Ralcorp Holdings Inc. (RAH, Financial) filed Annual Report for the period ended 2012-09-30.
Ralcorp Holdings, Inc. has a market cap of $3.93 billion; its shares were traded at around $88.93 with a P/E ratio of 17.9 and P/S ratio of 0.8. Ralcorp Holdings, Inc. had an annual average earning growth of 3.6% over the past 10 years.
Selling, general and administrative expenses (SG&A) as a percentage of net sales declined from 10.3% in 2011 to 10.2% in 2012. SG&A was negatively impacted by merger and integration costs of $4.2 million and $.6 million in 2012 and 2011, respectively, and restructuring charges of $2.3 million in 2012. Excluding these items, adjusted SG&A as a percentage of sales declined from 10.3% to 10.0%. Adjusted SG&A as a percentage of sales was positively impacted by higher net selling prices, lower overall incentive compensation expense, favorable
Ralcorp acquired American Italian Pasta Company (AIPC) on July 27, 2010. Net sales in 2011 were up $476.0 million from 2010 primarily due to ten additional months of results in 2011 compared to 2010. Comparing only the corresponding two-month periods of each year, base-business net sales increased 13% due to higher net selling prices (in response to rising raw material costs) which more than offset a 4% base-business volume decline. Retail sales volume was down 3% due to declines in domestic and international private-brand products as well as branded products. Last year, AIPC exited certain geographic markets where the brands were underperforming the market and shifted focus to private-brand products. Institutional volumes declined 8%, primarily as a result of lower ingredient sales (which have a significantly lower margin than other sales categories). For the full year ended September 30, 2011 compared to the full year ended September 30, 2010 (including the pre-acquisition period), net sales were up 2% despite 3% lower volumes due to improved net selling prices.
The increase in net cash provided by operating activities for continuing operations for the year ended September 30, 2011 is primarily attributable to significantly higher segment operating profit before depreciation and amortization expense, driven by our acquisition of AIPC. Operating cash flows were also positively impacted by an $18.6 million deferred gain on an interest rate swap settlement, a $9.0 million decrease in pension contributions, and a favorable $38.6 million change in cash flows related to income taxes, partially offset by higher inventory levels (net of accounts payable). We made a $17.5 million contribution to our qualified pension plan in 2011 compared to $26.5 million in 2010. As a result of a $677.2 million increase in our weighted average outstanding borrowings, we paid $136.3 million of interest in 2011 compared to $107.2 million in 2010.
Discontinued operations: With respect to goodwill and in applying the guidance of ASU No. 2011-08 in the fourth quarter of 2011, we identified certain adverse qualitative trends associated with Post, which we subsequently separated from Ralcorp in a tax-free spin-off to Ralcorp shareholders. Specifically, a revised business outlook of this business, as conducted by a new management team engaged in September and October 2011 in advance of the anticipated spin-off, revealed financial trends that could negatively impact the fair value of the business. Our step-one goodwill impairment analysis confirmed the carrying value of the former Branded Cereal Products segment was in excess of its fair value, which required us to perform step-two of the analysis to determine the amount of goodwill impairment to be recorded. Based on the step two analysis, we recorded a pre-tax, non-cash impairment charge of $418.8 million for Post to reduce the carrying value of goodwill to a revised balance of $1,375.2 million. In performing the calculation of fair value of this reporting unit, we assumed future revenue growth rates ranging from 0.6% to 3.3% with a long-term (terminal) growth rate of 3% and applied a discount rate of 8.5% to cash flows. Revenue growth assumptions (along with profitability and cash flow assumptions) were based on historical trends for the reporting unit and managements expectations for future growth. The discount rate was based on industry market data of similar companies, and included factors such as the weighted average cost of capital, internal rate of return, and weighted average return on assets. For the market approach, we used a weighted average multiple of 10.0 and 8.5 times projected 2012 and 2013 EBITDA, respectively, and a multiple of 2.4 and 2.0 times projected 2012 and 2013 revenue, respectively, based on industry market data. Holding all other assumptions constant, if the net sales growth rate for all future years had been one-quarter percentage point lower or the discount rate had been one-quarter percentage point higher, the goodwill impairment charge at September 30, 2011 would have been $76 million to $122 million higher, or if the EBITDA multiple for 2012 and 2013 had been 0.5 times lower or if the revenue multiple for 2012 and 2013 had been 0.2 times lower, the impairment would have been $15 million to $24 million higher.
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Ralcorp Holdings, Inc. has a market cap of $3.93 billion; its shares were traded at around $88.93 with a P/E ratio of 17.9 and P/S ratio of 0.8. Ralcorp Holdings, Inc. had an annual average earning growth of 3.6% over the past 10 years.
Highlight of Business Operations:
Net sales increased $535.0 million or 14% in 2012 as compared to 2011, primarily as a result of recent acquisitions, which added $357.3 million of sales in 2012, including $312.5 million from Refrigerated Dough. Excluding acquisitions, base business net sales increased 5% as significantly higher net selling prices more than offset a 4% decline in base business volumes. Net pricing in many of our product categories increased as commodity costs rose significantly during the year, with price increases accounting for approximately $288.6 million of the net sales increase. Volumes overall were adversely impacted by higher net selling prices, as consumer demand declined for several of our product categories due to the significance of the increase in shelf prices at retailers, most notably for nuts, peanut butter and pasta. We further describe these and other factors affecting net sales in the segment discussions below.Selling, general and administrative expenses (SG&A) as a percentage of net sales declined from 10.3% in 2011 to 10.2% in 2012. SG&A was negatively impacted by merger and integration costs of $4.2 million and $.6 million in 2012 and 2011, respectively, and restructuring charges of $2.3 million in 2012. Excluding these items, adjusted SG&A as a percentage of sales declined from 10.3% to 10.0%. Adjusted SG&A as a percentage of sales was positively impacted by higher net selling prices, lower overall incentive compensation expense, favorable
Ralcorp acquired American Italian Pasta Company (AIPC) on July 27, 2010. Net sales in 2011 were up $476.0 million from 2010 primarily due to ten additional months of results in 2011 compared to 2010. Comparing only the corresponding two-month periods of each year, base-business net sales increased 13% due to higher net selling prices (in response to rising raw material costs) which more than offset a 4% base-business volume decline. Retail sales volume was down 3% due to declines in domestic and international private-brand products as well as branded products. Last year, AIPC exited certain geographic markets where the brands were underperforming the market and shifted focus to private-brand products. Institutional volumes declined 8%, primarily as a result of lower ingredient sales (which have a significantly lower margin than other sales categories). For the full year ended September 30, 2011 compared to the full year ended September 30, 2010 (including the pre-acquisition period), net sales were up 2% despite 3% lower volumes due to improved net selling prices.
The increase in net cash provided by operating activities for continuing operations for the year ended September 30, 2011 is primarily attributable to significantly higher segment operating profit before depreciation and amortization expense, driven by our acquisition of AIPC. Operating cash flows were also positively impacted by an $18.6 million deferred gain on an interest rate swap settlement, a $9.0 million decrease in pension contributions, and a favorable $38.6 million change in cash flows related to income taxes, partially offset by higher inventory levels (net of accounts payable). We made a $17.5 million contribution to our qualified pension plan in 2011 compared to $26.5 million in 2010. As a result of a $677.2 million increase in our weighted average outstanding borrowings, we paid $136.3 million of interest in 2011 compared to $107.2 million in 2010.
Discontinued operations: With respect to goodwill and in applying the guidance of ASU No. 2011-08 in the fourth quarter of 2011, we identified certain adverse qualitative trends associated with Post, which we subsequently separated from Ralcorp in a tax-free spin-off to Ralcorp shareholders. Specifically, a revised business outlook of this business, as conducted by a new management team engaged in September and October 2011 in advance of the anticipated spin-off, revealed financial trends that could negatively impact the fair value of the business. Our step-one goodwill impairment analysis confirmed the carrying value of the former Branded Cereal Products segment was in excess of its fair value, which required us to perform step-two of the analysis to determine the amount of goodwill impairment to be recorded. Based on the step two analysis, we recorded a pre-tax, non-cash impairment charge of $418.8 million for Post to reduce the carrying value of goodwill to a revised balance of $1,375.2 million. In performing the calculation of fair value of this reporting unit, we assumed future revenue growth rates ranging from 0.6% to 3.3% with a long-term (terminal) growth rate of 3% and applied a discount rate of 8.5% to cash flows. Revenue growth assumptions (along with profitability and cash flow assumptions) were based on historical trends for the reporting unit and managements expectations for future growth. The discount rate was based on industry market data of similar companies, and included factors such as the weighted average cost of capital, internal rate of return, and weighted average return on assets. For the market approach, we used a weighted average multiple of 10.0 and 8.5 times projected 2012 and 2013 EBITDA, respectively, and a multiple of 2.4 and 2.0 times projected 2012 and 2013 revenue, respectively, based on industry market data. Holding all other assumptions constant, if the net sales growth rate for all future years had been one-quarter percentage point lower or the discount rate had been one-quarter percentage point higher, the goodwill impairment charge at September 30, 2011 would have been $76 million to $122 million higher, or if the EBITDA multiple for 2012 and 2013 had been 0.5 times lower or if the revenue multiple for 2012 and 2013 had been 0.2 times lower, the impairment would have been $15 million to $24 million higher.
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