10-Q/A

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10-Q/A 1 d349784d10qa.htm 10-Q/A 10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(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, 2011.

¨	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 (Address of principal Executive offices)		63101 (Zip Code)

(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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares of Common Stock, $.01 par value, outstanding as of September 10, 2012: 55,032,538

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (“Form 10-Q/A”) amends and restates the Quarterly Report on Form 10-Q of Ralcorp Holdings, Inc. (the “Company”) for the quarter ended December 31, 2011, as originally filed with the Securities and Exchange Commission (the “SEC”) on February 9, 2012 (the “Original Filing”). This Form 10-Q/A is being filed to restate the Company’s condensed consolidated financial statements in Item 1 and related disclosures (including certain amounts and disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2, and Controls and Procedures in Item 4) as discussed in Note 3 to the consolidated financial statements include in Note 1.

In the fourth quarter ended September 30, 2011, and as reflected in the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2011 filed with the SEC on December 14, 2011 (the “2011 Annual Report”), the Company recorded a $364.8 million non-cash goodwill impairment charge related to the Post brand cereal business (the former Branded Cereal Products segment). In finalizing the accounting for the separation of the Post brand cereal business, the Company identified an error in the amount of deferred taxes used in its fourth quarter 2011 goodwill impairment analysis. As a result of this error, the fair value of the net assets associated with the Post brand cereal business was understated and, as a result, the non-cash impairment that was recorded in the fourth quarter of fiscal 2011 was also understated. The Company concluded that an additional impairment charge of approximately $54.0 million (which is not deductible for tax purposes and thus has no associated income tax impact) should have been reflected in the fourth quarter of fiscal 2011. As a result, in this Form 10-Q/A, the Company is restating its condensed consolidated financial statements and related disclosures to recognize the impact to such financial statements that resulted from the increase to the non-cash goodwill impairment charge in the fourth quarter 2011. The Company has also filed a Form 10-K/A to restate its condensed consolidated financial statements and related disclosures as of and for the year ended September 30, 2011 included in the 2011 Annual Report to correct this error.

In connection with the preparation of the restated financial statements as described above, the Company identified additional errors in the financial statements related to the Condensed Financial Statements of Guarantors note to the consolidated financial statements included in Note 22 of the 2011 Annual Report and Note 17 in the Original Filing and each of the Quarterly Reports on Form 10-Q for the periods ended December 31, 2010, March 31, 2011 and June 30, 2011. These errors do not impact the Company’s consolidated balances and amounts. As a result, in this Form 10-Q/A, the Company is restating its consolidated financial statements and related disclosures as of December 31, 2011 and for the fiscal quarters ended December 31, 2011 and December 31, 2010 to correct the errors in the condensed consolidating financial statements of guarantors. The Company has also filed a Form 10-K/A to restate its consolidated financial statements and related disclosures as of September 30, 2011 and 2010 and for the fiscal years ended September 30, 2011, 2010 and 2009 included in the 2011 Annual Report to correct the errors in the Condensed Financial Statements of Guarantors note to the consolidated financial statements. The Company will restate the condensed consolidating financial statements of guarantors for the periods ended March 31, 2011 and June 30, 2011 through the filing of a Form 10-Q for the periods ended March 31, 2012 and June 30, 2012.

Ralcorp completed the spin-off of the Post brand cereals business (formerly the Branded Cereal Products segment) on February 3, 2012. The condensed consolidated financial statements and related disclosures in Item 1 and Management’s Discussion and Analysis of Financial Condition and Results in Item 2 have been recast to reflect the Post brand cereal business as discontinued operations in the accompanying financial statements, and unless otherwise specified, disclosures in this report relate solely to our continuing operations. See Note 4 to our condensed consolidated financial statements in Item 1 for further information.

Although this Form 10-Q/A supersedes the Original Filing in its entirety, this Form 10-Q/A only amends and restates Items 1, 2 and 4 of Part I, solely as a result of, and to reflect, the restatements and recasting of discontinued operations, and no other information in the Original Filing is amended hereby. While the foregoing items have been updated, this amended report does not reflect any other events occurring after the Original Filing. In addition, currently dated certifications from our Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are attached to this Form 10-Q/A as Exhibits 31.1, 31.2, and 32, respectively.

RALCORP HOLDINGS, INC.

INDEX


		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements		2

	Condensed Consolidated Statements of Earnings		2

	Condensed Consolidated Statements of Comprehensive Income		3

	Condensed Consolidated Balance Sheets		4

	Condensed Consolidated Statements of Cash Flows		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39

Item 4.	Controls and Procedures		39

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42

Item 4.	Mine Safety Disclosures		42

Item 6.	Exhibits		42

SIGNATURES			42

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

RALCORP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(Dollars in millions except per share data)


	Three Months Ended
	December 31,
	2011			2010
Net Sales	$	1,166.5		$	951.7
Cost of goods sold		(928.2	)		(743.5	)

Gross Profit		238.3			208.2
Selling, general and administrative expenses		(111.1	)		(95.0	)
Amortization of intangible assets		(20.8	)		(16.3	)
Other operating expenses, net		(3.4	)		(3.0	)

Operating Profit		103.0			93.9
Interest expense, net		(34.4	)		(35.7	)

Earnings from Continuing Operations before Income Taxes		68.6			58.2
Income taxes		(24.4	)		(20.9	)

Net Earnings from Continuing Operations		44.2			37.3
Earnings from discontinued operations, net of tax		21.1			34.0

Net Earnings	$	65.3		$	71.3

Basic Earnings per Share
Earnings from continuing operations	$	.80		$	.68
Earnings from discontinued operations		.38			.62

Net earnings	$	1.18		$	1.30

Diluted Earnings per Share
Earnings from continuing operations	$	.79		$	.67
Earnings from discontinued operations		.37			.61

Net earnings	$	1.16		$	1.28

See accompanying Notes to Condensed Consolidated Financial Statements.

RALCORP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in millions)


	Three Months Ended
	December 31,
	2011		2010
Net Earnings	$	65.3	$	71.3
Other comprehensive income		6.7		24.0

Comprehensive Income	$	72.0	$	95.3

See accompanying Notes to Condensed Consolidated Financial Statements.

RALCORP HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in millions)


	December 31,			September 30,
	2011			2011
	(Restated)			(Restated)
Assets
Current Assets
Cash and cash equivalents	$	61.4		$	50.0
Marketable securities		1.0			8.2
Receivables, net		352.0			349.6
Inventories		452.8			424.1
Deferred income taxes		15.7			15.7
Prepaid expenses and other current assets		20.7			11.8
Current assets of discontinued operations		138.2			135.3

Total Current Assets		1,041.8			994.7

Property, Net		847.1			783.2
Goodwill		1,391.0			1,160.9
Other Intangible Assets, Net		1,012.0			767.9
Other Assets		38.4			35.8
Noncurrent Assets of Discontinued Operations		2,533.3			2,536.7

Total Assets	$	6,863.6		$	6,279.2

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	287.9		$	284.4
Notes payable to banks		610.0			105.0
Current portion of long-term debt		106.3			30.7
Other current liabilities		205.4			192.1
Current liabilities of discontinued operations		62.3			59.7

Total Current Liabilities		1,271.9			671.9

Long-term Debt		2,083.6			2,172.5
Deferred Income Taxes		265.7			281.0
Other Liabilities		140.4			129.1
Noncurrent Liabilities of Discontinued Operations		461.8			459.5

Total Liabilities		4,223.4			3,714.0

Commitments and Contingencies

Shareholders’ Equity
Common stock		.6			.6
Additional paid-in capital		1,959.9			1,957.3
Common stock in treasury, at cost		(338.5	)		(338.9	)
Retained earnings		1,092.2			1,026.9
Accumulated other comprehensive loss		(74.0	)		(80.7	)

Total Shareholders’ Equity		2,640.2			2,565.2

Total Liabilities and Shareholders’ Equity	$	6,863.6		$	6,279.2

See accompanying Notes to Condensed Consolidated Financial Statements.

RALCORP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in millions)


	Three Months Ended
	December 31,
	2011			2010
Cash Flows from Operating Activities
Net earnings	$	65.3		$	71.3
Earnings from discontinued operations		21.1			34.0

Earnings from continuing operations		44.2			37.3
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
Depreciation and amortization		49.4			42.2
Stock-based compensation expense		3.1			3.4
Deferred income taxes		(15.9	)		5.5
Other, net		8.0			51.5

Net Cash Provided by Operating Activities—Continuing Operations		88.8			139.9
Net Cash Provided by Operating Activities—Discontinued Operations		35.5			37.8

Net Cash Provided by Operating Activities		124.3			177.7

Cash Flows from Investing Activities
Business acquisitions, net of cash acquired		(570.3	)		—
Additions to property and intangible assets		(29.4	)		(17.8	)
Purchase of securities		—			(10.0	)
Proceeds from sale or maturity of securities		7.2			10.0

Net Cash Used by Investing Activities—Continuing Operations		(592.5	)		(17.8	)
Net Cash Used by Investing Activities—Discontinued Operations		(9.0	)		(3.3	)

Net Cash Used by Investing Activities		(601.5	)		(21.1	)

Cash Flows from Financing Activities
Repayments of long-term debt		(25.7	)		(42.2	)
Net borrowings (repayments) under credit arrangements		515.0			(79.3	)
Purchases of treasury stock		(.6	)		(.6	)
Proceeds and tax benefits from exercise of stock awards		.8			2.3
Changes in book cash overdrafts		(1.4	)		(41.5	)
Other, net		—			(.1	)

Net Cash Provided (Used) by Financing Activities—Continuing Operations		488.1			(161.4	)
Net Cash Provided by Financing Activities—Discontinued Operations		—			—

Net Cash Provided (Used) by Financing Activities		488.1			(161.4	)

Effect of Exchange Rate Changes on Cash		.5			.4

Net Increase (Decrease) in Cash and Cash Equivalents		11.4			(4.4	)
Cash and Cash Equivalents, Beginning of Period		50.0			29.3

Cash and Cash Equivalents, End of Period	$	61.4		$	24.9

See accompanying Notes to Condensed Consolidated Financial Statements.

RALCORP HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions except per share data)

NOTE 1 – PRESENTATION OF CONDENSED FINANCIAL STATEMENTS

The accompanying unaudited historical financial statements of Ralcorp Holdings, Inc. (“Ralcorp” or the “Company”) have been prepared in accordance with the instructions for Form 10-Q/A and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim financial statements reflect all adjustments which are, in the opinion of management, necessary to fairly state the results for the periods presented. All such adjustments are of a normal recurring nature. Certain amounts for prior periods have been reclassified to conform to the current period’s presentation. Operating results for the periods presented are not necessarily indicative of the results for the full year. These statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K/A for the year ended September 30, 2011, filed on September 12, 2012. The significant accounting policies for the accompanying financial statements are the same as disclosed in Note 1 in that Annual Report.

Effective February 3, 2012, Ralcorp completed the spin-off of the Post cereals business (formerly, the Branded Cereal Products segment), which is reported as discontinued operations in the accompanying financial statements. All amounts related to discontinued operations are excluded from the notes to condensed consolidated financial statement unless otherwise indicated. See Note 4 for additional information about discontinued operations.

The segment previously referred to as Other Cereal Products, which includes private-brand and value-brand ready-to-eat cereals and the Bloomfield Bakers products (which includes nutritional bars and natural and organic specialty cookies, crackers and cereals), has been renamed the Cereal Products segment.

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This update establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). The amendments in this update are effective during interim and annual periods beginning after December 15, 2011 (i.e., Ralcorp’s financial statements for the quarter ending March 31, 2012). The adoption of this update is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” The objective of this update is to improve the comparability, consistency, and transparency of financial reporting to increase the prominence of items reported in other comprehensive income. This update requires that all nonowner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 (i.e., Ralcorp’s financial statements for the quarter ending December 31, 2012), except for those deferred by ASU No. 2011-05, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” issued in December 2011. The adoption of this update is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In September 2011, the FASB issued ASU No. 2011-9, “Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan,” which provides new requirements for the disclosures that an employer should provide related to its participation in multiemployer pension plans. Plans of this type are commonly used by employers to provide benefits to union employees that may work for multiple employers during their working life and thereby accrue benefits in one plan for their retirement. The revised disclosures will provide users of financial statements with additional information about the plans in which an employer participates, the level of an employer’s participation in the plans, and financial health of significant plans. The amendments in this update are effective for Ralcorp’s annual financial statements for the year ending September 30, 2012. The adoption of this update is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

NOTE 3 – RESTATEMENTS

In the fourth quarter of fiscal 2011 the Company recorded non-cash impairment charges totaling $471.4 related to intangible assets in the Branded Cereal Products segment (included in discontinued operations). These charges consisted of a goodwill impairment of $364.8 and trademark impairment charges of $106.6 (primarily related to the Honey Bunches of Oats, Post Selects, and Post trademarks). In May of 2012, the Company determined that the goodwill impairment calculation performed in the fourth quarter of fiscal 2011 resulting in the $364.8 non-cash impairment charge excluded certain deferred taxes when determining the fair value of the net assets of the former Branded Cereal Products segment. The exclusion of certain deferred taxes from the impairment computation resulted in the fourth quarter impairment charge being understated by $54.0. The impairment charge is not deductible for tax purposes and therefore, it does not impact income tax expense. The Company has restated its consolidated financial statements as of and for the year ended September 30, 2011 and condensed consolidated financial statements as of December 31, 2011 to reflect an additional non-cash goodwill impairment charge of $54.0 and corresponding reduction in goodwill for its former Branded Cereal Products segment. The effects of the restatement adjustment on the December 31, 2011 and September 30, 2011 consolidated balance sheets as previously reported and the impact of recasting the restated amounts for discontinued operations are listed in the following tables.


	December 31, 2011
	Previously Reported		Restatement Adjustment			Corrected		Recast Adjustment			Currently Reported
Consolidated Balance Sheet
Goodwill	$	2,820.4	$	(54.0	)	$	2,766.4	$	(1,375.4	)	$	1,391.0
Total assets		6,917.6		(54.0	)		6,863.6		—			6,863.6
Retained earnings		1,146.2		(54.0	)		1,092.2		—			1,092.2
Total shareholders’ equity		2,694.2		(54.0	)		2,640.2		—			2,640.2
Total liabilities and stockholders’ equity		6,917.6		(54.0	)		6,863.6		—			6,863.6


	September 30, 2011
	Previously		Restatement					Recast			Currently
	Reported		Adjustment			Corrected		Adjustment			Reported
Consolidated Balance Sheet
Goodwill	$	2,590.1	$	(54.0	)	$	2,536.1	$	(1,375.2	)	$	1,160.9
Total assets		6,333.2		(54.0	)		6,279.2		—			6,279.2
Retained earnings		1,080.9		(54.0	)		1,026.9		—			1,026.9
Total shareholders’ equity		2,619.2		(54.0	)		2,565.2		—			2,565.2
Total liability and shareholders’ equity		6,333.2		(54.0	)		6,279.2		—			6,279.2

In connection with the preparation of the restated financial statements, the Company identified additional errors in the footnotes to the financial statements related to the condensed financial statements of guarantors included in Note 17 of the originally filed December 31, 2011 and 2010 Quarterly Reports on Form 10-Q. These errors do not impact the Company’s consolidated balances and amounts. See Note 19 for additional information on the impact of these errors and the restatement of the condensed consolidating financial statements of guarantors.

NOTE 4 – DISCONTINUED OPERATIONS

On February 3, 2012, the Company separated its Post cereals business (formerly, the Branded Cereal Products segment) into a new, publicly traded company (“Spin-Off”) called Post Holdings, Inc. (“Post”). The Spin-Off was completed by a pro rata distribution of approximately 80.3% of the outstanding shares of Post common stock to holders of Ralcorp common stock, with the Company retaining approximately 19.7% of the Post common stock outstanding at February 3, 2012. Each Ralcorp shareholder received one share of Post common stock for every two shares of Ralcorp common stock held on January 30, 2012, the record date for the distribution. For U.S. federal income tax purposes, the distribution of shares of Post common stock in the Spin-Off is tax-free to Ralcorp and its shareholders, except with respect to cash received by Ralcorp shareholders in lieu of a fractional share, and the Company received a ruling from the Internal Revenue Service regarding the tax-free nature of the Spin-Off. Ralcorp received a total of $900 in cash in the Spin-Off transactions.

The Company’s investment does not provide the Company the ability to influence the operating or financial policies of Post and accordingly does not constitute significant continuing involvement. Furthermore, while the Company is a party to a separation agreement and various other agreements relating to the separation, including a transition services agreement (“TSA”), a tax matters agreement, an employee matters agreement and certain other commercial agreements, the Company has determined that the continuing cash flows generated by these agreements, which are expected to be eliminated within two years, and its investment in Post common stock do not constitute significant continuing involvement in the operations of Post. Accordingly, the net assets, operating results, and cash flows of Ralcorp’s Post cereals business are presented separately as discontinued operations.

Post is now a stand-alone public company which separately reports its financial results. Due to differences between the basis of presentation for discontinued operations and the basis of presentation as a stand-alone company, the financial results of the Post cereals business included within discontinued operations for the Company may not be indicative of actual financial results of Post as a stand-alone company.

The results of the Post cereals business included in discontinued operations for the three months ended December 31, 2011 and 2010 are summarized in the following table. Post separation costs are primarily professional services fees directly related to the Spin-Off transactions.


	Three Months Ended
	December 31,
	2011			2010
Net sales	$	214.4		$	221.6
Post separation costs		(2.7	)		—
Operating profit		32.7			53.2
Earnings before income taxes		32.7			53.2
Income taxes		(11.6	)		(19.2	)
Earnings from discontinued operations, net of income taxes		21.1			34.0

Ralcorp continues to purchase and sell certain products from or to Post. The amounts of the intercompany revenues and costs associated with such activities before the Spin-Off were as follows:


	Three Months Ended December 31,
	2011			2010
Intercompany net sales	$	.7		$	—
Intercompany costs and expenses		(4.8	)		(1.9	)

At December 31, 2011 and September 30, 2011, the major components of assets and liabilities of discontinued operations were as follows:


	December 31,		September 30,
	2011		2011
Current Assets
Receivables, net	$	52.9	$	60.8
Inventories		79.3		66.6
Deferred income taxes		3.9		3.9
Prepaid expenses and other current assets, net		2.1		4.0

Total Current Assets		138.2		135.3
Property, net		411.0		412.1
Goodwill (Restated)		1,375.4		1,375.2
Other Intangibles Assets, Net		745.5		748.6
Other Assets		1.4		.8

Total Assets	$	2,671.5	$	2,672.0

Current Liabilities
Accounts payable	$	30.7	$	28.8
Other current liabilities		31.6		30.9

Total Current Liabilities		62.3		59.7
Deferred Income Taxes		354.6		354.6
Other Liabilities		107.2		104.9

Total Liabilities	$	524.1	$	519.2

NOTE 5 – BUSINESS COMBINATIONS

On October 3, 2011, Ralcorp completed the acquisition of the North American private-brand refrigerated dough business of Sara Lee Corporation. The refrigerated dough business is a leading manufacturer and distributor of a full range of private-brand refrigerated dough products in the U.S. To fund the transaction, Ralcorp entered into a credit agreement consisting of a $550 term loan (see Note 15) that was repaid with a portion of the proceeds generated in connection with the separation of its Post cereal business (see Note 20). The refrigerated dough business, included in the Frozen Bakery Products segment, employs approximately 700 people and has manufacturing and distribution facilities in Carrollton, Texas and Forest Park, Georgia. The assigned goodwill is deductible for tax purposes. The purchase price allocation included $259.6 of customer relationships, trademarks, and other intangibles subject to amortization over a weighted average amortization period of approximately 15 years. Net sales and operating profit included in the statement of earnings related to this acquisition were $101.0 and $15.2, respectively, for the three months ended December 31, 2011.

On December 28, 2011, Ralcorp completed the acquisition of Pastificio Annoni S.p.A. (“Annoni”), a pasta manufacturer located in Bergamo, Italy. Annoni will operate as a part of the Pasta segment. The assigned goodwill is not deductible for tax purposes. Net sales and operating profit included in the statement of earnings related to this acquisition for the three months ended December 31, 2011 were insignificant.

Each of the acquisitions was accounted for using the purchase method of accounting, whereby the results of operations of each of the following acquisitions are included in the statements of earnings from the date of acquisition. The purchase price was allocated to acquired assets and liabilities based on their estimated fair values at the date of acquisition, and any excess was allocated to goodwill, as shown in the following table. For each acquisition, the goodwill is attributable to the assembled workforce of the acquired business and the significant synergies and opportunities expected from the combination of the acquired business with the existing Ralcorp businesses. Certain estimated values are not yet finalized (primarily deferred tax assets and liabilities and other intangible assets for Annoni) and are subject to change once additional information is obtained (but no later than one year from the applicable acquisition date).


	Refrigerated
	Dough			Annoni
Cash	$	.9		$	.9
Receivables		14.7			8.0
Inventories		23.1			.7
Other current assets		.1			—
Property		62.6			3.6
Goodwill		216.6			10.7
Other intangible assets		259.6			—

Total assets acquired		577.6			23.9

Accounts payable		(14.1	)		(3.0	)
Other current liabilities		(8.8	)		(1.1	)
Other liabilities		(3.2	)		(3.0	)

Total liabilities assumed		(26.1	)		(7.1	)

Net assets acquired	$	551.5		$	16.8

Supplemental Pro Forma Information

The following unaudited pro forma information shows Ralcorp’s results of operations as if the fiscal 2012 business combinations had been completed on October 1, 2010. The acquirees’ pre-acquisition results have been added to Ralcorp’s historical results, and the totals have been adjusted for the pro forma effects of amortization of intangible assets recognized as part of the business combination, inventory and property valuation adjustments, interest expense related to the financing of the business combinations, and related income taxes. These pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.


	Three Months Ended
	December 31,
	2011		2010
Net sales	$	1,171.1	$	1,051.0
Net earnings from continuing operations		44.6		43.0
Basic earnings per share from continuing operations		.81		.78
Diluted earnings per share from continuing operations		.79		.77

NOTE 6 – PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors qualified and supplemental noncontributory defined benefit pension plans and other postretirement benefit plans for certain of its employees. The following table provides the components of net periodic benefit cost for the plans.


	Three Months Ended
	December 31,
	2011			2010
Pension Benefits
Service cost	$	.7		$	.5
Interest cost		2.9			2.8
Expected return on plan assets		(4.7	)		(4.3	)
Amortization of net loss		1.4			1.1

Net periodic benefit cost	$	.3		$	.1

Other Postretirement Benefits
Service cost	$	—		$	—
Interest cost		.5			.4
Expected return on plan assets		—			—
Amortization of net loss		.1			—

Net periodic benefit cost	$	.6		$	.4

NOTE 7 – EARNINGS PER SHARE

The weighted average shares outstanding for basic and diluted earnings per share were as follows (in thousands):


	Three Months Ended
	December 31,
	2011		2010
Weighted Average Shares for Basic Earnings per Share		55,013		54,703
Dilutive effect of:
Stock options		205		270
Stock appreciation rights		600		222
Restricted stock awards		203		230

Weighted Average Shares for Diluted Earnings per Share		56,021		55,425

The following schedule shows stock appreciation rights (“SARs”) which were outstanding and could potentially dilute basic earnings per share in the future but which were not included in the computation of diluted earnings per share for the three months ended December 31, 2010 because to do so would have been antidilutive (in thousands). There were no such amounts for the three months ended December 31, 2011.


SARs at $66.07 per share			504
SARs at $58.79 per share			8
SARs at $56.27 per share			372
SARs at $57.14 per share			13
SARs at $57.45 per share			536
SARs at $61.98 per share			6

NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

In the ordinary course of business, the Company is exposed to commodity price risks relating to the acquisition of raw materials and supplies, interest rate risks relating to debt, and foreign currency exchange rate risks relating to its foreign subsidiaries. Authorized individuals within the Company may utilize derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The terms of these instruments generally do not exceed eighteen months for commodities, ten years for interest rates, and two years for foreign currency. The Company is not permitted to engage in speculative or leveraged transactions and will not hold or issue financial instruments for trading purposes.

The Post cereals business participated in Ralcorp’s hedging program before the Spin-Off (see Note 4). The fair value of the derivative instruments has not been reflected as assets or liabilities of discontinued operations as of December 31, 2011 and September 30, 2011 because Post was not legally a party to the underlying derivative instruments and because there are no significant instruments that were allocable only to Post. As of December 31, 2011 and September 30, 2011, the amount of Ralcorp’s net derivative liability that was related to Post was approximately $.4 and $10, respectively. The derivative effects of hedging allocated to Post (and included in earnings from discontinued operations on the statements of operations) for the three month period ended December 31, 2011 and 2010 were a loss of $2.1 and gain of $1.0, respectively. Amounts related to Post are included in the amounts disclosed in the rest of this note. As of the Spin-Off date, Post no longer participated in the Ralcorp derivative instrument program and no net derivative liability or asset was outstanding.

For the three months ended December 31, 2011, the Company’s derivative instruments consisted of commodity contracts (options, futures, and swaps) used as cash flow or fair value hedges on purchases of raw materials (ingredients and packaging) and energy (fuel), and foreign currency forward contracts used as cash flow hedges on receipts of foreign currency-denominated accounts receivable. Certain commodity-related derivatives do not meet the criteria for cash flow hedge accounting or simply are not designated as hedging instruments; nonetheless, they are economic hedges used to manage the future cost of raw materials. The following table shows the notional amounts of derivative instruments held.


	Dec. 31, 2011		Sept. 30, 2011
Raw materials (thousands of pounds)		124,900		1,395,470
Natural gas (thousands of MMBTUs)		1,990		3,885
Other fuel (thousands of gallons)		10,627		12,966
Currency (thousands of dollars)		59,000		83,250

The following table shows the fair value and balance sheet location of the Company’s derivative instruments as of December 31, 2011 and September 30, 2011, all of which were designated as hedging instruments under ASC Topic 815 except $12.8 of commodity contracts in a net liability position as of December 31, 2011.


	Fair Value
	Dec. 31 2011		Sept. 30, 2011		Balance Sheet Location
Liability Derivatives
Commodity contracts	$	25.5	$	49.0	Other current liabilities
Foreign exchange contracts		2.3		4.1	Other liabilities

	$	27.8	$	53.1

Asset Derivatives
Commodity contracts	$	.9	$	.3	Prepaid expenses and other current assets
Foreign exchange contracts		1.4		—	Prepaid expenses and other current assets

	$	2.3	$	.3

The following tables illustrate the effect of the Company’s derivative instruments on the statements of earnings and other comprehensive income (OCI) for the three months ended December 31, 2011 and 2010.


Derivatives in ASC Topic 815 Cash Flow	Amount of Gain (Loss) Recognized in OCI [Effective Portion]					Gain (Loss) Reclassified from Accumulated OCI into Earnings [Effective Portion]						Gain (Loss) Recognized in Earnings [Ineffective Portion and Amount Excluded from Effectiveness Testing]
Hedging Relationships	2011			2010		2011			2010			2011		2010			Location in Earnings
Commodity contracts	$	(.2	)	$	19.2	$	1.9		$	.3		$	.4	$	(.1	)	Cost of goods sold
Foreign exchange contracts		2.4			1.8		(.7	)		.7			—		—		SG&A expenses
Interest rate contracts		—			—		(.4	)		(.4	)		—		—		Interest expense, net

	$	2.2		$	21.0	$	.8		$	.6		$	.4	$	(.1	)


Derivatives Not Designated as Hedging Instruments	Amount of Gain (Loss) Recognized in Earnings					Location of Gain (Loss)
Under ASC Topic 815	2011			2010		Recognized in Earnings
Commodity contracts	$	(5.8	)	$	4.8	Cost of goods sold

Approximately $15.3 of the net cash flow hedge gains reported in accumulated OCI at December 31, 2011 are expected to be reclassified into earnings within the next twelve months. For gains or losses associated with commodity contracts, the reclassification will occur when the products produced with hedged materials are sold. For gains or losses associated with foreign exchange contracts, the reclassification will occur as hedged foreign currency-denominated accounts receivable are received. For gains or losses associated with interest rate swaps, the reclassification occurs on a straight-line basis over the term of the related debt.

Certain of the Company’s derivative instruments contain provisions that require the Company to post collateral when the derivatives in liability positions exceed a specified threshold, and others require collateral even when the derivatives are in asset positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2011 and September 30, 2011 was $3.3 and $3.9, respectively, and the related collateral required was $1.0 and $8.2 at December 31, 2011 and September 30, 2011, respectively.

NOTE 9 – FAIR VALUE MEASUREMENTS

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820:


	December 31, 2011						September 30, 2011
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets
Marketable securities	$	1.0	$	1.0	$	—	$	8.2	$	8.2	$	—
Derivative assets		2.3		—		2.3		.3		—		.3
Deferred compensation investment		25.9		25.9		—		22.9		22.9		—

	$	29.2	$	26.9	$	2.3	$	31.4	$	31.1	$	.3

Liabilities
Derivative liabilities	$	27.8	$	—	$	27.8	$	53.1	$	—	$	53.1
Deferred compensation liabilities		40.4		—		40.4		36.5		—		36.5

	$	68.2	$	—	$	68.2	$	89.6	$	—	$	89.6

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of three levels:



Level 1	–	Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2	–	Inputs are quoted prices of similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3	–	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The Company’s marketable securities consist of U.S. Treasury Bills. Fair value for marketable securities is measured using the market approach based on quoted prices. The Company utilizes the income approach to measure fair value for its derivative assets and liabilities (which include commodity options and swaps, an interest rate swap, and foreign currency forward contracts). The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices. The deferred compensation investment is invested primarily in mutual funds and its fair value is measured using the market approach. This investment is in the same funds and purchased in substantially the same amounts as the participants’ selected investment options (excluding Ralcorp common stock equivalents), which represent the underlying liabilities to participants in the Company’s deferred compensation plans. Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants’ selected investment options (excluding certain Ralcorp common stock equivalents to be distributed in shares) using the market approach.

The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, receivables, and accounts and notes payable approximate fair value because of the short maturities of these financial instruments. The carrying amount of the Company’s variable rate long-term debt (see Note 16) approximates fair value because the interest rates are adjusted to market frequently. Based on the discounted amount of future cash flows, using Ralcorp’s incremental rate of borrowing for similar debt, the Company’s fixed rate debt (which had a carrying amount of $1,940.9 as of December 31, 2011 and $1,951.6 as of September 30, 2011) had an estimated fair value of $2,204.6 as of December 31, 2011 and $2,070.1 as of September 30, 2011.

NOTE 10 – INVENTORIES

The reported value of inventories consisted of:


	December 31, 2011		September 30, 2011
Raw materials and supplies	$	201.7	$	184.7
Finished products		251.1		239.4

Total Inventories	$	452.8	$	424.1

NOTE 11 – PROPERTY, NET

The reported value of property, net, consisted of:


	December 31, 2011			September 30, 2011
Property at cost	$	1,516.4		$	1,424.3
Accumulated depreciation		(669.3	)		(641.1	)

Property, Net	$	847.1		$	783.2

NOTE 12 – GOODWILL

The changes in the carrying amount of goodwill by reportable segment (see Note 18) were as follows:


	Cereal Products		Snacks, Sauces & Spreads			Frozen Bakery Products		Pasta		Total
Balance, September 30, 2011
Goodwill (gross)	$	47.2	$	292.8		$	366.3	$	534.1	$	1,240.4
Accumulated impairment losses		—		(79.5	)		—		—		(79.5	)

Goodwill (net)	$	47.2	$	213.3		$	366.3	$	534.1	$	1,160.9
Goodwill acquired		—		—			216.6		10.7		227.3
Currency translation adjustment		—		1.2			1.6		—		2.8

Balance, December 31, 2011
Goodwill (gross)	$	47.2	$	294.0		$	584.5	$	544.8	$	1,470.5
Accumulated impairment losses		—		(79.5	)		—		—		(79.5	)

Goodwill (net)	$	47.2	$	214.5		$	584.5	$	544.8	$	1,391.0

NOTE 13 – OTHER INTANGIBLE ASSETS, NET

The reported value of other intangible assets, net, consisted of:


	Dec. 31, 2011			Sept. 30, 2011
Subject to amortization:
Computer software	$	79.1		$	75.3
Customer relationships		895.2			683.0
Trademarks/brands		36.0			35.5
Other		61.9			13.1

		1,072.2			806.9
Accumulated amortization		(241.0	)		(219.8	)

	$	831.2		$	587.1
Not subject to amortization:
Trademarks/brands		180.8			180.8

	$	1,012.0		$	767.9

Amortization expense related to intangible assets was:


	Three Months Ended December 31,
	2011		2010
Computer software	$	2.1	$	1.8
Customer relationships		17.6		13.4
Trademarks/brands		.6		.6
Other		.5		.5

	$	20.8	$	16.3

For the intangible assets recorded as of December 31, 2011, total amortization expense of $84.2, $75.8, $71.2, $66.3, and $61.3 is scheduled for fiscal 2012, 2013, 2014, 2015, and 2016, respectively.

NOTE 14 – CONTINGENCIES

In May 2009, a customer notified the Company that it was seeking to recover out-of-pocket costs and damages associated with the customer’s recall of certain peanut butter-based products. The customer recalled those products in January 2009 because they allegedly included ingredients that had the potential to be contaminated with salmonella. The customer’s recall stemmed from the U.S. Food and Drug Administration and other authorities’ investigation of Peanut Corporation of America, which supplied the Company with peanut paste and other ingredients. In accordance with the Company’s contractual arrangements with the customer, the parties submitted these claims to mediation. In January 2011, the Company resolved all pending contractual and other claims, resulting in a payment by the Company of $5.0 and an obligation to pay an additional $5.0, subject to the customer’s completion of certain contractual obligations through February 2013. The Company accrued $7.5 in the fiscal year ended September 30, 2010 based on early estimates of the settlement amount, and accrued an additional $2.5 in the quarter ended December 31, 2010.

Two subsidiaries of the Company are subject to three pending lawsuits brought by former employees currently pending in separate California state courts alleging, among other things, that employees did not receive sufficient meal breaks resulting in incorrect wage statements, unpaid overtime and untimely payments to terminated employees. Each of these suits was filed as a class action and seeks to include in the class certain current and former employees of the respective subsidiary involved. In each case, the plaintiffs are seeking unpaid wages, interest, attorneys’ fees, compensatory and other monetary damages and injunctive relief. No determination has been made by either court regarding class certification and there can be no assurance as to whether a class will be certified or, if a class is certified, as to the scope of such class. The Company’s liability, if any, relating to these lawsuits cannot be reasonably estimated at this time; however, the Company does not expect that its ultimate liability, if any, will exceed $10.0.

From time to time, the Company is a party to various other legal proceedings. In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accruals for estimated liabilities (if any), are not expected to be material, individually or in the aggregate, to the Company’s consolidated financial position, results of operations or cash flows. In addition, while it is difficult to estimate the potential financial impact of actions regarding expenditures for compliance with regulatory matters, in the opinion of management, based upon the information currently available, the ultimate liability arising from such compliance matters is not expected to be material, individually or in the aggregate, to the Company’s consolidated financial position, results of operations or cash flows.

NOTE 15 – SHORT-TERM FINANCING ARRANGEMENTS

The Company has an agreement to sell, on an ongoing basis, all of the trade accounts receivable of certain of its subsidiaries to a wholly owned, bankruptcy-remote subsidiary named Ralcorp Receivables Corporation (“RRC”). As of December 31, 2011, the accounts receivable of the American Italian Pasta Company, Bloomfield Bakers, Medallion Foods, and foreign subsidiaries had not been incorporated into the agreement and were not being sold to RRC. RRC can in turn sell up to $110.0 of ownership interests in qualifying receivables to bank commercial paper conduits. Ralcorp continues to service the receivables (with no significant servicing assets or liabilities) and remits collections to RRC, who remits the appropriate portion to the conduits as part of a monthly net settlement including the sale of an additional month of receivables. Interest incurred on the funding received from the conduits totaled $.3 in the three months ended December 31, 2011 and in the three months ended December 31, 2010.

In December 2010, the Company entered into uncommitted credit arrangements with banks totaling $150.0. The arrangements expired in December 2011.

On October 3, 2011, the Company entered into a credit agreement (“2011 Credit Agreement”) consisting of a $550 term loan. Borrowings under the agreement incur interest at the Company's choice of either (1) LIBOR plus the applicable margin rate (currently 1.50%) or (2) the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate, (c) the “Adjusted LIBOR Rate” plus 1%. Such borrowings are unsecured and mature on October 2, 2012. The covenants include requirements that “EBIT” be at least three times “Consolidated Interest Expense” and that “Total Debt” not exceed 3.75 times “Adjusted EBITDA” (each term as defined in the agreement).

As of December 31, 2011, funding from the receivables securitization was $60.0 at a weighted average interest rate of 1.28% and borrowings under the 2011 Credit Agreement were $550 at a weighted average interest rate of 1.75%. As of September 30, 2011, funding from the receivables securitization was $105.0 at a weighted average interest rate of 1.22%, and borrowings under the uncommitted credit arrangements were zero. These amounts are reflected on the Company’s consolidated balance sheet in “Notes payable to banks.”

NOTE 16 – LONG-TERM DEBT

The reported value of long-term debt consisted of:


	December 31, 2011						September 30, 2011
	Balance			Rate			Balance			Rate
Fixed Rate Senior Notes, Series C	$	50.0			5.43	%	$	50.0			5.43	%
Fixed Rate Senior Notes, Series D		21.4			4.76	%		32.1			4.76	%
Fixed Rate Senior Notes, Series E		100.0			5.57	%		100.0			5.57	%
Fixed Rate Senior Notes, Series F		75.0			5.43	%		75.0			5.43	%
Fixed Rate Senior Notes, Series I-1		75.0			5.56	%		75.0			5.56	%
Fixed Rate Senior Notes, Series I-2		25.0			5.58	%		25.0			5.58	%
Fixed Rate Senior Notes, Series J		100.0			5.93	%		100.0			5.93	%
Fixed Rate Senior Notes maturing 2018		577.5			7.29	%		577.5			7.29	%
Floating Rate Senior Notes maturing 2018		20.0			3.00	%		20.0			2.80	%
Fixed Rate Senior Notes maturing 2020		67.0			7.39	%		67.0			7.39	%
4.95% Senior Notes maturing 2020		300.0			4.95	%		300.0			4.95	%
Fixed Rate Senior Notes maturing 2039		450.0			6.63	%		450.0			6.63	%
Fixed Rate Senior Notes, Series 2009A		50.0			7.45	%		50.0			7.45	%
Fixed Rate Senior Notes, Series 2009B		50.0			7.60	%		50.0			7.60	%
2010 Revolving Credit Agreement		30.0			2.62	%		19.9			2.62	%
2010 Term Loan		175.0			2.75	%		190.0			2.75	%
Other		3.0			Various			—			Various

		2,168.9						2,181.5
Plus: Unamortized premium (discount), net		3.1						3.1
Plus: Unamortized adjustment related to interest rate fair value hedge		17.9						18.6
Less: Current portion		(106.3	)					(30.7	)

	$	2,083.6					$	2,172.5

NOTE 17 – SHAREHOLDERS’ EQUITY

During the three months ended December 31, 2011 and 2010, the Company repurchased 8,389 and 9,000 shares, respectively, of its common stock at a total cost of $.6 in each year. As of December 31, 2011, there were 8,274,383 shares in treasury and 55,202,252 shares outstanding. As of September 30, 2011, there were 8,291,667 shares in treasury and 55,184,968 shares outstanding.

Accumulated other comprehensive loss decreased $6.7 during the three months ended December 31, 2011 as a result of a $5.9 positive change in the foreign currency translation adjustment and a $1.0 net gain from cash flow hedging activities, offset by $.2 of related income taxes.

Accumulated other comprehensive loss decreased $24.0 during the three months ended December 31, 2010 as a result of a $10.3 positive change in the foreign currency translation adjustment and a $20.4 net gain from cash flow hedging activities, offset by $6.7 of related income taxes.

NOTE 18 – SEGMENT INFORMATION

Management evaluates each segment’s performance based on its segment operating profit, which is its operating profit before impairments of intangible assets, costs related to plant closures, and other unallocated corporate income and expenses. The following tables present information about the Company’s operating segments, which are also its reportable segments, including corresponding amounts for the prior year.


	Three Months Ended
	December 31,
	2011			2010
Net sales
Cereal Products	$	226.2		$	204.7
Snacks, Sauces & Spreads		473.6			417.4
Frozen Bakery Products		308.0			193.7
Pasta		158.7			135.9

Total	$	1,166.5		$	951.7

Segment operating profit
Cereal Products	$	28.8		$	22.5
Snacks, Sauces & Spreads		41.1			37.4
Frozen Bakery Products		33.9			23.0
Pasta		26.7			28.2

Total segment operating profit		130.5			111.1
Interest expense, net		(34.4	)		(35.7	)
Adjustments for economic hedges		(5.2	)		3.9
Merger and integration costs		(5.6	)		(.2	)
Accelerated amortization of intangible assets		(1.3	)		(1.3	)
Provision for legal settlement		—			(2.5	)
Amounts related to plant closures		(.1	)		(.2	)
Stock-based compensation expense		(3.1	)		(3.4	)
Systems upgrade and conversion costs		(1.6	)		(2.4	)
Other unallocated corporate expenses		(10.6	)		(11.1	)

Earnings before income taxes and equity earnings	$	68.6		$	58.2

Depreciation and amortization
Cereal Products	$	5.3		$	5.5
Snacks, Sauces & Spreads		10.6			10.3
Frozen Bakery Products		16.9			10.0
Pasta		12.7			13.2
Corporate		3.9			3.2

Total	$	49.4		$	42.2


	December 31,			September 30,
	2011			2011
Assets, end of period
Cereal Products	$	279.4		$	263.4
Snacks, Sauces & Spreads		799.7			799.0
Frozen Bakery Products		1,282.1			712.9
Pasta		1,484.1			1,463.0

Total		3,845.3			3,238.3
Cash and cash equivalents		61.4			50.0
Other unallocated corporate assets		285.4			318.9
Assets of discontinued operations		2,671.5			2,672.0

Total	$	6,863.6		$	6,279.2

NOTE 19 – CONDENSED FINANCIAL STATEMENTS OF GUARANTORS (RESTATED)

In August 2009 and July 2010, the Company issued a total of $750.0 of Senior Notes which are publicly tradable. The notes are fully and unconditionally guaranteed on a joint and several basis by most of Ralcorp’s domestic subsidiaries (“Guarantor Subsidiaries”), each of which is wholly owned, directly or indirectly, by Ralcorp Holdings, Inc. (“Parent Company”). The guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions). In addition, such securities are collateralized by 65% of the stock of Ralcorp’s indirectly wholly owned foreign operating subsidiaries. The notes are not guaranteed by the foreign subsidiaries and a few of Ralcorp’s wholly owned domestic subsidiaries (“Non-Guarantor Subsidiaries”).

In May of 2012, the Company identified errors in the previously issued condensed financial statements of guarantors included in the Quarterly Report on Form 10-Q for the quarter ended December 31, 2011. The Company has restated its condensed financial statements of guarantors as of December 31, 2011 and September 30, 2011, and for the quarters ended December 31, 2011 and 2010. The effect of the restatement adjustments on the condensed financial statements of guarantors as previously reported for these periods is disclosed in the following tables (which do not reflect recasting for discontinued operations). These errors are described in the legend following the tables.

Condensed Consolidating Statements of Earnings


	Three Months Ended December 31, 2011
	Parent Company						Guarantor Subsidiaries						Non-Guarantor Subsidiaries						Eliminations						Consolidated
	Previously						Previously						Previously						Previously						Previously
	Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated

Other intercompany revenues⁴	$	.5		$	.5		$	3.0		$	3.0		$	13.5		$	17.0		$	(17.0	)	$	(20.5	)	$	—		$	—
Cost of goods sold²		(109.4	)		(107.8	)		(898.2	)		(899.8	)		(81.7	)		(81.7	)		44.7			44.7			(1,044.6	)		(1,044.6	)
Gross Profit		32.6			34.2			287.3			285.7			33.4			36.9			(17.0	)		(20.5	)		336.3			336.3
Selling, general and administrative expenses^2,4		(37.7	)		(37.6	)		(135.2	)		(138.8	)		(17.3	)		(17.3	)		17.0			20.5			(173.2	)		(173.2	)
Amortization of intangible assets²		(2.9	)		(1.6	)		(19.6	)		(20.9	)		(1.5	)		(1.5	)		—			—			(24.0	)		(24.0	)
Other operating expenses, net²		(2.8	)		(2.7	)		(.5	)		(.6	)		(.1	)		(.1	)		—			—			(3.4	)		(3.4	)
Operating (Loss) Profit		(10.8	)		(7.7	)		132.0			125.4			14.5			18.0			—			—			135.7			135.7
(Loss) Earnings before Income Taxes and Equity Earnings		(44.9	)		(41.8	)		132.4			125.8			13.8			17.3			—			—			101.3			101.3
Income taxes^2,3,4		(15.9	)		14.8			(15.2	)		(44.7	)		(4.9	)		(6.1	)		—			—			(36.0	)		(36.0	)
(Loss) Earnings before Equity Earnings		(60.8	)		(27.0	)		117.2			81.1			8.9			11.2			—			—			65.3			65.3
Equity in earnings of subsidiaries^2,3		126.1			92.3			5.8			5.8			—			—			(131.9	)		(98.1	)		—			—
Net Earnings		65.3			65.3			123.0			86.9			8.9			11.2			(131.9	)		(98.1	)		65.3			65.3

	Three Months Ended December 31, 2010
	Parent Company						Guarantor Subsidiaries						Non-Guarantor Subsidiaries						Eliminations						Consolidated
	Previously						Previously						Previously						Previously						Previously
	Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated

Other intercompany revenues⁴	$	.5		$	.5		$	2.7		$	2.7		$	12.3		$	16.1		$	(15.5	)	$	(19.3	)	$	—		$	—
Gross Profit		39.0			39.0			266.7			266.7			27.8			31.6			(15.5	)		(19.3	)		318.0			318.0
Selling, general and administrative expenses⁴		(31.5	)		(31.5	)		(113.4	)		(117.2	)		(18.1	)		(18.1	)		15.5			19.3			(147.5	)		(147.5	)
Operating Profit		5.8			5.8			133.2			129.4			8.1			11.9			—			—			147.1			147.1
(Loss) Earnings before Income Taxes and Equity Earnings		(30.3	)		(30.3	)		133.4			129.6			8.3			12.1			—			—			111.4			111.4
Income taxes⁴		10.9			10.9			(47.9	)		(46.5	)		(3.1	)		(4.5	)		—			—			(40.1	)		(40.1	)
(Loss) Earnings before Equity Earnings		(19.4	)		(19.4	)		85.5			83.1			5.2			7.6			—			—			71.3			71.3
Net Earnings		71.3			71.3			87.1			84.7			5.2			7.6			(92.3	)		(92.3	)		71.3			71.3

Condensed Consolidating Balance Sheets


	December 31, 2011
	Parent Company				Guarantor Subsidiaries					Non-Guarantor Subsidiaries				Eliminations						Consolidated
	Previously Reported		Restated		Previously Reported			Restated		Previously Reported		Restated		Previously Reported			Restated			Previously Reported		Restated

Receivables, net^2,3,4	$	41.1	$	3.9	$	108.8		$	131.1	$	259.0	$	275.7	$	(4.0	)	$	(5.8	)	$	404.9	$	404.9
Total Current Assets		140.7		103.5		558.3			580.6		346.8		363.5		(4.0	)		(5.8	)		1,041.8		1,041.8
Intercompany Notes and Interest^3,4		—		—		88.9			100.5		106.6		115.0		(195.5	)		(215.5	)		—		—
Investment in Subsidiaries^1,2,3,4		5,530.4		5,551.2		299.6			289.8		—		—		(5,830.0	)		(5,841.0	)		—		—
Deferred Income Taxes²		141.0		85.4		—			—		—		—		(141.0	)		(85.4	)		—		—
Goodwill¹		—		—		2,707.5			2,653.5		112.9		112.9		—			—			2,820.4		2,766.4
Other Assets³		11.0		38.3		28.6			1.3		.2		.2		—			—			39.8		39.8
Total Assets		5,922.2		5,877.5		6,367.8			6,310.6		798.1		823.2		(6,170.5	)		(6,147.7	)		6,917.6		6,863.6
Accounts payable³		71.3		71.3		215.0			216.8		36.3		36.3		(4.0	)		(5.8	)		318.6		318.6
Other current liabilities²		128.1		129.1		82.7			89.1		26.2		18.8		—			—			237.0		237.0
Total Current Liabilities		855.2		856.2		297.7			305.9		123.0		115.6		(4.0	)		(5.8	)		1,271.9		1,271.9
Intercompany Notes and Interest^3,4		91.5		99.9		15.1			15.1		88.9		100.5		(195.5	)		(215.5	)		—		—
Long-term Debt²		2,081.2		2,081.1		(.1	)		—		2.5		2.5		—			—			2,083.6		2,083.6
Deferred Income Taxes²		—		—		750.2			694.6		11.1		11.1		(141.0	)		(85.4	)		620.3		620.3
Total Liabilities		3,228.0		3,237.3		1,070.5			1,023.2		265.4		269.6		(340.5	)		(306.7	)		4,223.4		4,223.4
Other shareholders’ equity^1,2,3,4		2,693.6		2,639.6		5,297.3			5,287.4		532.7		553.6		(5,830.0	)		(5,841.0	)		2,693.6		2,639.6
Total Shareholders’ Equity		2,694.2		2,640.2		5,297.3			5,287.4		532.7		553.6		(5,830.0	)		(5,841.0	)		2,694.2		2,640.2
Total Liabilities and Shareholders’ Equity		5,922.2		5,877.5		6,367.8			6,310.6		798.1		823.2		(6,170.5	)		(6,147.7	)		6,917.6		6,863.6



	September 30, 2011
	Parent Company				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations						Consolidated
	Previously Reported		Restated		Previously Reported		Restated		Previously Reported		Restated		Previously Reported			Restated			Previously Reported		Restated

Receivables, net^2,3,4	$	57.5	$	55.7	$	70.0	$	49.4	$	284.7	$	310.8	$	(1.8	)	$	(5.5	)	$	410.4	$	410.4
Total Current Assets		151.2		149.4		480.4		459.8		368.2		394.3		(5.1	)		(8.8	)		994.7		994.7
Intercompany Notes and Interest⁴		—		—		88.8		88.8		130.7		106.8		(219.5	)		(195.6	)		—		—
Investment in Subsidiaries^1,2,3,4		4,921.9		4,873.5		267.7		271.4		—		—		(5,189.6	)		(5,144.9	)		—		—
Deferred Income Taxes²		141.0		85.4		—		—		—		—		(141.0	)		(85.4	)		—		—
Goodwill¹		—		—		2,491.0		2,437.0		99.1		99.1		—			—			2,590.1		2,536.1
Other Assets³		11.5		35.3		24.9		1.1		.2		.2		—			—			36.6		36.6
Total Assets		5,326.5		5,244.5		5,735.7		5,641.0		826.2		828.4		(5,555.2	)		(5,434.7	)		6,333.2		6,279.2
Accounts payable²		74.7		74.7		201.8		205.5		41.8		41.8		(5.1	)		(8.8	)		313.2		313.2
Other current liabilities²		120.2		116.1		84.5		88.6		18.3		18.3		—			—			223.0		223.0
Total Current Liabilities		225.6		221.5		286.3		294.1		165.1		165.1		(5.1	)		(8.8	)		671.9		671.9
Intercompany Notes and Interest⁴		115.6		91.7		15.1		15.1		88.8		88.8		(219.5	)		(195.6	)		—		—
Deferred Income Taxes²		—		—		765.5		709.9		11.1		11.1		(141.0	)		(85.4	)		635.6		635.6
Total Liabilities		2,707.3		2,679.3		1,070.1		1,022.3		302.2		302.2		(365.6	)		(289.8	)		3,714.0		3,714.0
Other shareholders’ equity^1,2,3,4		2,618.6		2,564.6		4,665.6		4,618.7		524.0		526.2		(5,189.6	)		(5,144.9	)		2,618.6		2,564.6
Total Shareholders’ Equity		2,619.2		2,565.2		4,665.6		4,618.7		524.0		526.2		(5,189.6	)		(5,144.9	)		2,619.2		2,565.2
Total Liabilities and Shareholders’ Equity		5,326.5		5,244.5		5,735.7		5,641.0		826.2		828.4		(5,555.2	)		(5,434.7	)		6,333.2		6,279.2

Condensed Consolidating Statements of Cash Flows


	Three Months Ended December 31, 2011
	Parent Company						Guarantor Subsidiaries						Non-Guarantor Subsidiaries						Eliminations						Consolidated
	Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated
Net Cash Provided by Operating Activities^2,3,4,5	$	64.6		$	51.3		$	(38.7	)	$	32.7		$	95.1		$	60.3		$	3.3		$	(20.0	)	$	124.3		$	124.3
Intercompany investments and advances^2,3,4,5		(599.8	)		—			625.9			—			(26.1	)		—			—			—			—			—
Payments for equity contributions⁵		—			(600.2	)		—			—			—			—			—			600.2			—			—
Payments for intercompany lending⁵		—			—			—			(11.6	)		—			(35.2	)		—			46.8			—			—
Receipt of intercompany loan repayments⁵		—			—			—			—			—			34.6			—			(34.6	)		—			—
Net Cash Used by Investing Activities		(595.9	)		(596.3	)		38.5			(599.0	)		(44.1	)		(18.6	)		—			612.4			(601.5	)		(601.5	)
Proceeds from equity contributions⁵		—			—			—			586.9			—			4.5			—			(591.4	)		—			—
Payments for equity distributions⁵		—			—			—			(13.6	)		—			(.9	)		—			14.5			—			—
Proceeds from intercompany borrowing⁵		—			35.2			—			—			—			11.6			—			(46.8	)		—			—
Repayments of intercompany loans⁵		—			(26.8	)		—			—			—			(7.8	)		—			34.6			—			—
Net Cash Provided (Used) by Financing Activities		529.7			543.4			3.4			569.5			(45.0	)		(35.7	)		—			(589.1	)		488.1			488.1

	Three Months Ended December 31, 2010
	Parent Company						Guarantor Subsidiaries						Non-Guarantor Subsidiaries						Eliminations						Consolidated
	Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated			Previously Reported			Restated
Net Cash Provided (Used) by Operating Activities^2,3,4,5	$	270.7		$	141.6		$	(6.1	)	$	228.7		$	(78.8	)	$	(98.5	)	$	(8.1	)	$	(94.1	)	$	177.7		$	177.7
Intercompany investments and advances^2,3,4,5		(35.5	)		—			59.5			—			(24.0	)		—			—			—			—			—
Payments for equity contributions⁵		—			(6.2	)		—			—			—			—			—			6.2			—			—
Proceeds from equity distributions⁵		—			91.2			—			—			—			—			—			(91.2	)		—			—
Payments for intercompany lending⁵		—			—			—			—			—			(54.9	)		—			54.9			—			—
Receipt of intercompany loan repayments⁵		—			—			—			—			—			46.3			—			(46.3	)		—			—
Net Cash Provided (Used) by Investing Activities		(36.2	)		84.3			38.3			(21.2	)		(23.2	)		(7.8	)		—			(76.4	)		(21.1	)		(21.1	)
Proceeds from equity contributions⁵		—			—			—			.4			—			5.8			—			(6.2	)		—			—
Payments for equity distributions⁵		—			—			—			(176.2	)		—			(1.0	)		—			177.2			—			—
Proceeds from intercompany borrowing⁵		—			54.9			—			—			—			—			—			(54.9	)		—			—
Repayments of intercompany loans⁵		—			(46.3	)		—			—			—			—			—			46.3			—			—
Net Cash (Used) Provided by Financing Activities		(228.9	)		(220.3	)		(32.5	)		(207.8	)		100.0			104.3			—			162.4			(161.4	)		(161.4	)

¹	The calculated amount of impairment of intangible assets was incorrect as discussed in Note 3.

²	Transactions were not in the correct legal entity, and the amounts were not properly reclassified to the correct column.

³	Clerical errors led to misclassifications between columns and between line items.

⁴	Intercompany amounts related to the receivables securitization program discussed in Note 15 were not correctly calculated or reported.

⁵	Cash flows related to intercompany loans and investments were all included in a single line in cash flows from investing activities instead of separately identified and classified by transaction type in cash flows from operating, investing, and financing activities.

Set forth below are condensed consolidating financial statements presenting the results of operations, financial position, and cash flows of the Parent Company (“Parent”), the Guarantor Subsidiaries (“Guarantor”) on a combined basis, and the Non-Guarantor Subsidiaries (“Non-Guarantor”) on a combined basis, along with the eliminations necessary to arrive at the information for Ralcorp Holdings, Inc. on a consolidated basis. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among Parent, Guarantor, and Non-Guarantor. For this presentation, investments in subsidiaries are accounted for using the equity method of accounting. These condensed consolidating financial statements have been restated to correct for certain errors (as disclosed above) and recasted to show discontinued operations (as described in Note 4). Effective with the Spin-Off, Post Foods LLC is no longer a guarantor, and all related amounts for Post have been reclassified to Non-Guarantor Subsidiaries to conform with the current presentation.

Condensed Consolidating Statements of Earnings


	Three Months Ended December 31, 2011
	Parent			Guarantor			Non-Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(Restated)			(Restated)			(Restated)			(Restated)
Net Sales	$	145.4		$	977.4		$	82.2		$	(38.5	)	$	1,166.5
Other intercompany revenues		.5			2.2			17.8			(20.5	)		—
Cost of goods sold		(111.1	)		(788.5	)		(67.1	)		38.5			(928.2	)

Gross Profit		34.8			191.1			32.9			(20.5	)		238.3
Selling, general and administrative expenses		(36.0	)		(83.1	)		(12.5	)		20.5			(111.1	)
Amortization of intangible assets		(1.6	)		(17.7	)		(1.5	)		—			(20.8	)
Other operating expenses, net		(2.7	)		(.6	)		(.1	)		—			(3.4	)

Operating Profit		(5.5	)		89.7			18.8			—			103.0
Interest (expense) income, net		(34.1	)		.4			(.7	)		—			(34.4	)

(Loss) Earnings from Continuing Operations before Income Taxes and Equity Earnings		(39.6	)		90.1			18.1			—			68.6
Income taxes		14.0			(33.2	)		(5.2	)		—			(24.4	)
Equity in earnings of subsidiaries		92.3			5.8			—			(98.1	)		—

Earnings before Equity Earnings		66.7			62.7			12.9			(98.1	)		44.2
(Loss) earnings from discontinued operations, net of income taxes		(1.4	)		—			22.5			—			21.1

Net Earnings	$	65.3		$	62.7		$	35.4		$	(98.1	)	$	65.3


	Three Months Ended December 31, 2010
	Parent			Guarantor			Non-Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
				(Restated)			(Restated)			(Restated)
Net Sales	$	135.8		$	759.8		$	78.4		$	(22.3	)	$	951.7
Other intercompany revenues		.5			1.8			17.0			(19.3	)		—
Cost of goods sold		(98.1	)		(600.9	)		(66.8	)		22.3			(743.5	)

Gross Profit		38.2			160.7			28.6			(19.3	)		208.2
Selling, general and administrative expenses		(34.2	)		(64.1	)		(16.0	)		19.3			(95.0	)
Amortization of intangible assets		(1.3	)		(13.4	)		(1.6	)		—			(16.3	)
Other operating expenses, net		(.4	)		(2.6	)		—			—			(3.0	)

Operating Profit		2.3			80.6			11.0			—			93.9
Interest (expense) income, net		(36.1	)		.2			.2			—			(35.7	)

(Loss) Earnings from Continuing Operations before Income Taxes and Equity Earnings		(33.8	)		80.8			11.2			—			58.2
Income taxes		12.2			(28.0	)		(5.1	)		—			(20.9	)
Equity in earnings of subsidiaries		90.7			1.6			—			(92.3	)		—

Earnings from Continuing Operations		69.1			54.4			6.1			(92.3	)		37.3
Earnings from discontinued operations, net of income taxes		2.2			—			31.8			—			34.0

Net Earnings	$	71.3		$	54.4		$	37.9		$	(92.3	)	$	71.3

Condensed Consolidating Balance Sheets


	December 31, 2011
	Parent			Guarantor			Non-Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(Restated)			(Restated)			(Restated)			(Restated)			(Restated)
Assets
Current Assets
Cash and cash equivalents	$	.9		$	3.2		$	57.3		$	—		$	61.4
Marketable securities		1.0			—			—			—			1.0
Receivables, net		3.9			86.6			267.3			(5.8	)		352.0
Inventories		74.4			356.6			21.8			—			452.8
Deferred income taxes		14.4			1.1			.2			—			15.7
Prepaid expenses and other current assets		8.9			9.3			2.5			—			20.7
Current assets of discontinued operations		—			—			138.2			—			138.2

Total Current Assets		103.5			456.8			487.3			(5.8	)		1,041.8
Intercompany Notes and Interest		—			100.5			115.0			(215.5	)		—
Investment in Subsidiaries		5,551.2			289.8			—			(5,841.0	)		—
Deferred Income Taxes		46.5			—			—			(46.5	)		—
Property		254.3			1,097.1			165.0			—			1,516.4
Accumulated Depreciation		(180.5	)		(445.6	)		(43.2	)		—			(669.3	)
Goodwill		—			1,284.6			106.4			—			1,391.0
Other Intangible Assets		67.8			1,112.3			72.9			—			1,253.0
Accumulated Amortization		(42.5	)		(180.8	)		(17.7	)		—			(241.0	)
Other Assets		36.9			1.3			.2			—			38.4
Noncurrent Assets of Discontinued Operations		40.3			—			2,531.9			(38.9	)		2,533.3

Total Assets	$	5,877.5		$	3,716.0		$	3,417.8		$	(6,147.7	)	$	6,863.6

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	71.3		$	189.1		$	33.3		$	(5.8	)	$	287.9
Notes payable to banks		550.0			—			60.0			—			610.0
Current portion of long-term debt		105.8			—			.5			—			106.3
Other current liabilities		125.6			67.0			12.8			—			205.4
Current liabilities of discontinued operations		3.5			—			58.8			—			62.3

Total Current Liabilities		856.2			256.1			165.4			(5.8	)		1,271.9
Intercompany Notes and Interest		99.9			15.1			100.5			(215.5	)		—
Long-term Debt		2,081.1			—			2.5			—			2,083.6
Deferred Income Taxes		—			310.1			2.1			(46.5	)		265.7
Other Liabilities		102.1			6.9			31.4			—			140.4
Noncurrent Liabilities of Discontinued Operations		98.0			—			402.7			(38.9	)		461.8

Total Liabilities		3,237.3			588.2			704.6			(306.7	)		4,223.4

Shareholders’ Equity
Common stock		.6			—			—			—			.6
Other shareholders’ equity		2,639.6			3,127.8			2,713.2			(5,841.0	)		2,639.6

Total Shareholders’ Equity		2,640.2			3,127.8			2,713.2			(5,841.0	)		2,640.2

Total Liabilities and Shareholders’ Equity	$	5,877.5		$	3,716.0		$	3,417.8		$	(6,147.7	)	$	6,863.6


	September 30, 2011
	Parent			Guarantor			Non-Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(Restated)			(Restated)			(Restated)			(Restated)			(Restated)
Assets
Current Assets
Cash and cash equivalents	$	2.5		$	—		$	50.8		$	(3.3	)	$	50.0
Marketable securities		8.2			—			—			—			8.2
Receivables, net		55.7			65.9			233.5			(5.5	)		349.6
Inventories		65.2			334.9			24.0			—			424.1
Deferred income taxes		14.4			1.1			.2			—			15.7
Prepaid expenses and other current assets		3.4			7.1			1.3			—			11.8
Current assets of discontinued operations		—			—			135.3			—			135.3

Total Current Assets		149.4			409.0			445.1			(8.8	)		994.7
Intercompany Notes and Interest		—			88.8			106.8			(195.6	)		—
Investment in Subsidiaries		4,873.5			271.4			—			(5,144.9	)		—
Deferred Income Taxes		46.5			—			—			(46.5	)		—
Property		252.5			1,015.9			155.9			—			1,424.3
Accumulated Depreciation		(177.1	)		(426.8	)		(37.2	)		—			(641.1	)
Goodwill		—			1,068.1			92.8			—			1,160.9
Other Intangible Assets		66.3			850.7			70.7			—			987.7
Accumulated Amortization		(40.8	)		(163.3	)		(15.7	)		—			(219.8	)
Other Assets		34.5			1.1			.2			—			35.8
Noncurrent Assets of Discontinued Operations		39.7			—			2,535.9			(38.9	)		2,536.7

Total Assets	$	5,244.5		$	3,114.9		$	3,354.5		$	(5,434.7	)	$	6,279.2

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	74.7		$	180.7		$	37.8		$	(8.8	)	$	284.4
Notes payable to banks		—			—			105.0			—			105.0
Current portion of long-term debt		30.7			—			—			—			30.7
Other current liabilities		112.0			67.6			12.5			—			192.1
Current liabilities of discontinued operations		4.1			—			55.6			—			59.7

Total Current Liabilities		221.5			248.3			210.9			(8.8	)		671.9
Intercompany Notes and Interest		91.7			15.1			88.8			(195.6	)		—
Long-term Debt		2,172.5			—			—			—			2,172.5
Deferred Income Taxes		—			325.4			2.1			(46.5	)		281.0
Other Liabilities		97.6			2.4			29.1			—			129.1
Noncurrent Liabilities of Discontinued Operations		96.0			—			402.4			(38.9	)		459.5

Total Liabilities		2,679.3			591.2			733.3			(289.8	)		3,714.0

Shareholders’ Equity
Common stock		.6			—			—			—			.6
Other shareholders’ equity		2,564.6			2,523.7			2,621.2			(5,144.9	)		2,564.6

Total Shareholders’ Equity		2,565.2			2,523.7			2,621.2			(5,144.9	)		2,565.2

Total Liabilities and Shareholders’ Equity	$	5,244.5		$	3,114.9		$	3,354.5		$	(5,434.7	)	$	6,279.2

Condensed Consolidating Statements of Cash Flows


	Three Months Ended December 31, 2011
	Parent			Guarantor			Non-Guarantor
	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(Restated)			(Restated)			(Restated)			(Restated)
Cash Flows from Operating Activities
Net Cash Provided (Used) by Operating Activities — Continuing Operations	$	51.9		$	64.3		$	(5.9	)	$	(21.5	)	$	88.8
Net Cash (Used) Provided by Operating Activities — Discontinued Operations		(.6	)		—			34.6			1.5			35.5

Net Cash Provided by Operating Activities		51.3			64.3			28.7			(20.0	)		124.3

Cash Flows from Investing Activities
Business acquisitions, net of cash acquired		—			(554.4	)		(15.9	)		—			(570.3	)
Additions to property and intangible assets		(3.3	)		(24.3	)		(1.8	)		—			(29.4	)
Proceeds from sale or maturity of securities		7.2			—			—			—			7.2
Payments for equity contributions		(559.9	)		—			—			559.9			—
Payments for intercompany lending		—			(11.6	)		(35.2	)		46.8			—
Receipt of intercompany loan repayments		—			—			34.6			(34.6	)		—

Net Cash Used by Investing Activities — Continuing Operations		(556.0	)		(590.3	)		(18.3	)		572.1			(592.5	)
Net Cash Used by Investing Activities — Discontinued Operations		(40.3	)		—			(9.0	)		40.3			(9.0	)

Net Cash Used by Investing Activities		(596.3	)		(590.3	)		(27.3	)		612.4			(601.5	)

Cash Flows from Financing Activities
Repayments of long-term debt		(25.7	)		—			—			—			(25.7	)
Net borrowings (repayments) under credit arrangements		560.0			—			(45.0	)		—			515.0
Purchase of treasury stock		(.6	)		—			—			—			(.6	)
Proceeds and tax benefits from exercise of stock awards		.8			—			—			—			.8
Changes in book cash overdrafts		.5			(3.8	)		1.9			—			(1.4	)
Proceeds from equity contributions		—			555.3			4.5			(559.8	)		—
Payments for equity distributions		—			(22.3	)		(.9	)		23.2			—
Proceeds from intercompany borrowing		35.2			—			11.6			(46.8	)		—
Repayments of intercompany loans		(26.8	)		—			(7.8	)		34.6			—

Net Cash Provided (Used) by Financing Activities — Continuing Operations		543.4			529.2			(35.7	)		(548.8	)		488.1
Net Cash Provided by Financing Activities — Discontinued Operations		—			—			40.3			(40.3	)		—

Net Cash Provided by Financing Activities		543.4			529.2			4.6			(589.1	)		488.1

Effect of Exchange Rate Changes on Cash		—			—			.5			—			.5

Net (Decrease) Increase in Cash and Cash Equivalents		(1.6	)		3.2			6.5			3.3			11.4
Cash and Cash Equivalents, Beginning of Period		2.5			—			50.8			(3.3	)		50.0

Cash and Cash Equivalents, End of Period	$	.9		$	3.2		$	57.3		$	—		$	61.4


	Three Months Ended December 31, 2010
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(Restated)			(Restated)			(Restated)			(Restated)
Cash Flows from Operating Activities
Net Cash Provided (Used) by Operating Activities—Continuing Operations	$	106.0		$	125.7		$	(31.2	)	$	(60.6	)	$	139.9
Net Cash Provided by Operating Activities—Discontinued Operations		35.6			—			35.7			(33.5	)		37.8

Net Cash Provided by Operating Activities		141.6			125.7			4.5			(94.1	)		177.7

Cash Flows from Investing Activities
Additions to property and intangible assets		(.7	)		(18.7	)		1.6			—			(17.8	)
Purchases of securities		(10.0	)		—			—			—			(10.0	)
Proceeds from sale or maturity of securities		10.0			—			—			—			10.0
Payments for equity contributions		(6.2	)		—			—			6.2			—
Proceeds from equity distributions		21.0			—			—			(21.0	)		—
Payments for intercompany lending		—			—			(54.9	)		54.9			—
Receipt of intercompany loan repayments		—			—			46.3			(46.3	)		—

Net Cash Provided (Used) by Investing Activities—Continuing Operations		14.1			(18.7	)		(7.0	)		(6.2	)		(17.8	)
Net Cash Provided (Used) by Investing Activities—Discontinued Operations		70.2			—			(3.3	)		(70.2	)		(3.3	)

Net Cash Provided (Used) by Investing Activities		84.3			(18.7	)		(10.3	)		(76.4	)		(21.1	)

Cash Flows from Financing Activities
Repayments of long-term debt		(42.2	)		—			—			—			(42.2	)
Net (repayments) borrowings under credit arrangements		(179.3	)		—			100.0			—			(79.3	)
Purchase of treasury stock		(.6	)		—			—			—			(.6	)
Proceeds and tax benefits from exercise of stock awards		2.3			—			—			—			2.3
Changes in book cash overdrafts		(9.1	)		(31.9	)		(.5	)		—			(41.5	)
Proceeds from equity contributions		—			.4			5.8			(6.2	)		—
Payments for equity distributions		—			(75.7	)		(1.0	)		76.7			—
Proceeds from intercompany borrowing		54.9			—			—			(54.9	)		—
Repayments of intercompany loans		(46.3	)		—			—			46.3			—
Other, net		—			(.1	)		—			—			(.1	)

Net Cash (Used) Provided by Financing Activities—Continuing Operations		(220.3	)		(107.3	)		104.3			61.9			(161.4	)
Net Cash Used by Financing Activities—Discontinued Operations		—			—			(100.5	)		100.5			—

Net Cash (Used) Provided by Financing Activities		(220.3	)		(107.3	)		3.8			162.4			(161.4	)

Effect of Exchange Rate Changes on Cash		—			—			.4			—			.4

Net Increase (Decrease) in Cash and Cash Equivalents		5.6			(.3	)		(1.6	)		(8.1	)		(4.4	)
Cash and Cash Equivalents, Beginning of Period		.6			.3			28.4			—			29.3

Cash and Cash Equivalents, End of Period	$	6.2		$	—		$	26.8		$	(8.1	)	$	24.9

NOTE 20 – SUBSEQUENT EVENTS

On January 17, 2012, Ralcorp amended its indenture associated with its notes dated as of August 4, 2008 (“Indenture”). In addition, the holders consented to certain matters in connection with the separation of Ralcorp’s subsidiary, Post Holdings, Inc. (“Post”). Post is the new holding company for Ralcorp’s branded cereals business, which, as described below, Ralcorp distributed to its shareholders in a tax-free spin-off. As amended:

•

The Indenture contains covenants that limit Ralcorp’s ability and the ability of Ralcorp's subsidiaries to, among other things: cause Ralcorp’s leverage ratio to exceed 3.5 to 1 at the end of any fiscal quarter, without paying additional interest, or cause Ralcorp’s leverage ratio to exceed 3.75 to 1, at the end of any fiscal quarter, or 3.5 to 1, for the two successive fiscal quarters immediately following a period during which it exceeded 3.5 to 1, in any case; cause Ralcorp’s consolidated adjusted net worth to fall below a specified amount; incur priority debt in an amount exceeding 20% of Ralcorp’s consolidated adjusted net worth; sell assets, including the stock of its subsidiaries; create certain liens; engage in transactions with affiliates; merge or consolidate with other entities; change the nature of its business or violate foreign assets control regulations. These covenants are subject to important exceptions and qualifications set forth in the Indenture.

•

The Indenture provides for the payment of additional interest in the amount of 1.00% in the event that the Company’s 6.625% Senior Notes due August 15, 2039 fail to have an investment grade rating from at least two of the rating agencies.

On January 17, 2012, Ralcorp also entered into amendments with respect to the Note Purchase Agreement dated as of May 22, 2003, as amended (the “2003 Note Purchase Agreement”), and the Note Purchase Agreement dated as of May 28, 2009 (the “2009 Note Purchase Agreement”). The amendments to the 2003 Note Purchase Agreement and the 2009 Note Purchase Agreement amend certain covenants so that those covenants are substantially similar to those set forth in the Indenture and consented to certain matters in connection with the separation of Post. These covenants and consents are subject to important exceptions and qualifications set forth in the 2003 Note Purchase Agreement and the 2009 Note Purchase Agreement.

On January 20, 2012, the Company entered into a credit agreement with banks (“Term Loan Banks”) under which it borrowed $775 as a term loan (“$775 Term Loan”). The proceeds of the $775 Term Loan were used by Ralcorp for general corporate purposes, including the repayment of Ralcorp’s or its subsidiaries’ outstanding indebtedness. Ralcorp repaid all $550 outstanding under, and terminated, the 2011 Credit Agreement, with no material early termination penalties incurred. Ralcorp also repaid all amounts outstanding under its receivables securitization program and the 2010 Revolving Credit Facility, and partially repaid amounts outstanding under the 2010 Term Loan.

On January 27, 2012, the Company entered into an exchange agreement with the Term Loan Banks or their affiliates. Pursuant to the terms of the exchange agreement, on February 3, 2012, Ralcorp delivered $775 in aggregate principal amount of 7.375% senior notes due 2022 (an obligation of Post Holdings, Inc.) in full satisfaction of the $775 Term Loan. Post initially issued the notes to Ralcorp on February 3, 2012 in connection with an internal reorganization as part of the separation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of Ralcorp Holdings, Inc. As discussed in the Explanatory Note to this Form 10-Q/A, the financial information contained in this report has been restated to reflect the restatement items described in Note 3 to the Condensed Consolidated Financial Statements in Item 1. This discussion should be read in conjunction with the financial statements under Item 1 and the CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS under this Item 2. The terms “our,” “we,” “Company,” and “Ralcorp” as used herein refer to Ralcorp Holdings, Inc. and its consolidated subsidiaries. Sales information for the “base business,” as reported herein, has been adjusted to exclude estimated current year sales attributable to recently acquired businesses for the period corresponding to the pre-acquisition period of the comparative period of the prior year. For each acquired business, the excluded period starts at the beginning of the most recent fiscal year being compared and ends one year after the acquisition date.

On February 3, 2012, the Company separated its Post cereals business (formerly, the Branded Cereal Products segment) into a new, publicly traded company (“Spin-Off”). The Company retained approximately 19.7% of the Post common stock outstanding at February 3, 2012. The net assets, operating results, and cash flows of Post are presented separately as discontinued operations (see Note 4 to the Condensed Consolidated Financial Statements in Item 1) for all periods presented unless otherwise specified.

RESULTS OF OPERATIONS

As discussed in more detail below, our results for the current year were affected by the October 3, 2011 acquisition of the operations of the North American private-brand refrigerated dough business of Sara Lee Corp. (“Refrigerated Dough”). In the first quarter of fiscal 2012, this acquisition contributed approximately $.14 per share.

The following table summarizes key financial measures for the three-month periods ended December 31, 2011 and 2010.


	Three Months Ended December 31,
	2011			2010			% Change
(dollars in millions, except per share data)
Net Sales	$	1,166.5		$	951.7			23	%
Operating Profit		103.0			93.9			10	%
Net Earnings from Continuing Operations		44.2			37.3			18	%
Earnings from discontinued operations, net of tax		21.1			34.0			-38	%
Net Earnings		65.3			71.3			-8	%
Diluted Earnings per Share from Continuing Operations	$	.79		$	.67			18	%
Diluted Earnings per Share from Discontinued Operations	$	.37		$	.61			-39	%
Adjusted Diluted Earnings per Share ⁽¹⁾	$	.92		$	.67			37	%

⁽¹⁾Reconciliation to Diluted Earnings per Share from Continuing Operations:

Adjusted Diluted Earnings per Share	$	.92		$	.67
Adjustments for economic hedges		(.06	)		.04
Merger and integration costs		(.06	)		—
Accelerated amortization of intangible assets		(.01	)		(.01	)
Provision for legal settlement		—			(.03	)

Diluted Earnings per Share from Continuing Operations	$	.79		$	.67

Net Sales


	Three Months Ended December 31,
	2011		2010		% Change
(dollars in millions)
Base-business Net Sales	$	1,065.5	$	951.7		12	%
Net sales from recent acquisitions excluded from base-business net sales:
Refrigerated Dough		101.0		—		11	%

Net Sales	$	1,166.5	$	951.7		23	%

Net sales increased 23% compared to last year’s first quarter, largely due to the acquisition of Refrigerated Dough. Base-business net sales increased 12% for the three months ended December 31, 2011 as a result of an increase in overall net pricing due to adjustments in response to higher ingredient and freight costs. Base-business volume was flat compared to a year ago.

Margins


	Three Months Ended December 31,
	2011			2010
(% of net sales)
Gross Profit		20.4	%		21.9	%
Selling, general and administrative expenses		-9.5	%		-10.0	%
Amortization of intangible assets		-1.8	%		-1.7	%
Other operating expenses, net		-.3	%		-.3	%

Operating Profit		8.8	%		9.9	%

Adjusted Gross Profit		20.9	%		21.5	%
Adjustments for economic hedges		-.4	%		.4	%
Merger and integration costs		-.1	%		—	%

Gross Profit		20.4	%		21.9	%

Adjusted Selling, General and Administrative Expenses		-9.4	%		-10.0	%
Merger and integration costs		-.1	%		—	%

Selling, General & Administrative Expenses		-9.5	%		-10.0	%

Adjusted Operating Profit		9.8	%		9.9	%
Adjustments for economic hedges		-.4	%		.4	%
Merger and integration costs		-.5	%		—	%
Accelerated amortization of intangible assets		-.1	%		-.1	%
Provision for legal settlement		—	%		-.3	%
Amounts related to plant closures		—	%		—	%

Operating Profit		8.8	%		9.9	%

Gross profit margin was negatively impacted in fiscal 2012 by $5.2 million of net adjustments for economic hedge contracts as well as a $1.6 million inventory adjustment related to acquisition accounting for Refrigerated Dough. In fiscal 2011, gross profit margin was positively impacted by $3.9 million of net adjustments for economic hedge contracts. Excluding the effect of these items, adjusted gross profit margin decreased from 21.5% last year to 20.9% this year. Base-business raw material and freight costs (net of hedging activities) were approximately $105 million higher, with the most significant impact in snack nuts (included in the Snacks, Sauces & Spreads segment) and durum wheat (included in the Pasta segment). Most of these rising commodity costs were offset through a combination of pricing adjustments and savings from cost reduction efforts, but the resulting impact of the higher costs offset by higher sales reduced gross margins (gross profit as a percentage of net sales) by approximately 2.0 percentage points. This negative effect was partially offset by the positive impact of the addition of the higher-margin products of Refrigerated Dough and favorable manufacturing costs overall.

Selling, general and administrative (“SG&A”) expenses as a percentage of net sales decreased from 10.0% to 9.5% compared to the prior year. The SG&A percentage was negatively impacted by merger and integration costs in fiscal 2012. Excluding the effect of this items, adjusted SG&A expense as a percentage of net sales declined from 10.0% to 9.4%. The improved rate was driven primarily by the effect of sales growth (as described above) outpacing SG&A growth for most of our segments, especially for Snacks, Sauces & Spreads, for Pasta, and for Cereal Products. Rates were also positively affected by a decrease in costs related to information systems projects. These decreases were partially offset by an increase in mark-to-market adjustments for certain stock-based deferred compensation.

Total amortization expense for the first quarter of fiscal 2012 was $20.8 million ($.24 per diluted share) compared to $16.3 million ($.19 per share) a year ago. The increase is primarily due to the acquisition of Refrigerated Dough.

In addition to the items discussed above, the first quarter operating profit margin was affected by other merger and integration costs (primarily in the current year) and a provision for legal settlement (in the prior year only), as described below.

Adjustments for Economic Hedges

Certain derivative contracts do not qualify for cash flow hedge accounting but are used as economic hedges of the Company’s exposure to changes in commodity costs. Realized and unrealized gains and losses on such contracts are recognized at a corporate level but not allocated to affect segment operating profit until the hedged exposure affects earnings. In the first quarter of fiscal 2012, net mark-to-market losses on such derivatives resulted in a net adjustment for economic hedges of a $5.2 million loss. In the prior year, net mark-to-market gains on such derivatives resulted in a net adjustment for economic hedges of a $3.9 million gain. This net adjustment was recognized in cost of goods sold on the statement of earnings but excluded from segment operating profit and the Company’s non-GAAP measures of Adjusted EBITDA and Adjusted Diluted Earnings per Share.

Merger and Integration Costs

During the three months ended December 31, 2011 and 2010, Ralcorp recorded approximately $5.6 million and $.2 million, respectively, of expenses related to acquisition activity. In 2012, those costs related primarily to the acquisition of Refrigerated Dough including a one-time finished goods inventory revaluation adjustment. Of the $5.6 million net merger and integration costs recorded in the three months ended December 31, 2011, $1.6 million is included in “Cost of goods sold,” $1.4 million is included in “Selling, general and administrative expenses,” and $2.6 million is included in “Other operating expenses, net.”

Provision for Legal Settlement

During the three months ended December 31, 2010, the Company increased its accrual by $2.5 million related to certain contractual claims by a customer. Those claims arose primarily as a result of the customer’s recall of certain peanut-butter-based products in January 2009 and were subsequently settled for a total of $10.0 million. The provision for legal settlement is included in “Other operating expenses, net.”

Interest Expense and Income Taxes

Interest expense decreased $1.3 million due to a decline in the weighted average interest rate. The weighted average interest rate on all of the Company’s outstanding borrowings was 5.1% and 5.6% in the quarters ended December 31, 2011 and 2010, respectively.

The effective income tax rate for continuing operations was approximately 35.6% in the first quarter of 2012, down slightly from 36.0% in last year’s first quarter.

Discontinued Operations

As a result of the Spin-Off, the financial results for the Post cereals business are now included in results from discontinued operations. In the first quarter, net earnings from discontinued operations were $21.1 million, compared to net earnings of $34.0 million in the corresponding period last year. Results for fiscal 2012 were negatively impacted by increased marketing investments, higher raw material costs (driven by wheat, nuts, and corn), separation costs (mostly professional service fees) associated with the Spin-Off, unfavorable manufacturing expenses (due to the negative impact of lower production volumes on plant utilization and fixed cost absorption), and lower volumes. These unfavorable variances were partially offset by increased net pricing and favorable warehouse and broker expenses.

Non-GAAP Financial Measures

The non-GAAP financial measures presented herein (including “base-business net sales” and measures labeled as “adjusted”) do not comply with accounting principles generally accepted in the United States, or GAAP, because they are adjusted to exclude (include) certain cash and non-cash income and expenses that would otherwise be included in (excluded from) the most directly comparable GAAP measure in the statement of operations. These non-GAAP financial measures, which are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the methods of calculation, should not be considered an alternative to, or more meaningful than, related measures determined in accordance with GAAP. These non-GAAP measures supplement other metrics used by management and investors to evaluate the businesses and facilitate comparison of operations over time.


	Three Months Ended December 31,
	2011			2010
(dollars in millions)
Adjusted EBITDA	$	163.3		$	135.0
Interest expense, net		(34.4	)		(35.7	)
Income taxes		(24.4	)		(20.9	)
Depreciation and amortization		(49.4	)		(42.2	)
Adjustments for economic hedges		(5.2	)		3.9
Merger and integration costs		(5.6	)		(.2	)
Provision for legal settlement		—			(2.5	)
Amounts related to plant closures (excluding depreciation)		(.1	)		(.1	)

Net Earnings from Continuing Operations	$	44.2		$	37.3

Segment Results


	Three Months Ended December 31,
	2011			% Change			2010
(pounds in millions)
Sales Volume
Cereal Products		133.3			-1	%		134.5
Snacks, Sauces & Spreads		347.2			2	%		341.9
Frozen Bakery Products		254.8			46	%		174.0
Pasta		208.8			-2	%		212.0

Total Sales Volume		944.1			9	%		862.4

(dollars in millions)
Net Sales
Cereal Products	$	226.2			11	%	$	204.7
Snacks, Sauces & Spreads		473.6			13	%		417.4
Frozen Bakery Products		308.0			59	%		193.7
Pasta		158.7			17	%		135.9

Total Net Sales	$	1,166.5			23	%	$	951.7

Segment Profit
Cereal Products	$	28.8			28	%	$	22.5
Snacks, Sauces & Spreads		41.1			10	%		37.4
Frozen Bakery Products		33.9			47	%		23.0
Pasta		26.7			-5	%		28.2

Total Segment Profit	$	130.5			17	%	$	111.1

Segment Profit Margin
Cereal Products		13	%					11	%
Snacks, Sauces & Spreads		9	%					9	%
Frozen Bakery Products		11	%					12	%
Pasta		17	%					21	%
Total Segment Profit Margin		11	%					12	%
Depreciation and Amortization
Cereal Products	$	5.3			-4	%	$	5.5
Snacks, Sauces & Spreads		10.6			3	%		10.3
Frozen Bakery Products		16.9			69	%		10.0
Pasta		12.7			-4	%		13.2
Corporate		3.9			22	%		3.2

Total Segment Profit	$	49.4			17	%	$	42.2

Cereal Products

Volume changes from the first quarter of the prior year were as follows:


Private-brand ready-to-eat cereal	3	%
Nutritional bars	13	%
Hot cereal	-7	%
Other minor categories	-15	%
Total	-1	%

Net sales increased 11% as higher net selling prices (raised in response to commodity cost increases) and a favorable sales mix (with a shift to nutritional bars, which have a higher price per pound) were partially offset by slightly lower overall volume. Volume declines in hot cereal, foodservice, co-manufacturing, and other minor categories were almost completely offset by volume gains in nutritional bars and ready-to-eat cereals driven by new product sales, expanded distribution of existing products, and strong promotional programs.

Segment operating profit increased 28% as improved net selling prices were only partially offset by higher raw material costs (driven by oats, corn, wheat, fruits, and nuts), production costs (primarily nutritional bars), freight costs, distribution costs, and customer promotion costs.

Snacks, Sauces & Spreads

Volume changes from the first quarter of the prior year were as follows:


Nuts	-11	%
Crackers	11	%
Cookies	6	%
Peanut butter	3	%
Preserves & jellies	-3	%
Syrups	5	%
Chips	3	%
Dressings	2	%
Other minor categories	-6	%
Total	2	%

Net sales grew 13% as a result of increased net selling prices and higher overall volume, partially offset by increased trade promotion spending. Net selling prices were raised in reaction to significantly higher commodity costs across many of the segment’s product categories, but most notably in snack nuts.

Segment operating profit increased 10% driven by improved net selling prices, a favorable sales mix (primarily due to higher cracker and cookie volume and lower snack nut volumes), and favorable manufacturing costs. Those beneficial effects were partially offset by the effects of significantly higher raw material costs (primarily cashews, peanuts, and tree nuts, but also including oils, wheat, and packaging), freight costs, information systems costs, and brokerage costs.

Frozen Bakery Products

Base-business volume changes from the first quarter of the prior year were as follows:


In-store bakery (ISB)	-6	%
Foodservice	6	%
Retail	-5	%
Total	-1	%

Net sales were up 59% primarily attributable to incremental sales from the acquisition of Refrigerated Dough. Excluding results from this acquisition, base business net sales were up 7% driven by price increases in response to commodity cost increases, partially offset by slightly lower volumes. Volume gains in foodservice were offset by the effects of volume declines in retail griddle products and the in-store bakery channel (primarily frozen dough and bread). Foodservice sales benefited from a new product for a major restaurant chain.

Segment operating profit was up 47% primarily due to the acquisition of Refrigerated Dough. Excluding this acquisition, segment operating profit decreased 19% driven by higher raw materials (primarily flour, dairy, and eggs), freight, and increased information systems costs as well as unfavorable foreign exchange rates, partially offset by improved net selling prices.

Pasta

Volume changes from the first quarter of the prior year were as follows:


Retail	-1	%
Institutional	-3	%
Total	-2	%

Net sales were up 17% due to higher net selling prices in response to rising raw material costs, partially offset by lower volumes. Retail sales volume was down 1% with small declines in private-brand and branded products. Institutional volumes declined 3%, due to lower ingredient and foodservice sales, partially offset by higher co-manufacturing volume.

Segment operating profit decreased 5% due to lower sales volumes and net selling price increases not completely offsetting significantly higher raw material costs (primarily durum and semolina wheat).

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have funded operating needs by generating positive cash flows through operations. We expect to continue generating operating cash flows through our mix of businesses and expect that short-term and long-term liquidity requirements will be met through a combination of operating cash flows and strategic use of borrowings under committed and uncommitted credit arrangements. To help ensure sufficient liquidity, we continue to monitor market events and the financial institutions associated with our credit facilities, including monitoring credit ratings and outlooks, capital raising and merger activity. The following tables show recent cash flow and capitalization data (in millions of dollars), which is discussed below.


	Three Months Ended December 31,
	2011			2010
(dollars in millions)
Cash provided by operating activities—continuing operations	$	88.8		$	139.9
Cash provided by operating activities—discontinued operations		35.5			37.8

Net cash provided by operating activities		124.3			177.7

Cash used by investing activities—continuing operations		(592.5	)		(17.8	)
Cash used by investing activities—discontinued operations		(9.0	)		(3.3	)

Net cash used by investing activities		(601.5	)		(21.1	)

Cash provided (used) by financing activities—continuing operations		488.1			(161.4	)
Cash provided by financing activities—discontinued operations		—			—

Net cash provided (used) by financing activities		488.1			(161.4	)

Effect of exchange rate changes on cash and cash equivalents		.5			.4

Net increase (decrease) in cash and cash equivalents	$	11.4		$	(4.4	)

Continuing Operations


	December 31,		September 30,
	2011		2010
(dollars in millions)
Cash and cash equivalents	$	61.4	$	50.0
Notes payable to banks		610.0		105.0
Current portion of long-term debt		106.3		30.7
Working capital excluding cash, notes payable to banks and current debt		348.9		332.9
Long-term debt excluding current portion		2,083.6		2,172.5
Total shareholders’ equity (restated)		2,640.2		2,565.2

Capital resources remained strong at December 31, 2011, with a long-term debt to total capital (which is the total of long-term debt and total shareholders’ equity) ratio of 44%, compared to 46% (restated) for September 30, 2011. Cash on hand increased by $11.4 million from the end of fiscal 2011, while the current portion of long-term debt (including notes payable to banks) increased significantly during the quarter due to entering the $550 million 2011 Credit Agreement to facilitate the Refrigerated Dough acquisition. Working capital excluding cash and cash equivalents and current indebtedness (defined as notes payable to banks plus the current portion of long-term debt) increased from September 30, 2011 to December 31, 2011, primarily as a result of business acquisitions (as disclosed in Note 5 to the financial statements under Item 1) and a reduction in compensation-related accruals ($9.8 million), partially offset by an increase in income taxes payable ($23.7 million).

The decrease in net cash provided by operating activities for continuing operations for the three months ended December 31, 2011 is primarily attributable to payments and receipts for our derivative instruments used for hedging, with a net outflow of about $30 million this year compared to a net inflow of about that same amount last year.

Cash flows from investing activities were impacted by the acquisitions of Refrigerated Dough on October 3, 2011 for $551.5 million and Pastificio Annoni S.p.A. (included in our Pasta segment) on December 28, 2011 for $16.8 million. Capital expenditures were $29.4 million and $17.8 million in the three months ended December 31, 2011 and 2010, respectively. Total capital expenditures for fiscal 2012 are expected to be $190 to $205 million (including maintenance expenditures of approximately $40 million). As noted below, we have adequate capacity under current borrowing arrangements, in addition to cash on hand, to meet these cash needs.

During the three months ended December 31, 2011 and 2010, we repurchased approximately eight thousand and nine thousand shares, respectively, of Ralcorp common stock for $.6 million each quarter. In addition, during the first three months of 2012, we repaid $10.7 million of Series D and $15.0 million of the 2010 Term Loan. During the next twelve months, another $10.7 million of Series D, $75.0 million of Series F, and $20.0 million of the 2010 Term Loan are scheduled to be repaid. As of December 31, we had outstanding borrowings of only $30.0 million against our 2010 ($300 million) Revolving Credit Agreement.

All of our notes provide that, if we elect to pay additional interest, our ratio of “Total Debt” to “Adjusted EBITDA” (each term as defined in the debt agreements) may exceed their normal 3.5 to 1 limit, but be no greater than 3.75 to 1, for a period not to exceed 12 consecutive months. As of December 31, 2011, that ratio was 3.4 to 1, and we were also in compliance with all other debt covenants. Refer to Note 20 to the financial statements under Item 1 for information about subsequent amendments to our debt covenants.

Discontinued Operations

On February 3, 2012, we completed our separation of Post Foods (the Branded Cereal Products segment) in a tax-free spin-off to Ralcorp shareholders. In transactions related to the spin-off, Ralcorp received a total of $900 million (included in financing cash flows from discontinued operations), which was used to retire debt, including all amounts outstanding under the 2010 Revolving Credit Agreement, the 2010 Term Loan, the 2011 Credit Agreement, and the receivables securitization program. Remaining proceeds (approximately $85 million) were retained by the Company to be used for general corporate purposes. After paying down these variable rate instruments, the Company has only fixed interest rate debt remaining. Refer to Note 4 to the financial statements under Item 1 for more information about these transactions.

Cash provided by operating activities from discontinued operations declined $2.3 million from $37.8 million in the quarter ended December 31, 2010 to $35.5 million in the first quarter of fiscal 2012. The decline in operating cash flows versus prior year was due to lower net income and an increase in working capital in the first quarter of 2012 compared to the first quarter of 2011. Cash used in investing activities consisted of capital expenditures of $9.0 million and $3.3 million in 2011 and 2010, respectively.

OUTLOOK

Within our Annual Report on Form 10-K/A for the year ended September 30, 2011, we provided a discussion of the outlook for the Company, including specific factors and trends affecting our businesses. We believe the outlook comments contained within that document are still appropriate, except as updated by the following paragraphs.

We completed the acquisition of the North American private brand refrigerated dough business from Sara Lee Corp. on October 3, 2012. In the first quarter, results from this business (included in our Frozen Bakery Products segment) added $101 million of sales and was $.14 accretive to diluted earnings per share. We currently expect that the refrigerated dough business will add approximately $340 million in net sales to our consolidated fiscal 2012 results and will increase diluted earnings per share for fiscal 2012 by approximately $.30, including synergies but before one-time transition costs. It is important to note that this business is somewhat seasonal with approximately 60% of profits generated in our first and second fiscal quarters.

As previously discussed, we incurred significant amounts of raw material and freight cost increases during the first three months of fiscal 2012. For fiscal 2012, we currently expect the net year-over-year increase in unit costs for raw materials will result in a 10-12% increase in cost of goods sold, with the most significant impact in our second fiscal quarter. The primary commodities driving this estimated increase are durum wheat, cashews, tree nuts (particularly almonds and pecans), and peanuts. Excluding durum wheat and snack nuts, we expect this increase will be 5-6% after the effects of hedging and forward purchase contracts. To offset the impact of these significant cost increases, we expect to take additional actions, including aggressively reducing costs through ongoing continuous improvement and other initiatives and increasing prices when justified. The timing of these pricing actions and acceptance by our customers is expected to lag our cost increases, particularly in the first half of fiscal 2012 for the Pasta and Snacks, Sauces & Spreads reporting segments. We expect that operating results in the second half of fiscal 2012 will improve for both segments as pricing and commodity increases become better aligned.

Our operating results benefit from contract manufacturing, or ‘co-manufacturing,’ revenue of national brand products, which represented between 8% and 9% of total revenue over the last three years, primarily in our Snacks, Sauces & Spreads and Cereal Products reporting segments. The impact from co-manufacturing arrangements can fluctuate significantly from period to period. We use this type of business mostly to utilize excess capacity in our production facilities, but require an appropriate margin to do so. We were unable to reach an agreement to extend a contract manufacturing agreement with a nutritional bar customer in our Cereal Products’ Bloomfield business that would allow us an acceptable margin. This customer represented approximately 5% of total Ralcorp sales in fiscal 2011, and we expect to transition out of this contract over the next year. As a result, we are re-scaling our Bloomfield business by bringing in several new customers and closing a production facility at the end of February. We expect that these efforts, combined with base-business growth, will allow our Cereal Products segment to have fiscal year 2012 operating profit at least equal to our fiscal 2011 level, in spite of this loss.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 under Item 1 for a discussion regarding recently issued accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates during the three months ended December 31, 2011.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, are made throughout this report. These forward-looking statements are sometimes identified by the use of terms and phrases such as “believe,” “should,” “expect,” “project,” “estimate,” “anticipate,” “intend,” “plan,” “will,” “can,” “may,” or similar expressions elsewhere in this report. Our results of operations and financial condition 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. Those risks and uncertainties include but are not limited to the following:

•

our ability to effectively manage the growth from acquisitions or continue to make acquisitions at the rate at which we have been acquiring in the past;

•

significant increases in the costs of certain commodities, packaging or energy used to manufacture our products;

•

our ability to continue to compete in our business segments and our ability to retain our market position;

•

our ability to maintain competitive pricing, successfully introduce new products or successfully manage costs across all parts of the Company;

•

significant competition within the private-brand business;

•

our ability to successfully implement business strategies to reduce costs;

•

the loss or bankruptcy of a significant customer;

•

allegations that our products cause injury or illness, product recalls and product liability claims and other litigation;

•

our ability to anticipate changes in consumer preferences and trends;

•

our ability to service our outstanding debt or obtain additional financing;

•

disruptions in the U.S. and global capital and credit markets;

•

fluctuations in foreign currency exchange rates;

•

the termination or expiration of current co-manufacturing agreements;

•

consolidations among the retail grocery and foodservice industries;

•

loss of key employees;

•

change in estimates in critical accounting judgments and changes to or new laws and regulations affecting our business;

•

termination of existing anti-dumping measures imposed against certain foreign imports of dry pasta;

•

labor strikes or work stoppages by our employees;

•

losses or increased funding and expenses related to our qualified pension plan;

•

impairment in the carrying value of goodwill or other intangibles;

•

the existence of material weaknesses in the Company’s internal control over financial reporting as of September 30, 2011 and December 31, 2011;

•

technology failure;

•

our inability to protect our intellectual property rights;

•

changes in weather conditions, natural disasters and other events beyond our control;

•

the possibility that the combined post-separation value of Ralcorp and Post shares may not equal or exceed the pre-separation value of our common stock;

•

potential liabilities that may arise due to fraudulent transfer considerations surrounding the separation of the Post cereals business;

•

significant tax liabilities that could arise as a result of the separation of the Post cereals business; and

•

tax restrictions that may prevent us from engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for a period of time after the separation of the Post cereals business.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements included in this document. These risks and uncertainties, as well as other risks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Except as discussed in the following paragraphs, we believe there have been no material changes in the reported market risks faced by the Company during the three months ended December 31, 2011. For additional information, refer to Item 7A of our Annual Report on Form 10-K/A for the year ended September 30, 2011.

As of December 31, 2011, a hypothetical 10% adverse change in relevant market prices would have decreased the fair value of our commodity-related derivatives portfolio, which includes futures, options, and swaps, by approximately $8.4 million. This volatility analysis ignores changes in the exposures inherent in the related hedged transactions. Because the Company does not hold or trade derivatives for speculation or profit, all changes in derivative values are effectively offset by corresponding changes in the hedged exposures.

As of December 31, 2011, the fair value of our fixed rate debt was approximately $2,204.6 million, based on the discounted amount of future cash flows using Ralcorp’s incremental rate of borrowing for similar debt. A hypothetical 10% decrease in interest rates would have increased the fair value of the fixed rate debt by approximately $86.2 million.

As of December 31, 2011, we held foreign currency forward contracts with a total notional amount of $59.0 million and fair value of negative $1.0 million. A hypothetical 10% increase in the expected CAD-USD exchange rates would have reduced that fair value by $5.2 million.

Item 4. Controls and Procedures.

Restatement of Previously Issued Financial Statements

As the Company announced on May 7, 2012, and June 13, 2012 the Audit Committee of the Board of Directors of the Company and management determined that the previously issued consolidated financial statements for the fiscal year ended September 30, 2011, 2010 and 2009 filed on Form 10-K and the quarterly and fiscal year-to-date periods ended December 31, 2011, December 31, 2010, March 31, 2011, and June 30, 2011 filed on Form 10-Q would need to be restated (as described below).

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2011. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded in our original filing on Form 10-Q for the quarter ended December 31, 2011 that, as of December 31, 2011, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information that is required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Subsequent to the evaluation made in connection with the original filing and in connection with the restatement and reflected in the filing of this Form 10-Q/A, the Company’s Chief Executive Officer and Chief Financial Officer re-evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures and concluded that, because of the material weaknesses in internal control over financial reporting discussed below, the Company’s disclosure controls and procedures were not effective as of December 31, 2011. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The first control deficiency related to the Company’s goodwill assessment and resulted in restatements of the Company’s 2011 annual consolidated financial statements and its interim condensed consolidated financial statements for the quarterly period ended December 31, 2011. The second control deficiency related to the Condensed Financial Statements of Guarantors footnote (“Guarantors Footnote”) and resulted in restatements to the 2011, 2010, and 2009 annual consolidated financial statements and the interim condensed consolidated financial statements for the quarterly and fiscal year-to-date periods ended December 31, 2011 and 2010, June 30, 2011, and March 31, 2011. Additionally, the control deficiencies could result in future misstatements to the impairment of goodwill and related disclosures and to the Guarantors Footnote within the Company’s consolidated financial statements that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that the control deficiencies each constitute a material weakness.

The identified material weaknesses in internal control over financial reporting are as follows:

•

Goodwill Assessment: Our internal control over financial reporting related to goodwill assessments was improperly designed and was not effective in capturing the proper amount of deferred income taxes when assessing the carrying values of our reporting units for purposes of evaluating whether there is a goodwill impairment. Specifically, our controls did not prevent or detect the fact that certain deferred income taxes relative to certain corporate allocations and adjustments to reporting units were improperly excluded from our computations when evaluating goodwill impairment. The exclusion of certain deferred income taxes from the impairment computation resulted in the fourth quarter impairment charge for the Branded Cereal Products segment being understated by $54.0 million and corresponding goodwill balance being overstated by the same amount.

•

Guarantors Footnote: Our internal control over financial reporting related to the preparation of the Guarantors Footnote was improperly designed and was not effective in properly presenting the amounts accurately or completely within the Guarantors Footnote. Specifically, we did not design a process to prepare the Guarantors Footnote in accordance with SEC rules and regulations and accounting principles generally accepted in the United States of America, including consideration of intercompany transactions and whether certain amounts were recorded in the appropriate columns. This resulted in multiple errors to the Condensed Consolidating Balance Sheets, Condensed Consolidating Statements of Operations, and Condensed Consolidating Statements of Cash Flows within the Guarantors Footnote for the periods described above.

Remediation Plan

Management has been actively engaged in developing remediation plans to address the above material weaknesses. Management has developed a plan and timetable for the implementation of the foregoing remediation efforts, which includes the following:

•

Goodwill Assessment: Implementation of additional cross-functional review procedures over the goodwill impairment calculation process related to the overall completeness and accuracy of the calculation especially as it relates to deferred income taxes. Specifically, additional review processes will be conducted with the tax function to ensure that all tax implications related to the carrying value of the reporting units are captured in the Company’s goodwill impairment tests.

•

Guarantors Footnote: The methodologies for preparing and controls surrounding the Guarantors Footnote are in the process of being revised. The Company is in process of implementing additional controls to prepare the financial information for the Parent Company, Guarantor Subsidiaries, and Non-Guarantor Subsidiaries in accordance with SEC rules and regulations and accounting principles generally accepted in the United States of America. This will include controls related to analyzing intercompany transactions and whether certain amounts are recorded in the appropriate columns.

Changes in Internal Over Financial Reporting

On October 3, 2011, we completed the acquisition of Sara Lee’s North American refrigerated dough business (“Refrigerated Dough”). In connection with the transaction, we entered into a transition services agreement with Sara Lee Corporation to provide services to Refrigerated Dough relating to, among others, finance and administration, human resources, and payroll and information technology to enable us to manage an orderly transition of Refrigerated Dough into Ralcorp. As a result of our acquisition of Refrigerated Dough, we have expanded our internal controls over financial reporting to include consolidation of the Refrigerated Dough results of operations and financial position. These controls will be incorporated into our Section 404 assessment for 2012. There were no other changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

There is no information required to be reported under any items except those indicated below.

Item 1.

Legal Proceedings.

In May 2009, a customer notified the Company that it was seeking to recover out-of-pocket costs and damages associated with the customer’s recall of certain peanut butter-based products. The customer recalled those products in January 2009 because they allegedly included ingredients that had the potential to be contaminated with salmonella. The customer’s recall stemmed from the U.S. Food and Drug Administration and other authorities’ investigation of Peanut Corporation of America, which supplied the Company with peanut paste and other ingredients. In accordance with the Company’s contractual arrangements with the customer, the parties submitted these claims to mediation. In January 2011, the Company resolved all pending contractual and other claims, resulting in a payment by the Company of $5.0 million and an obligation to pay and additional $5.0 million, subject to the customer’s completion of certain contractual obligations through February 2013. The company accrued $7.5 million in the fiscal year ended September 30, 2010 based on early estimates of the settlement amount, and accrued an additional $2.5 million in the quarter ended December 31, 2010.

In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accruals for estimated liabilities (if any), are not expected to be material, individually or in the aggregate, to the Company’s consolidated financial position, results of operations or cash flows. In addition, while it is difficult to estimate the potential financial impact of actions regarding expenditures for compliance with regulatory matters, in the opinion of management, based upon the information currently available, the ultimate liability arising from such compliance matters is not expected to be material, individually or in the aggregate, to the Company’s consolidated financial position, results of operations or cash flows.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES


Period	(a) Total Number of Shares Purchased			(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs**
October 1 - October 31,2011		8,389	*	$	78.00		0		See total

November 1 - November 30, 2011		0			0		0		See total

December 1 - December 31, 2011		0			0		0		See total

Total		8,389			0		0		5,000,000

*	On October 1, 2011, 8,389 were forfeited back to the Company in satisfaction of required taxes to be withheld by federal, state and local governments in connections with the vesting of an employee restricted stock award.

On November 10, 2009, the Board of Directors authorized the repurchase of up to 7,000,000 shares of common stock at prevailing market prices. The authorization has no expiration date. From time to time, the Company may repurchase its common stock through plans established under Rule 10b5-l. Typically, these plans direct a broker to purchase a variable amount of shares each day (usually between 0 and 50,000) depending on the previous day’s closing share price.

Item 4.

Mine Safety Disclosures.

Not Applicable

Item 6.

Exhibits.


31.1		Section 302 Certification of Kevin J. Hunt dated September 12, 2012

31.2		Section 302 Certification of Scott Monette dated September 12, 2012

32		Section 1350 Certification of Kevin J. Hunt and Scott Monette dated September 12, 2012

**101.INS		XBRL Instance Document

**101.SCH		XBRL Taxonomy Extension Schema Document

**101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

**101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

**101.LAB		XBRL Taxonomy Extension Label Linkbase Document

**101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

**	Furnished with this Form 10-Q/A

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.

Exhibit Index


Exhibit		Description

31.1		Section 302 Certification of Kevin J. Hunt dated September 12, 2012

31.2		Section 302 Certification of Scott Monette dated September 12, 2012

32		Section 1350 Certification of Kevin J. Hunt and Scott Monette dated September 12, 2012

**101.INS		XBRL Instance Document

**101.SCH		XBRL Taxonomy Extension Schema Document

**101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

**101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

**101.LAB		XBRL Taxonomy Extension Label Linkbase Document

**101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

**	Furnished with this Form 10-Q/A