form10q050511.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

                                             (Mark One)

(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 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
 
63101
(Address of principal
 
(Zip Code)
Executive offices)
   

(314) 877-7000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X)   No (   )

Indicate 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 (X)   No (  )

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):
Large accelerated filer (X)
Accelerated filer (  )
Non-accelerated filer (  )
Smaller reporting company (  )

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 May 4, 2011:  55,044,384
 
 
 
 
 
 
 

 
 
RALCORP HOLDINGS, INC.

INDEX

   
PAGE
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
 
     
 
Condensed Consolidated Statements of Earnings
1
     
 
Condensed Consolidated Statements of Comprehensive Income
1
     
 
Condensed Consolidated Balance Sheets
2
     
 
Condensed Consolidated Statements of Cash Flows
3
     
 
Notes to Condensed Consolidated Financial Statements
4
     
Item 2.
Management’s Discussion and Analysis of Financial
 
 
Condition and Results of Operations
20
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
30
     
Item 4.
Controls and Procedures
30
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
31
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
31
     
Item 6.
Exhibits
31
     
SIGNATURES
 
31












(i)
 
 
 
 

 
 

 
 
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
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Net Sales
  $ 1,172.6     $ 965.0     $ 2,345.9     $ 1,956.9  
Cost of goods sold
    (832.6 )     (698.6 )     (1,687.9 )     (1,417.7 )
Gross Profit
    340.0       266.4       658.0       539.2  
Selling, general and administrative expenses
    (155.8 )     (133.9 )     (303.3 )     (262.4 )
Amortization of intangible assets
    (19.4 )     (11.3 )     (38.9 )     (22.6 )
Impairment of intangible assets
    -       (20.5 )     -       (20.5 )
Other operating expenses, net
    (.7 )     (3.0 )     (4.6 )     (3.9 )
Operating Profit
    164.1       97.7       311.2       229.8  
Interest expense, net
    (33.8 )     (23.9 )     (69.5 )     (50.4 )
Earnings before Income Taxes
    130.3       73.8       241.7       179.4  
Income taxes
    (47.0 )     (27.1 )     (87.1 )     (65.5 )
Net Earnings
  $ 83.3     $ 46.7     $ 154.6     $ 113.9  
                                 
Earnings per Share
                               
  Basic
  $ 1.52     $ .85     $ 2.82     $ 2.06  
  Diluted
  $ 1.50     $ .84     $ 2.78     $ 2.03  

See accompanying Notes to Condensed Consolidated Financial Statements.



RALCORP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in millions)

   
Three Months Ended
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Net Earnings
  $ 83.3     $ 46.7     $ 154.6     $ 113.9  
Other comprehensive income
    10.1       1.3       34.1       14.4  
Comprehensive Income
  $ 93.4     $ 48.0     $ 188.7     $ 128.3  
 
See accompanying Notes to Condensed Consolidated Financial Statements.

 
 

 
1

 

RALCORP HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in millions)
 
 
 
Mar. 31,
   
Sept. 30,
 
   
2011
   
2010
 
             
Assets
           
Current Assets
           
  Cash and cash equivalents
  $ 41.4     $ 29.3  
  Marketable securities
    10.0       10.0  
  Investment in Ralcorp Receivables Corporation
    -       137.8  
  Receivables, net
    349.2       233.4  
  Inventories
    469.3       425.1  
  Deferred income taxes
    4.0       10.6  
  Prepaid expenses and other current assets
    34.5       30.8  
    Total Current Assets
    908.4       877.0  
Property, Net
    1,204.8       1,219.0  
Goodwill
    2,952.1       2,945.7  
Other Intangible Assets, Net
    1,692.7       1,727.0  
Other Assets
    38.6       36.2  
    Total Assets
  $ 6,796.6     $ 6,804.9  
                 
Liabilities and Shareholders' Equity
               
Current Liabilities
               
  Accounts and notes payable
  $ 519.6     $ 279.5  
  Other current liabilities
    185.5       347.6  
    Total Current Liabilities
    705.1       627.1  
Long-term Debt
    2,184.3       2,464.9  
Deferred Income Taxes
    661.5       685.1  
Other Liabilities
    217.2       198.6  
    Total Liabilities
    3,768.1       3,975.7  
Shareholders' Equity
               
  Common stock
    .6       .6  
  Additional paid-in capital
    1,951.4       1,945.2  
  Common stock in treasury, at cost
    (344.4 )     (348.8 )
  Retained earnings
    1,422.7       1,268.1  
  Accumulated other comprehensive loss
    (1.8 )     (35.9 )
    Total Shareholders' Equity
    3,028.5       2,829.2  
    Total Liabilities and Shareholders' Equity
  $ 6,796.6     $ 6,804.9  

See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
 

 
2

 

RALCORP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in millions)

   
Six Months Ended
 
   
March 31,
 
   
2011
   
2010
 
             
Cash Flows from Operating Activities
           
Net earnings
  $ 154.6     $ 113.9  
Adjustments to reconcile net earnings to net
               
  cash flow provided by operating activities:
               
  Depreciation and amortization
    113.0       77.4  
  Impairment of intangible assets
    -       20.5  
  Stock-based compensation expense
    7.9       9.5  
  Deferred income taxes
    (23.4 )     (19.8 )
  Other, net
    (25.3 )     (41.0 )
    Net Cash Provided by Operating Activities
    226.8       160.5  
                 
Cash Flows from Investing Activities
               
Additions to property and intangible assets
    (51.8 )     (57.2 )
Proceeds from sale of property
    .1       .5  
Purchases of securities
    (10.0 )     (12.8 )
Proceeds from sale or maturity of securities
    10.0       14.8  
    Net Cash Used by Investing Activities
    (51.7 )     (54.7 )
                 
Cash Flows from Financing Activities
               
Repayments of long-term debt
    (44.7 )     (95.3 )
Net repayments under credit arrangements
    (116.8 )     -  
Purchases of treasury stock
    (.6 )     (115.5 )
Proceeds and tax benefits from exercise of stock awards
    4.9       7.8  
Changes in book cash overdrafts
    (7.0 )     (23.4 )
Other, net
    (.1 )     (.1 )
    Net Cash Used by Financing Activities
    (164.3 )     (226.5 )
                 
Effect of Exchange Rate Changes on Cash
    1.3       1.0  
                 
Net Increase (Decrease) in Cash and Cash Equivalents
    12.1       (119.7 )
Cash and Cash Equivalents, Beginning of Period
    29.3       282.8  
Cash and Cash Equivalents, End of Period
  $ 41.4     $ 163.1  

See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
3

 
 
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 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 for the year ended September 30, 2010, filed on November 29, 2010.  The significant accounting policies for the accompanying financial statements are the same as disclosed in Note 1 in that Annual Report, except that Ralcorp Receivables Corporation is now presented on a consolidated basis (see Note 2 and Note 13).

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS

Issued in December 2009, Accounting Standards Update (ASU) No. 2009-16 amends the ASC for the issuance of FAS 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140.”  The amendments in this ASU improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance (which had been applied to Ralcorp Receivables Corporation) and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets.  In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets.  Comparability and consistency in accounting for transferred financial assets were also improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.  Also issued in December 2009, ASU 2009-17 amends the ASC for the issuance of FAS 167, “Amendments to FASB Interpretation No. 46(R).”  The amendments in this ASU replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity.  An approach that is expected to be primarily qualitative will be more effective for identifying which reporting entity has a controlling financial interest in a variable interest entity.  The amendments in this ASU also require additional disclosures about a reporting entity’s involvement in variable interest entities, which will enhance the information provided to users of financial statements.  These ASUs became effective for Ralcorp’s 2011 fiscal year and affected the Company’s reporting related to its sale of accounts receivable (see Note 13).  In fiscal 2011, the outstanding balance of receivables sold remain on Ralcorp’s consolidated balance sheet ($224.0 at March 31, 2011), proceeds received from the conduits ($119.0 at March 31, 2011) are shown as notes payable in Ralcorp’s consolidated balance sheet, and there is no investment in Ralcorp Receivables Corporation at March 31, 2011.  In addition, any proceeds received from or paid to the conduits are shown as cash flows from financing activities rather than from operating activities in Ralcorp’s consolidated statement of cash flows.  Because these ASUs are required to be applied prospectively, prior period amounts have not been reclassified to conform.

NOTE 3 – BUSINESS COMBINATIONS

On May 31, 2010, the Company acquired J.T. Bakeries Inc., a leading manufacturer of high-quality private-brand and co-branded gourmet crackers in North America, and North American Baking Ltd., a leading manufacturer of premium private-brand specialty crackers in North America.  These businesses operate plants in Kitchener and Georgetown, Ontario and are included in Ralcorp’s Snacks, Sauces & Spreads segment.  On June 25, 2010, the Company acquired Sepp’s Gourmet Foods Ltd., a leading manufacturer of foodservice and private-brand frozen griddle products.  Sepp’s has operations in Delta, British Columbia and in Richmond Hill, Ontario and is included in Ralcorp’s Frozen Bakery Products segment.  Net sales and operating profit included in the statement of earnings related to these three acquisitions were $28.7 and negative $.4, respectively, for the three months ended March 31, 2011 and $71.8 and $2.7, respectively, for the six months ended March 31, 2011, net of approximately $1.0 of amortization expense each quarter.  Operating profit has been negatively impacted by declines in the value of the U.S. Dollar relative to the Canadian Dollar because, while nearly all the costs of these businesses are denominated in Canadian Dollars, the majority of their sales are conducted in U.S. Dollars and pricing has not yet been adjusted to compensate.
 


 
4

 

On July 27, 2010, the Company completed the purchase of American Italian Pasta Company (AIPC), which is reported as Ralcorp’s Pasta segment.  Ralcorp acquired all of the outstanding shares of AIPC common stock for $53.00 per share in cash.  AIPC is based in Kansas City, Missouri and has four plants that are located in Columbia, South Carolina; Excelsior Springs, Missouri; Tolleson, Arizona; and Verolanuova, Italy.  Acquired identifiable intangible assets consist of $372.2 of customer relationships with a weighted-average life of 16 years and $193.0 of trademarks of which $180.8 have indefinite lives and $12.2 have a weighted-average life of 15 years.  Finished goods inventory acquired in the acquisition was valued essentially as if Ralcorp were a distributor purchasing the inventory.  This resulted in a one-time allocation of purchase price to acquired inventory which was $3.9 higher than the historical manufacturing cost of the inventory.  All of the $3.9 inventory valuation adjustment was recognized in cost of products sold during fiscal 2010.
 
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.  The following table summarizes the provisional amounts recognized as of September 30, 2010, as well as adjustments made in the six months ended March 31, 2011.  The adjustments did not have a significant impact on the consolidated statements of income, balance sheets or cash flows in any period; therefore, the financial statements have not been retrospectively adjusted.  Certain estimated values are not yet finalized (primarily deferred tax assets and liabilities) and are subject to change once additional information is obtained (but no later than one year from the applicable acquisition date).
 
   
Acquisition
   
Adjustments
   
Acquisition
 
   
Date Amounts
   
During the
   
Date Amounts
 
   
Recognized as of
   
Six Months Ended
   
Recognized
 
   
September 30, 2010 (a)
   
March 31, 2011
   
(as Adjusted)
 
Cash
  $ 41.1     $ -     $ 41.1  
Receivables (b)
    53.7       .7       54.4  
Inventories (c)
    55.6       (.2 )     55.4  
Other current assets (b)
    22.2       (.2 )     21.9  
Property (d)
    306.1       1.6       307.7  
Goodwill
    577.4       .2       577.6  
Other intangible assets (c)
    612.9       (2.0 )     610.9  
Other assets
    .6       -       .6  
Total assets acquired
    1,669.6       -       1,669.6  
Accounts payable
    (35.6 )     -       (35.5 )
Other current liabilities (b)
    (31.1 )     (.1 )     (31.2 )
Deferred income taxes
    (243.1 )     -       (243.1 )
Other liabilities
    (6.2 )     -       (6.2 )
Total liabilities assumed
    (316.0 )     -       (316.0 )
Net assets acquired
  $ 1,353.6     $ -     $ 1,353.6  
 
 
(a)  
As previously reported in Ralcorp’s 2010 Annual Report on Form 10-K.
(b)  
The adjustments to “Receivables”, “Other current assets”, and “Other current liabilities” reflect the identification and adjustment of unrecorded AIPC and Sepp’s Gourmet Foods assets or liabilities at the acquisition date.
(c)  
The adjustments to “Inventories” and “Other intangible assets” reflects changes in the estimated fair value of AIPC’s inventories and customer relationships based on the valuation analyses finalized late in the first quarter of fiscal 2011.
(d)  
The adjustments to “Property” reflect changes in the estimated fair values for AIPC (increase of $1.5) and Sepp’s Gourmet Foods (increase of $.1) based on the analyses finalized late in the first quarter of fiscal 2011.
 
 
 
 

 
5

 
Supplemental Pro Forma Information

The following unaudited pro forma information shows Ralcorp’s results of operations as if the fiscal 2010 business combinations had all been completed on October 1, 2009.  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 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
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
Net sales
  $ 1,172.6     $ 1,138.0     $ 2,345.9     $ 2,316.7  
Net earnings
    83.8       59.6       155.3       143.7  
Basic earnings per share
    1.53       1.09       2.83       2.59  
Diluted earnings per share
    1.51       1.07       2.79       2.56  


NOTE 4 – GOODWILL

The changes in the carrying amount of goodwill by reportable segment (see Note 16) were as follows:
 
   
Branded
   
Other
   
Snacks,
   
Frozen
             
   
Cereal
   
Cereal
   
Sauces
   
Bakery
             
   
Products
   
Products
   
& Spreads
   
Products
   
Pasta
   
Total
 
Balance, September 30, 2010
                                   
Goodwill (gross)
  $ 1,794.1     $ 47.2     $ 293.5     $ 367.7     $ 522.7     $ 3,025.2  
Accumulated impairment losses
    -       -       (79.5 )     -       -       (79.5 )
Goodwill (net)
  $ 1,794.1     $ 47.2     $ 214.0     $ 367.7     $ 522.7     $ 2,945.7  
  Purchase price allocation adjust.
    -       -       -       .1       .1       .2  
  Currency translation adjustment
    .4       -       2.5       3.3       -       6.2  
Balance, March 31, 2011
                                               
Goodwill (gross)
  $ 1,794.5     $ 47.2     $ 296.0     $ 371.1     $ 522.8     $ 3,031.6  
Accumulated impairment losses
    -       -       (79.5 )     -       -       (79.5 )
Goodwill (net)
  $ 1,794.5     $ 47.2     $ 216.5     $ 371.1     $ 522.8     $ 2,952.1  
 
 
 
 
 
 
6

 
NOTE 5 – 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
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
Pension Benefits
                       
  Service cost
  $ 1.3     $ 1.6     $ 2.7     $ 3.3  
  Interest cost
    3.0       3.3       6.1       6.6  
  Expected return on plan assets
    (4.6 )     (4.0 )     (9.3 )     (8.0 )
  Amortization of prior service cost
    .1       .1       .2       .2  
  Amortization of net loss
    1.2       1.0       2.4       1.9  
  Net periodic benefit cost
  $ 1.0     $ 2.0     $ 2.1     $ 4.0  
                                 
Other Postretirement Benefits
                               
  Service cost
  $ .6     $ .8     $ 1.2     $ 1.5  
  Interest cost
    1.3       1.3       2.6       2.6  
  Amortization of prior service cost
    (.3 )     (.4 )     (.6 )     (.7 )
  Amortization of net loss
    .1       -       .1       -  
  Net periodic benefit cost
  $ 1.7     $ 1.7     $ 3.3     $ 3.4  
 

NOTE 6 – EARNINGS PER SHARE

The weighted-average shares outstanding for basic and diluted earnings per share were as follows (in thousands):
 
   
Three Months Ended
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Weighted Average Shares
                       
  for Basic Earnings per Share
    54,769       54,541       54,736       55,232  
  Dilutive effect of:
                               
    Stock options
    244       333       255       340  
    Stock appreciation rights
    246       439       234       291  
    Restricted stock awards
    249       184       239       167  
Weighted Average Shares
                               
  for Diluted Earnings per Share
    55,508       55,497       55,464       56,030  
 
 

 

 
7

 
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 periods indicated because to do so would have been antidilutive (in thousands).

   
Six Months Ended
   
Six Months Ended
 
   
March 31, 2011
   
March 31, 2010
 
   
First
   
Second
   
First
   
Second
 
   
Quarter
   
Quarter
   
Quarter
   
Quarter
 
SARs at $56.56 per share
    -       -       405       -  
SARs at $66.07 per share
    504       497       504       504  
SARs at $65.45 per share
    -       -       25       -  
SARs at $58.79 per share
    8       -       8       8  
SARs at $56.27 per share
    372       -       390       390  
SARs at $57.14 per share
    13       13       13       13  
SARs at $57.45 per share
    536       536       -       -  
SARs at $61.98 per share
    6       6       -       -  
SARs at $62.03 per share
    -       3       -       -  
SARs at $61.95 per share
    -       6       -       -  

NOTE 7 – 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.
 
For the six months ended March 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 used to manage the future cost of raw materials.  The following table shows the notional amounts of derivative instruments held.
 
   
Mar. 31,
   
Dec. 31,
   
Sept. 30,
 
   
2011
   
2010
   
2010
 
Raw materials (thousands of pounds)
    656,779       714,529       679,393  
Natural gas (thousands of MMBTUs)
    5,130       2,075       3,200  
Other fuel (thousands of gallons)
    6,445       5,668       8,001  
Currency (thousands of dollars)
    22,900       43,700       69,450  

The following table shows the fair value and balance sheet location of the Company’s derivative instruments as of March 31, 2011 and September 30, 2010, all of which were designated as hedging instruments under ASC Topic 815 except $4.5 of the commodity contracts in asset positions as of March 31, 2011.
 
   
Fair Value
   
   
Mar. 31,
   
Sept. 30,
   
   
2011
   
2010
 
Balance Sheet Location
Asset Derivatives
             
 Foreign exchange contracts
  $ 2.1     $ .9  
Prepaid expenses and other current assets
 Commodity contracts
    12.2       15.8  
Prepaid expenses and other current assets
    $ 14.3     $ 16.7    
                   
Liability Derivatives
                 
 Commodity contracts
  $ 1.3     $ 2.6  
Other current liabilities
 
 
 
 

 

 
8

 
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 March 31, 2011 and 2010.
 
                           
Gain (Loss)
   
               
Gain (Loss)
   
Recognized in
   
   
Amount of Gain
   
Reclassified from
   
Earnings [Ineffective
   
   
(Loss) Recognized
   
Accumulated OCI
   
Portion and Amount
   
Derivatives in
 
in OCI
   
into Earnings
   
Excluded from
   
ASC Topic 815 Cash Flow
 
[Effective Portion]
   
[Effective Portion]
   
Effectiveness Testing]
   
Hedging Relationships
 
2011
   
2010
   
2011
   
2010
   
2011
   
2010
 
Location in Earnings
Commodity contracts
  $ 8.4     $ (9.1   $ 8.8     $ (2.7 )   $ .1     $ -  
Cost of goods sold
Foreign exchange contracts
    .7       .2       1.4       1.9       -       -  
SG&A expenses
Interest rate contracts
    -       -       (.4 )     -       -       -  
Interest expense, net
    $ 9.1     $ (8.9   $ 9.8     $ (.8 )   $ .1     $ -    

               
Derivatives Not Designated
 
Amount of Gain (Loss)
   
as Hedging Instruments
 
Recognized in Earnings
 
Location of Gain (Loss)
Under ASC Topic 815
 
2011
   
2010
 
Recognized in Earnings
Commodity contracts
  $ 6.0     $ -  
Cost of goods sold
 
The following tables illustrate the effect of the Company’s derivative instruments on the statements of earnings and other comprehensive income (OCI) for the six months ended March 31, 2010 and 2011
 
                           
Gain (Loss)
   
               
Gain (Loss)
   
Recognized in
   
   
Amount of Gain
   
Reclassified from
   
Earnings [Ineffective
   
   
(Loss) Recognized
   
Accumulated OCI
   
Portion and Amount
   
Derivatives in
 
in OCI
   
into Earnings
   
Excluded from
   
ASC Topic 815 Cash Flow
 
[Effective Portion]
   
[Effective Portion]
   
Effectiveness Testing]
   
Hedging Relationships
 
2011
   
2010
   
2011
   
2010
   
2011
   
2010
 
Location in Earnings
Commodity contracts
  $ 27.6     $ .4     $ 9.1     $ (8.2 )   $ -     $ (.2 )
Cost of goods sold
Foreign exchange contracts
    2.5       .9       2.1       4.0       -       -  
SG&A expenses
Interest rate contracts
    -       -       (.8 )     (1.0 )     -       -  
Interest expense, net
    $ 30.1     $ 1.3     $ 10.4     $ (5.2 )   $ -     $ (.2 )  

Derivatives in
 
Amount of Gain (Loss)
   
ASC Topic 815 Fair Value
 
Recognized in Earnings
 
Location of Gain (Loss)
Hedging Relationships
 
2011
   
2010
 
Recognized in Earnings
Commodity contracts
  $ (.1 )   $ -  
Cost of goods sold
                   
 
Derivatives Not Designated
 
Amount of Gain (Loss)
   
as Hedging Instruments
 
Recognized in Earnings
 
Location of Gain (Loss)
Under ASC Topic 815
 
2011
   
2010
 
Recognized in Earnings
Commodity contracts
  $ 10.8     $ -  
Cost of goods sold

Approximately $34.1 of the net cash flow hedge gains reported in accumulated OCI at March 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.

 


 
 
9

 

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 March 31, 2011 and September 30, 2010 was $1.3 and $2.6, respectively, and the related collateral required was $10.0 at both dates.
 
NOTE 8 – 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:
 
   
March 31, 2011
   
September 30, 2010
 
   
Total
   
Level 1
   
Level 2
   
Total
   
Level 1
   
Level 2
 
Assets
                                   
Marketable securities
  $ 10.0     $ 10.0     $ -     $ 10.0     $ 10.0     $ -  
Derivative assets
    14.3       -       14.3       16.7       -       16.7  
Deferred compensation investment
    25.8       25.8       -       22.2       22.2       -  
    $ 50.1     $ 35.8     $ 14.3     $ 48.9     $ 32.2     $ 16.7  
Liabilities
                                               
Derivative liabilities
  $ 1.3     $ -     $ 1.3     $ 2.6     $ -     $ 2.6  
Deferred compensation liabilities
    36.7       -       36.7       31.2       -       31.2  
    $ 38.0     $ -     $ 38.0     $ 33.8     $ -     $ 33.8  


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, interest rate swaps, 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 14) 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 $1,951.6 as of March 31, 2011 and $1,991.4 as of September 30, 2010) had an estimated fair value of $2,212.7 as of March 31, 2011 and $2,399.5 as of September 30, 2010.
 
 


 
10

 
NOTE 9 – INVENTORIES

The reported value of inventories consisted of:
 
   
Mar. 31,
   
Sept. 30,
 
   
2011
   
2010
 
Raw materials and supplies
  $ 179.6     $ 172.4  
Finished products
    289.7       252.7  
    $ 469.3     $ 425.1  

NOTE 10 – PROPERTY, NET

The reported value of property, net, consisted of:
   
Mar. 31,
   
Sept. 30,
 
   
2011
   
2010
 
Property at cost
  $ 1,919.8     $ 1,858.5  
Accumulated depreciation
    (715.0 )     (639.5 )
    $ 1,204.8     $ 1,219.0  

NOTE 11 – OTHER INTANGIBLE ASSETS, NET

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

   
Mar. 31,
   
Sept. 30,
 
   
2011
   
2010
 
Computer software
  $ 68.9     $ 66.0  
Customer relationships
    842.6       840.1  
Trademarks/brands
    989.6       989.6  
Other
    13.1       13.1  
      1,914.2       1,908.8  
Accumulated amortization
    (221.5 )     (181.8 )
    $ 1,692.7     $ 1,727.0  
 
Amortization expense related to intangible assets was:

   
Three Months Ended
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
Computer software
  $ 1.8     $ 2.1     $ 3.6     $ 4.0  
Customer relationships
    15.3       7.1       30.7       14.3  
Trademarks/brands
    1.8       1.6       3.6       3.3  
Other
    .5       .5       1.0       1.0  
    $ 19.4     $ 11.4     $ 38.9     $ 22.7  
 
For the intangible assets recorded as of March 31, 2011, total amortization expense of $78.9, $77.8, $68.5, $63.1, and $59.2 is scheduled for fiscal 2011, 2012, 2013, 2014, and 2015, respectively.
 
 
 
 

 
11

 
NOTE 12 – 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.
 
In June 2010, two former employees of a subsidiary of the Company filed a lawsuit in California state court 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.  In March 2011, one former employee of a separate subsidiary of the Company filed a lawsuit in a different California state court containing similar allegations.  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, yet is not likely to be material to its consolidated financial position, results of operations or cash flows.
 
From time to time, the Company is a party to various other legal proceedings.  The Company’s liability, if any, from pending legal proceedings cannot be determined with certainty; however, 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 to the Company’s consolidated financial position, results of operations or cash flows.  In addition, while it is difficult to quantify with certainty 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 should not be material to the Company’s consolidated financial position, results of operations or cash flows.
 
NOTE 13 – 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 March 31, 2011, the accounts receivable of the AIPC, J.T. Bakeries, North American Baking, Sepp’s Gourmet Foods, Post Foods Canada, Bloomfield Bakers, Western Waffles, and Medallion Foods businesses had not been incorporated into the agreement and were not being sold to RRC.  RRC can in turn sell up to $135.0 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 $.4 and $.7 in the three and six months ended March 31, 2011.  Accounting for this agreement changed as of the beginning of fiscal 2011, as described in Note 2.
 
In December 2010, the Company entered into uncommitted credit arrangements with banks totaling $150.0.  The arrangements expire in December 2011.
 
As of March 31, 2011, funding from the receivables securitization was $119.0 at a weighted-average interest rate of 1.29%, and borrowings under the uncommitted credit arrangements (which had an initial term maturing April 7, 2011) were $150.0 at a weighted-average interest rate of 1.73%.  These amounts are reflected on the Company’s consolidated balance sheet in “Accounts and notes payable.”  There were no corresponding amounts as of September 30, 2010
 
 

 
12

 
NOTE 14 – LONG-TERM DEBT

The reported value of long-term debt consisted of:

   
March 31, 2011
   
September 30, 2010
 
   
Balance
   
Rate
   
Balance
   
Rate
 
Fixed Rate Senior Notes, Series B
  $ -       n/a     $ 29.0       4.24%  
Fixed Rate Senior Notes, Series C
    50.0      
5.43%
      50.0       5.43%  
Fixed Rate Senior Notes, Series D
    32.1       4.76%       42.9       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       2.85%       20.0       2.98%  
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%  
2008 Revolving Credit Agreement
    -       n/a       123.4       1.30%  
2010 Revolving Credit Agreement
    37.7       2.71%       300.0       2.81%  
2010 Term Loan
    195.0       2.75%       200.0       2.81%  
Other
    -       n/a       .1    
Various
 
      2,204.3               2,634.9          
Plus:  Unamortized premium (discount), net
    3.2               3.2          
Less: Current portion
    (23.2 )             (173.2 )        
    $ 2,184.3             $ 2,464.9          

NOTE 15 – SHAREHOLDERS’ EQUITY

During the six months ended March 31, 2011 and 2010, the Company repurchased 9,000 and 2,000,000 shares, respectively, of its common stock at a total cost of $.6 and $115.5, respectively.  As of March 31, 2011, there were 8,436,107 shares in treasury and 55,040,528 shares outstanding.  As of September 30, 2010, there were 8,547,923 shares in treasury and 54,928,712 shares outstanding.
 
Accumulated other comprehensive loss decreased $34.1 during the six months ended March 31, 2011 as a result of a $21.2 increase in the foreign currency translation adjustment and a $19.7 net gain from cash flow hedging activities, offset by $6.8 of related income taxes.

NOTE 16 – SEGMENT INFORMATION

Management evaluates each segment’s performance based on its segment 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.
 
 


 
13

 
   
Three Months Ended
   
Six Months Ended
 
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
   
2010
 
Net Sales
                       
  Branded Cereal Products
  $ 255.3     $ 260.6     $ 476.9     $ 506.5  
  Other Cereal Products
    198.9       193.3       403.6       388.2  
  Snacks, Sauces & Spreads
    382.2       338.2       799.6       707.5  
  Frozen Bakery Products
    192.7       172.9       386.4       354.7  
  Pasta
    143.5       -       279.4       -  
    Total
  $ 1,172.6     $ 965.0     $ 2,345.9     $ 1,956.9  
                                 
Segment Profit
                               
  Branded Cereal Products
  $ 56.9     $ 55.0     $ 106.6     $ 104.1  
  Other Cereal Products
    21.3       22.0       42.5       46.2  
  Snacks, Sauces & Spreads
    33.3       40.5       70.7       88.0  
  Frozen Bakery Products
    22.9       18.2       45.9       44.6  
  Pasta
    36.6       -       64.8       -  
    Total segment profit
    171.0       135.7       330.5       282.9  
  Interest expense, net
    (33.8 )     (23.9 )     (69.5 )     (50.4 )
  Provision for legal settlement
    -       -       (2.5 )     -  
  Adjustments for economic hedges
    6.0       -       10.8       -  
  Merger and integration costs
    (.1 )     (4.5 )     (.3 )     (5.1 )
  Amounts related to plant closures
    (.2 )     (.1 )     (.4 )     (.8 )
  Impairment of intangible assets
    -       (20.5 )     -       (20.5 )
  Stock-based compensation expense
    (4.1 )     (4.5 )     (7.9 )     (9.5 )
  Systems upgrade and conversion costs
    (1.5 )     (1.4 )     (3.9 )     (2.7 )
  Other unallocated corporate expenses
    (7.0 )     (7.0 )     (15.1 )     (14.5 )
    Earnings before income taxes
  $ 130.3     $ 73.8     $ 241.7     $ 179.4  
                                 
Depreciation and Amortization
                               
  Branded Cereal Products
  $ 14.4     $ 13.8     $ 29.1     $ 27.4  
  Other Cereal Products
    6.6       5.3       13.4       10.5  
  Snacks, Sauces & Spreads
    10.2       8.4       20.5       16.9  
  Frozen Bakery Products
    9.7       9.0       19.7       17.7  
  Pasta
    13.1       -       26.3       -  
  Corporate
    2.1       2.5       4.0       4.9  
    Total
  $ 56.1     $ 39.0     $ 113.0     $ 77.4  
                                 
   
Mar. 31,
   
Sept. 30,
                 
     2011      2010                  
Assets
                               
  Branded Cereal Products
  $ 3,218.6     $ 3,271.3                  
  Other Cereal Products
    266.8       268.7                  
  Snacks, Sauces & Spreads
    756.1       760.0                  
  Frozen Bakery Products
    731.6       743.4                  
  Pasta
    1,456.3       1,456.6                  
    Total segment assets
    6,429.4       6,500.0                  
  Cash and cash equivalents
    41.4       29.3                  
  Investment in Ralcorp Receivables Corporation
    -       137.8                  
  Other unallocated corporate assets
    325.8       137.8                  
    Total
  $ 6,796.6     $ 6,804.9                  
 
 
 
 

 
14

 
NOTE 17 – CONDENSED FINANCIAL STATEMENTS OF GUARANTORS

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).  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).
 
Set forth below are condensed consolidating financial statements presenting the results of operations, financial position, and cash flows of the Parent Company, the Guarantor Subsidiaries on a combined basis, and the Non-Guarantor Subsidiaries 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 the Parent Company, the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries.  For this presentation, investments in subsidiaries are accounted for using the equity method of accounting.
 

Condensed Consolidating Statements of Earnings
   
Three Months Ended March 31, 2011
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Net Sales
  $ 124.0     $ 995.5     $ 85.1     $ (32.0 )   $ 1,172.6  
Other intercompany revenues
    .4       2.9       12.2       (15.5 )     -  
Cost of goods sold
    (83.8 )     (705.4 )     (75.4 )     32.0       (832.6 )
Gross Profit
    40.6       293.0       21.9       (15.5 )     340.0  
Selling, general and administrative expenses
    (30.6 )     (122.8 )     (17.9 )     15.5       (155.8 )
Amortization of intangible assets
    (1.4 )     (16.6 )     (1.4 )     -       (19.4 )
Other operating expenses, net
    (.3 )     (.4 )     -       -       (.7 )
Operating Profit
    8.3       153.2       2.6       -       164.1  
Interest (expense) income, net
    (34.2 )     .9       1.3       -       (33.8 )
Earnings before Income Taxes and Equity Earnings
    (25.9 )     152.3       3.9       -       130.3  
Income taxes
    9.3       (55.0 )     (1.3 )     -       (47.0 )
Earnings before Equity Earnings
    (16.6 )     97.3       2.6       -       83.3  
Equity in earnings of subsidiaries
    99.9       (1.0     -       (98.9 )     -  
Net Earnings
  $ 83.3     $ 96.3     $ 2.6     $ (98.9 )   $ 83.3  
 
 
   
Three Months Ended March 31, 2010
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Net Sales
  $ 127.8     $ 824.9     $ 43.4     $ (31.1 )   $ 965.0  
Other intercompany revenues
    .4       2.5       30.9       (33.8 )     -  
Cost of goods sold
    (91.5 )     (598.2 )     (40.0 )     31.1       (698.6 )
Gross Profit
    36.7       229.2       34.3       (33.8 )     266.4  
Selling, general and administrative expenses
    (33.8 )     (110.5 )     (23.4 )     33.8       (133.9 )
Amortization of intangible assets
    (1.8 )     (9.1 )     (.4 )     -       (11.3 )
Impairment of intangible assets
    -       (20.5 )     -       -       (20.5 )
Other operating expenses, net
    (4.6 )     1.6       -       -       (3.0 )
Operating Profit
    (3.5 )     90.7       10.5       -       97.7  
Interest (expense) income, net
    (24.5 )     .2       .4       -       (23.9 )
Earnings before Income Taxes and Equity Earnings
    (28.0 )     90.9       10.9       -       73.8  
Income taxes
    10.4       (32.8 )     (4.7 )     -