-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D682foDOBDRZ8bM3X3p89Dq99aPaRo1ZM9E9M9tWm3U6bU7w2q6/gvSvNH4kCwDX NtIsS3y3xhzzYl2EadARhA== 0001029506-00-000004.txt : 20000215 0001029506-00-000004.hdr.sgml : 20000215 ACCESSION NUMBER: 0001029506-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RALCORP HOLDINGS INC /MO CENTRAL INDEX KEY: 0001029506 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 431766315 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12619 FILM NUMBER: 540329 BUSINESS ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3148777000 MAIL ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 FORMER COMPANY: FORMER CONFORMED NAME: NEW RALCORP HOLDINGS INC DATE OF NAME CHANGE: 19961223 10-Q 1 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 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)
RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF EARNINGS (Dollars in millions except per share data, shares in thousands) Three Months Ended December 31, ------------------- 1999 1998 ------- -------- 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 ======== ======== See accompanying Notes to Condensed Consolidated Financial Statements.
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RALCORP HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (Condensed) (Dollars in millions) Dec. 31, Sept. 30, 1999 1999 -------- --------- 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 ======== ========= See accompanying Notes to Condensed Consolidated Financial Statements.
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RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed) (Dollars in millions) Three Months Ended December 31, ------------------- 1999 1998 --------- --------- 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 ========= ========= See accompanying Notes to Condensed Consolidated Financial Statements.
3 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:
Dec. 31, Sep. 30, 1999 1999 -------- -------- Receivables $ 66.6 $ 62.0 Allowance for doubtful accounts (2.4) (2.1) -------- -------- $ 64.2 $ 59.9 ======== ========
NOTE 4 - INTANGIBLE ASSETS, NET consisted of the following:
Dec. 31, Sep. 30, 1999 1999 -------- -------- Intangible assets at cost $ 133.6 $ 110.8 Accumulated amortization (12.4) (10.1) -------- -------- $ 121.2 $ 100.7 ======== ========
NOTE 5 - PROPERTY, NET consisted of the following:
Dec. 31, Sep. 30, 1999 1999 -------- -------- Property at cost $ 304.9 $ 280.4 Accumulated depreciation (119.8) (114.9) -------- -------- $ 185.1 $ 165.5 ======== ========
4 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:
Three Months Ended December 31, ------------------- 1999 1998 -------- -------- 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 ======== ========
Dec. 31, Sep. 30, 1999 1999 -------- -------- 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 ======== ========
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 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.
NET SALES BY SEGMENT Three Months Ended December 31, ----------------------- 1999 1998 ------- ------- 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 ======= =======
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 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 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 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 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 (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 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 EXHIBIT INDEX Exhibit Number Description - ------ ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS SEP-30-2000 OCT-01-1999 DEC-31-1999 3,800 0 66,600 2,400 80,900 157,600 304,900 119,800 530,700 85,700 0 300 0 0 331,400 530,700 204,900 204,900 155,500 155,500 37,300 100 1,100 12,100 4,500 7,600 0 0 0 7,600 0.25 0.24
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