ST. LOUIS, Aug. 7 /PRNewswire-FirstCall/ -- Ralcorp Holdings, Inc. today filed its Quarterly Report on Form 10-Q for the period ended June 30, 2007. Reported diluted earnings per share were $.43 including the impact of a non-cash loss on forward sale contracts related to Ralcorp's investment in Vail Resorts, Inc., or $1.13 per share excluding that impact. In last year's third quarter, reported diluted earnings per share was $1.12 including the impact of a non-cash gain on those contracts, or $1.03 excluding that impact. Other reported results for the quarter include:
-- Net sales increased 26% from a year ago, largely as a result of
recent business acquisitions, as well as volume gains in the base
businesses and higher pricing in response to rising input costs.
-- Total segment profit contribution was up 15% as a result of
acquisitions, higher selling prices, and cost reduction efforts,
partially offset by higher ingredient costs and amortization
expense.
-- Earnings before income taxes and equity earnings were $1.9 million
(compared to $32.4 million last year) after a $29.8 million
($.70 per share) non-cash loss on Ralcorp's Vail forward sale
contracts. Last year's amount included a $3.7 million ($.09 per
share) non-cash gain on the forward sale contracts.
-- Equity in earnings of Vail Resorts, Inc. (after tax) was $10.1
million ($.37 per share) compared to $9.0 million ($.33 per
share) a year ago.
-- Net earnings were $11.6 million compared to $30.2 million a year
ago (including the non-cash after-tax effects of losses or gains
on the Vail forward sale contracts).
Segment results and other key components of earnings before income taxes and equity earnings are summarized in the following tables (in millions):
Three Months Ended Nine Months Ended
June 30, June 30,
2007 2006 2007 2006
Net Sales
Ralston Foods $182.0 $114.7 $ 422.5 $ 332.3
Bremner 81.0 80.4 242.2 239.3
Cereals, Crackers & Cookies 263.0 195.1 664.7 571.6
Frozen Bakery Products 149.6 111.9 457.4 326.9
Dressings, Syrups, Jellies
& Sauces 109.2 102.9 314.6 289.6
Snack Nuts & Candy 61.7 52.5 188.5 177.0
Total $583.5 $462.4 $1,625.2 $1,365.1
Profit Contribution
Cereals, Crackers & Cookies $ 26.9 $ 20.9 $ 63.3 $ 55.2
Frozen Bakery Products 14.3 11.7 52.0 36.5
Dressings, Syrups, Jellies
& Sauces 4.1 7.4 11.8 6.9
Snack Nuts & Candy 4.4 3.2 16.6 10.0
Total segment profit
contribution 49.7 43.2 143.7 108.6
Interest expense, net (11.4) (7.9) (30.2) (20.6)
(Loss) gain on forward sale
contracts (29.8) 3.7 (82.3) (1.7)
Gain on sale of securities - - - 2.6
Accelerated depreciation - - - (1.1)
Systems upgrades and conversions (.1) (.6) (.4) (3.0)
Stock-based compensation
expense (1.9) (1.3) (5.3) (4.1)
Other unallocated corporate
expenses (4.6) (4.7) (16.4) (15.1)
Earnings before income taxes
and equity earnings $ 1.9 $ 32.4 $ 9.1 $ 65.6
The third quarter sales growth was $121.1 million, of which approximately 75% is attributable to the timing of recent business acquisitions. Those acquisitions include Bloomfield Bakers (March 16, 2007) in the Cereals, Crackers & Cookies segment and Cottage Bakery (November 10, 2006) in the Frozen Bakery Products segment. The remaining growth (approximately 6% over the prior year) was due to volume gains in the Frozen Bakery Products and Snack Nuts & Candy segments, price increases in response to rapidly rising costs, and favorable mix in most of the Company's base businesses.
For the quarter, the Company's overall ingredient and packaging costs were unfavorable by a total of about $13.0 million. The costs of several key ingredients are expected to continue to rise, with a greater impact on profitability in the fourth quarter of fiscal 2007, as lower-priced forward commodity contracts and hedge positions expire.
Amortization of intangible assets related to acquisitions (primarily customer relationships and trademarks) increased with the addition of amounts for Bloomfield and Cottage. Amortization of such intangibles was $6.4 million ($.15 per share) for the third quarter of fiscal 2007, but only $2.5 million ($.06 per share) for the third quarter of fiscal 2006. Through nine months, the corresponding amortization was $13.5 million ($.32 per share) for fiscal 2007 and $7.2 million ($.16 per share) for fiscal 2006.
Net earnings for the third quarter of fiscal 2007 were affected by a $29.8 million unrealized non-cash loss on the Company's forward sale contracts related to its shares of Vail Resorts, Inc. , compared to a $3.7 million non-cash gain on the contracts in last year's third quarter. The contracts, which include a collar on the Vail stock price, operate as a hedge of the future sale of the stock in that the Company will receive no less than the $140 million prepaid proceeds for the 4,950,100 shares subject to these contracts. However, because Ralcorp accounts for its investment in Vail Resorts using the equity method, these contracts are not currently eligible for hedge accounting. Consequently, gains or losses due to changes in the fair value of the contracts are immediately recognized in earnings. Amortization of the prepayment discounts, which totaled $2.1 million in the most recent quarter and $1.3 million a year ago, is included in interest expense.
Diluted earnings per share excluding the impact of the gains or losses on forward sale contracts related to Ralcorp's investment in shares of Vail Resorts, Inc., as reported herein, is a non-GAAP financial measure. The Company's management believes that presentation of this non-GAAP financial measure provides useful information to investors regarding Ralcorp's operations, which are unaffected by the existence of the forward sale contracts or unrealized changes in their fair value.
For additional information regarding the Company's results, refer to the comparative statements of earnings below, as well as the financial statements
and management's discussion and analysis included in its Quarterly Report on Form 10-Q for the period ended June 30, 2007, filed August 7, 2007.
Ralcorp produces a variety of store brand foods that are sold under the individual labels of various grocery, mass merchandise and drug store retailers, and frozen bakery products that are sold to restaurants and other foodservice customers. Ralcorp's diversified product mix includes: ready-to-eat and hot cereals; nutritional and cereal bars; snack mixes, corn-based chips and extruded corn snack products; crackers and cookies; snack nuts; chocolate candy; salad dressings; mayonnaise; peanut butter; jams and jellies; syrups; sauces; frozen griddle products including pancakes, waffles, and French toast; frozen biscuits and other frozen pre-baked products such as breads and muffins; and frozen dough for cookies, Danishes, bagels and doughnuts. In addition, Ralcorp holds an interest of approximately 19 percent in Vail Resorts, Inc., the leading mountain resort operator in the United States.
NOTE: Information in this press release that includes information other than historical data contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are sometimes identified by their use of terms and phrases such as "should," "will," "can," "believes," "could," "likely," "anticipates," "intends," "plans," "expects," "if," "would," or similar expressions. Any such forward-looking statements are made based on information currently known and are subject to various risks and uncertainties and are therefore qualified by the Company's cautionary statements contained in its filings with the Securities and Exchange Commission.
RALCORP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(Dollars in millions except per share data, shares in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
2007 2006 2007 2006
Net Sales $ 583.5 $ 462.4 $1,625.2 $1,365.1
Cost of products sold (475.7) (373.6) (1,313.1) (1,109.6)
Gross Profit 107.8 88.8 312.1 255.5
Selling, general and
administrative expenses (64.7) (52.2) (190.5) (170.2)
Interest expense, net (11.4) (7.9) (30.2) (20.6)
(Loss) gain on forward sale
contracts (29.8) 3.7 (82.3) (1.7)
Gain on sale of securities - - - 2.6
Earnings before Income Taxes
and Equity Earnings 1.9 32.4 9.1 65.6
Income taxes (.4) (11.2) (2.2) (22.4)
Earnings before Equity Earnings 1.5 21.2 6.9 43.2
Equity in earnings of Vail Resorts,
Inc., net of related deferred
income taxes 10.1 9.0 12.8 10.6
Net Earnings $ 11.6 $ 30.2 $ 19.7 $ 53.8
Earnings per Share
Basic $ .44 $ 1.14 $ .74 $ 1.92
Diluted $ .43 $ 1.12 $ .72 $ 1.88
Weighted Average Shares for
Basic Earnings per Share 26,304 26,515 26,617 27,993
Dilutive effect of:
Stock options 587 479 562 498
Stock appreciation rights 105 - 66 -
Restricted stock awards 71 39 65 35
Weighted Average Shares for
Diluted Earnings per Share 27,067 27,033 27,310 28,526
