months Year Ended
Ended September 30, September 30, ------------- ------------- 2009
2008 2009 2008 ---- ---- ---- ---- Gain on forward sale contracts $
- $.39 $.20 $2.32 Gain on sale of securities .30 .10 .79 .15 Equity
in (loss) earnings of Vail Resorts, Inc. - (.02) .17 .45 Post Foods
inventory valuation adjustment - (.32) - (.47) Post Foods
transition and integration costs (.04) (.09) (.35) (.16) Fourth
quarter diluted earnings per share excluding the items above were
$1.14 compared to $.84 last year, a 36% increase. The corresponding
annual figure was $4.28 compared to $3.09 last year, a 39%
increase. Ralcorp acquired Post Foods (included in the Cereals
segment) on August 4, 2008 and Harvest Manor Farms (included in the
Snacks segment) on March 20, 2009. In addition to quantifying the
incremental amounts from these acquisitions, the discussions below
include references to the base businesses, meaning businesses that
were owned by Ralcorp (and therefore included in operating results)
for the duration of each of the periods being compared (i.e.,
excluding businesses acquired since the beginning of the
comparative period of the prior fiscal year). Fourth quarter net
sales grew $109.7 million, with a $89.6 million increase from Post
Foods and $44.5 million from Harvest Manor, and annual net sales
were up $1,067.5 million due to an $890.1 million increase from
Post Foods and $90.5 million from Harvest Manor. Total segment
profit contribution for the base businesses grew 32% for the
quarter and 36% for the year. Base business raw material costs were
lower for the fourth quarter but nearly $70 million higher for the
year. Commenting on the Post Foods' business, co-CEO David Skarie
said, "Post delivered over $300 million in EBITDA during our first
year of ownership, which met our expectations. We are pleased that
the business met our objectives despite a difficult transition and
increased competitive pressure, particularly in the last six months
of our fiscal year. We have met with all of our major customers to
reinforce our commitment to growing this business on both a short
and long term basis. The customers are excited about our plans for
the coming year as we improve our competitive position. In
addition, now that Post is firmly on the Ralcorp platform, we will
begin driving costs out of the business." Regarding the financial
condition of Ralcorp, co-CEO Kevin Hunt said, "We finished the year
with a strong balance sheet and excellent liquidity. We remain
dedicated to creating long-term value for our shareholders. We
expect that our solid cash position and committed financing will
allow us to actively evaluate value-creating acquisition
opportunities and additional share repurchases." Other reported
results for the quarter ended September 30, 2009 included: -- Net
sales increased 13%, primarily as a result of the Post Foods and
Harvest Manor acquisitions and improved pricing (which had lagged
cost increases in previous periods), partially offset by base
business volume declines in every segment. -- Total segment profit
contribution was up 50%, primarily due to acquisitions and the
timing of commodity cost changes, slightly offset by a decrease in
overall base business net sales. -- Food EBITDA increased to $159.8
million compared to $86.4 million last year, generally due to
incremental EBITDA from Post Foods partially offset by related
transition and integration costs. -- Earnings before income taxes
and equity earnings were $122.5 million (compared to $68.1 million
a year ago) including the special items related to Vail Resorts and
Post Foods, as discussed below. -- Equity in loss of Vail Resorts,
Inc. (after tax) was zero compared to $1.1 million ($.02 per share)
a year ago. -- Net earnings were $79.9 million compared to $41.1
million last year. -- Weighted average shares for diluted EPS rose
to 57.1 million from 45.6 million a year ago, primarily as a result
of the 30.5 million shares issued in the Post Foods acquisition.
Segment results and other key measures are summarized in the
following tables (in millions): Three Months Year Ended Ended
September 30, September 30, ------------- ------------- 2009 2008
2009 2008 ---- ---- ---- ---- Net Sales Cereals $474.7 $380.4
$1,873.9 $936.5 Frozen Bakery Products 164.8 178.7 694.8 711.8
Snacks 210.4 178.9 793.7 687.0 Sauces and Spreads 133.3 135.5 529.5
489.1 ----- ----- ----- ----- Total $983.2 $873.5 $3,891.9 $2,824.4
====== ====== ======== ======== Profit Contribution Cereals $94.5
$57.6 $342.6 $118.1 Frozen Bakery Products 20.0 15.8 69.1 63.7
Snacks 16.6 15.0 79.5 47.1 Sauces and Spreads 11.4 6.6 38.1 15.7
---- --- ---- ---- Total segment profit contribution 142.5 95.0
529.3 244.6 Interest expense, net (26.1) (21.0) (99.0) (54.6) Gain
on forward sale contracts - 27.8 17.6 111.8 Gain on sale of
securities 26.8 7.1 70.6 7.1 Restructuring charges (.1) - (.5)
(1.7) Acquired inventory valuation adjustment - (23.4) (.4) (23.4)
Stock-based compensation expense (3.4) (3.2) (13.4) (11.5) Post
Foods transition and integration costs (3.5) (6.3) (31.6) (7.9)
Other unallocated corporate expenses (13.7) (7.9) (35.1) (23.9)
----- ---- ----- ----- Earnings before Income Taxes and Equity
(Loss) Earnings $122.5 $68.1 $437.5 $240.5 ====== ===== ======
====== Reconciliation of Food EBITDA to Net Earnings Food EBITDA
$159.8 $86.4 $593.0 $275.7 Depreciation and amortization (38.0)
(32.2) (144.7) (99.5) Interest expense, net (26.1) (21.0) (99.0)
(54.6) Gain on forward sale contracts - 27.8 17.6 111.8 Gain on
sale of securities 26.8 7.1 70.6 7.1 Income taxes (42.6) (25.9)
(156.9) (86.7) Equity in (loss) earnings of Vail Resorts, Inc., net
of related deferred income taxes - (1.1) 9.8 14.0 --- ---- --- ----
Net Earnings $79.9 $41.1 $290.4 $167.8 ===== ===== ====== ======
Cereals Segment Results As detailed above, the increase in
year-over-year net sales in the Cereals segment is attributable
primarily to the timing of the acquisition of Post Foods last year.
Post Foods' sales were $270.1 million and $1,070.6 million for the
quarter and year ended September 30, 2009, respectively. Compared
to last year's fourth quarter (including the pre-acquisition
period), total Post cereal net sales were down 7%, as a 15% volume
shortfall was partially offset by higher pricing. That volume
decline cut across most major brands and was largely due to
reductions in Post promotional activity, down-weighting on selected
products, and heightened competitive activity. Base business net
sales (i.e., excluding Post Foods) grew 2% for the fourth quarter
and 6% for the year. Base business volume was down 1% for the
quarter and up 4% for the year, while net prices were higher. The
base business continues to increase distribution with most of its
largest retail cereal customers and also benefited from a favorable
sales mix, excluding the effects of declines in co-manufacturing
sales. The segment's profit contribution increased significantly as
a result of the acquisition. Profit from Post Foods was about $73.6
million for the quarter (net of $3.2 million of amortization
related to brands and customer relationships and $10.3 million of
depreciation) and about $250.6 million for the year (net of $12.6
million of amortization and $38.0 million of depreciation) compared
to $43.3 million (net of $2.2 million of amortization and $7.6
million of depreciation) during the final two months of the prior
year. For the quarter, the remaining improvement in the segment's
profit contribution is primarily attributable to higher pricing and
reduced raw material costs in the base business. For the full year,
base business profit was improved by higher pricing and overall
volume growth, largely offset by the impact of increased costs.
Frozen Bakery Products Segment Results The Frozen Bakery Products
segment's net sales decreased 8% and 2% compared to last year's
fourth quarter and year, respectively, as a result of 10% and 11%
volume declines partially offset by selling price improvements. The
segment's net sales are being impacted by general economic and
competitive conditions. Sales volume in the foodservice channel,
particularly in the higher margin bread category, has been
negatively impacted by the loss of a major customer due to pricing
actions and lower restaurant traffic at our casual-themed national
customers. In the in-store bakery channel, volume losses were
primarily attributable to lower sales of breads (particularly
higher priced organic breads) and cookies, partially offset by an
increase in frozen dough sales volumes. Fourth quarter volume was
flat in the retail channel, but a decrease for the full year was
driven by aggressive pricing and promotion by a branded competitor
(particularly in the third quarter) and overall category softness,
as well as reduced co-manufacturing business. The segment's profit
contribution was up 26% and 8% for the quarter and year,
respectively, as a result of significant pricing improvements,
favorable raw material costs for the quarter and favorable exchange
rates, partially offset by the volume declines and an unfavorable
product mix. Although overall raw material costs were favorable for
the fourth quarter, they were unfavorable for the year. Snacks
Segment Results For the three and twelve months ended September 30,
2009, net sales for the Snacks segment increased 18% and 16%,
respectively, primarily due to the acquisition of Harvest Manor, as
discussed above. Fourth quarter net sales for the base business
were down 7% on an 8% volume shortfall. For the full year, base
business sales were up 2%, as a result of price improvements offset
by a 7% volume decline. Base business volume declines in both the
quarter and the year are primarily attributable to segment
management's decision to exit lower margin business in response to
the rapid raw material cost escalation over the last eighteen
months. The segment's profit contribution for the fourth quarter
and full year was higher than last year as a result of incremental
profit from Harvest Manor, improved mix, and higher pricing driven
by higher input costs. Results from Harvest Manor added about $1.1
million for the quarter and about $5.6 million for the year. Raw
material costs in the segment's base business were favorable for
the quarter but unfavorable for the full year. Sauces and Spreads
Segment Results In the Sauces and Spreads segment, fourth quarter
net sales decreased 2% as a result of volume declines partially
offset by higher selling prices. Fourth quarter volume was 4%
lower, primarily due to the loss of a major low-margin spoonable
salad dressing customer and lower sales of jellies and table syrup.
For the year, volume was down 1% but net sales increased 8%,
primarily as a result of the timing of price increases in response
to rising costs, partially offset by the effect of a change in
product mix. Profit contribution was significantly higher than last
year as a result of the improved selling prices in the three and
twelve months ended September 30, 2009, partially offset in the
twelve-month period by higher input costs. The segment's raw
material costs were favorable in the fourth quarter but unfavorable
for the full year. Special Items Related to Vail Resorts, Inc. and
Post Foods Earnings comparability was affected by changes in the
fair value of the Company's forward sale contracts related to its
shares of Vail Resorts, Inc. (Vail), gains of the sale of Vail
shares, and equity method earnings from its investment in Vail.
Fair value adjustments on forward sale contracts resulted in a gain
of $27.8 million for the quarter ended September 30, 2008. On
November 21, 2008, the first tranche of the initial contract was
settled and Ralcorp delivered 890,000 shares, and on June 4, 2009,
all remaining contracts were settled and Ralcorp delivered
3,503,263 shares. As a result of this significant reduction in
ownership, Ralcorp ceased recognizing earnings from Vail on the
equity method as of June 2009. Ralcorp sold its remaining 2,601,543
shares on the open market during the fourth quarter of 2009 with
gains totaling $26.8 million, while results for the fourth quarter
of fiscal 2008 included a $7.1 million gain on the sale of 368,700
shares on the open market. As of September 30, 2009, Ralcorp owned
zero shares of Vail common stock. As planned, Ralcorp is incurring
significant costs related to transitioning Post Foods into
Ralcorp's operations, including decoupling the cereal assets of
Post Foods from those of other operations of Kraft Foods Inc. (the
former owner), developing stand-alone Post Foods information
systems, developing independent sales, logistics and purchasing
functions for Post Foods, and other integration tasks. While a
portion of those costs are capitalized, the expense portion totaled
$3.5 million and $31.6 million in the quarter and year ended
September 30, 2009, respectively, and $6.3 million and $7.9 million
in the corresponding periods last year. Finished goods inventory
acquired in the Post Foods acquisition was valued essentially as if
Ralcorp were a distributor purchasing the inventory. This resulted
in a one-time allocation of purchase price to acquired inventory
which was $23.4 million higher than the historical manufacturing
cost of the inventory. Inventory value and cost of products sold
were based on post-acquisition production costs for all product
manufactured after the acquisition date. In the quarter ended
September 30, 2008, all of the $23.4 million (non-cash) inventory
valuation adjustment was recognized in cost of products sold,
reducing net earnings by approximately $15.0 million after the
related tax effect. Additional Information The following measures,
as reported herein, are non-GAAP financial measures which the
Company's management believes provide useful information to
investors regarding the performance of Ralcorp's operations: --
Diluted earnings per share excluding special items is an additional
measure for comparing the earnings generated by operations between
periods, without the effects of certain special items related to
Ralcorp's investment in Vail Resorts, Inc. and the Post Foods
acquisition (as described above). -- Food EBITDA (earnings before
interest, income taxes, depreciation, and amortization, excluding
equity method earnings and other gains or losses related to the
Company's investment in Vail Resorts, Inc.) provides information
regarding the performance of Ralcorp's food business operations,
without the effects of the Company's investment in Vail Resorts,
Inc. and related transactions. -- Total segment profit contribution
is an accumulation of the GAAP measures of profit contribution for
each reportable segment which are reported to the chief operating
decision maker for purposes of making decisions about allocating
resources to each segment and assessing its performance, which
gives investors a combined measure of these key amounts. Other
unallocated corporate expenses were higher in the three months
ended September 30, 2009 primarily as a result of $2.6 million of
up-front payments to a business partner for outsourcing of certain
procurement functions and related upgrades to the Company's
procurement technology platform, as well as increased unallocated
systems costs (largely software amortization), incentive
compensation, and other unallocated expenses. These increases were
partially offset by a $2.7 million favorability in fair value
adjustments related to deferred compensation liabilities. For
additional information regarding the Company's results and
financial position, refer to the statements and schedules below.
Ralcorp produces Post branded cereals, a variety of value brand and
store brand foods sold under the individual labels of various
grocery, mass merchandise and drugstore retailers, and frozen
bakery products sold to in-store bakeries, restaurants and other
foodservice customers. Ralcorp's diversified product mix includes:
ready-to-eat and hot cereals; nutritional and cereal bars; snack
mixes, corn-based chips and extruded corn snack products; crackers
and cookies; snack nuts; chocolate candy; salad dressings;
mayonnaise; peanut butter; jams and jellies; syrups; sauces; frozen
griddle products including pancakes, waffles, and French toast;
frozen biscuits and other frozen pre-baked products such as breads
and muffins; and frozen dough for cookies, Danishes, bagels and
doughnuts. RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENTS OF
EARNINGS (Dollars in millions except per share data, shares in
thousands) Three Months Year Ended Ended September 30, September
30, ------------- ------------- 2009 2008 2009 2008 ---- ---- ----
---- Net Sales $983.2 $873.5 $3,891.9 $2,824.4 Cost of products
sold (704.9) (698.1) (2,834.1) (2,318.1) ------ ------ --------
-------- Gross Profit 278.3 175.4 1,057.8 506.3 Selling, general
and administrative expenses (156.4) (121.2) (609.0) (328.4)
Interest expense, net (26.1) (21.0) (99.0) (54.6) Gain on forward
sale contracts - 27.8 17.6 111.8 Gain on sale of securities 26.8
7.1 70.6 7.1 Restructuring charges (.1) - (.5) (1.7) --- --- ---
---- Earnings before Income Taxes and Equity (Loss) Earnings 122.5
68.1 437.5 240.5 Income taxes (42.6) (25.9) (156.9) (86.7) -----
----- ------ ----- Earnings before Equity (Loss) Earnings 79.9 42.2
280.6 153.8 Equity in (loss) earnings of Vail Resorts, Inc., net of
related deferred income taxes - (1.1) 9.8 14.0 --- ---- --- ----
Net Earnings $79.9 $41.1 $290.4 $167.8 ===== ===== ====== ======
Earnings per Share Basic $1.41 $.91 $5.16 $5.51 Diluted $1.40 $.90
$5.09 $5.38 Weighted Average Shares for Basic Earnings per Share
56,368 44,849 56,166 30,321 Dilutive effect of: Stock options 382
560 437 560 Stock appreciation rights 178 111 151 98 Restricted
stock awards 155 115 207 89 --- --- --- -- Weighted Average Shares
for Diluted Earnings per Share 57,083 45,635 56,961 31,068 ======
====== ====== ====== RALCORP HOLDINGS, INC. DEPRECIATION AND
AMORTIZATION BY SEGMENT (In millions) Three Months Ended Year Ended
September 30, September 30, ------------- ------------ 2009 2008
2009 2008 ---- ---- ---- ---- Cereals $18.8 $15.0 $71.3 $29.5
Frozen Bakery Products 8.8 9.0 35.4 36.3 Snacks 6.0 4.8 22.4 20.2
Sauces and Spreads 2.3 2.2 8.7 8.3 Corporate 2.1 1.2 6.9 5.2 ---
--- --- --- Total $38.0 $32.2 $144.7 $99.5 ===== ===== ====== =====
RALCORP HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEET (In
millions) Sept. 30, Sept. 30, 2009 2008 ---- ---- Cash and Cash
Equivalents $282.8 $14.1 All Other Current Assets 671.4 633.7
Noncurrent Assets 4,498.0 4,696.1 ------- ------- Total Assets
$5,452.2 $5,343.9 ======== ======== Current Liabilities $479.0
$391.9 Long-term Debt 1,611.4 1,668.8 Other Noncurrent Liabilities
656.2 871.7 Shareholders' Equity 2,705.6 2,411.5 ------- -------
Total Liabilities and Shareholders' Equity $5,452.2 $5,343.9
======== ======== DATASOURCE: Ralcorp Holdings, Inc. CONTACT: Scott
Monette, +1-314-877-7113, or Matt Pudlowski, +1-314-877-7091, both
of Ralcorp Holdings, Inc.
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