Print
Email
Ralcorp Holdings Inc. (RAH) filed Quarterly Report for the period ended 2012-02-07.
Ralcorp Holdings Inc. has a market cap of $4.14 billion; its shares were traded at around $76.8 with a P/E ratio of 14.5 and P/S ratio of 0.9. Ralcorp Holdings Inc. had an annual average earning growth of 5.4% over the past 10 years.
This is the annual revenues and earnings per share of RAH over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of RAH.
Highlight of Business Operations:
Net sales increased 18% compared to last year s first quarter, largely due to the acquisition of Refrigerated Dough. Base-business net sales increased 9% 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, partially offset by an overall 1% volume decline. Excluding sales of the Branded Cereal Products segment, base-business volume was flat compared to a year ago.Selling, general and administrative (SG&A) expenses as a percentage of net sales decreased a tenth of one percentage point compared to the prior year. The SG&A percentage was negatively impacted by merger and integration costs and Post separation costs in fiscal 2012. Excluding the effect of these items, adjusted SG&A expense as a percentage of net sales declined from 12.6% to 12.2%. 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 Other Cereal Products. Rates were also positively affected by a decrease in costs related to information systems projects. These decreases were partially offset by increased advertising expense in the Branded Cereal Products segment as well as an increase in mark-to-market adjustments for certain stock-based deferred compensation.
22 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 totaled $5.8 million, and net gains of $3.6 million were reclassified to segment operating profit, resulting in a net adjustment for economic hedges of $9.4 million loss. In the prior year, net mark-to-market gains on such derivatives totaled $4.8 million, and nothing was reclassified to segment operating profit, resulting in a net adjustment for economic hedges of $4.8 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. Post Separation Costs During the quarter ended December 31, 2011, Ralcorp incurred $2.7 million of costs (primarily professional service fees) related to the separation of the Post cereals business from the other Ralcorp businesses. These Post separation costs are included in “Selling, general and administrative expenses.” 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 was approximately 35.5% in the first quarter of 2012, down slightly from 36.0% in last year s first quarter. 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.
OUTLOOK Within our Annual Report on Form 10-K 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 On February 3, 2012, we completed our separation of Post Foods (the Branded Cereal Product segment) in a tax-free spin-off to Ralcorp shareholders. Ralcorp received $900 million in cash from Post which was used to pay down variable rate debt of approximately $815 million, with the remainder of cash held for general corporate purposes. The reduction in overall debt will result in lower interest expense for the remainder of fiscal 2012. In addition, Ralcorp retained approximately 19.7% of Post s outstanding shares, which will be reflected as “Investment in Post” on our balance sheet. Effective with our second quarter financial reporting, we expect to report Post as a “discontinued operation,” and thus Post (along with related impairment losses) will be excluded from results from continuing operations. All comments included below exclude the fiscal 2012 operations of Post. 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 5% and 8% of total revenue over the last three years, primarily in our Snacks, Sauces & Spreads and Other 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 Other Cereal Products Bloomfield business that would allow us an acceptable margin. This customer represented approximately 4% 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 Other Cereal Products segment to have fiscal year 2012 operating profit at least equal to our fiscal 2011 level, in spite of this loss.
Subscribe RSS
