form10-q_020712.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 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
 
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 February 8, 2012:  55,274,475
 

 
 
 

 


RALCORP HOLDINGS, INC.
 
INDEX
 
   
PAGE
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
1
     
 
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
32
     
Item 4.
Controls and Procedures
32
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
33
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
34
 
Item 4.
 
Mine Safety Disclosures
 
34
 
Item 6.
 
Exhibits
 
34
     
SIGNATURES
34
 
 
 
 
 
 
 
 
 
(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
 
   
December 31,
 
   
2011
   
2010
 
             
Net Sales
  $ 1,380.9     $ 1,173.3  
Cost of goods sold
    (1,044.6 )     (855.3 )
Gross Profit
    336.3       318.0  
Selling, general and administrative expenses
    (173.2 )     (147.5 )
Amortization of intangible assets
    (24.0 )     (19.5 )
Other operating expenses, net
    (3.4 )     (3.9 )
Operating Profit
    135.7       147.1  
Interest expense, net
    (34.4 )     (35.7 )
Earnings before Income Taxes
    101.3       111.4  
Income taxes
    (36.0 )     (40.1 )
Net Earnings
  $ 65.3     $ 71.3  
                 
Earnings per Share
               
  Basic
  $ 1.18     $ 1.30  
  Diluted
  $ 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.
 
 
 

 
1

 

RALCORP HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in millions)
 
 
 
Dec. 31,
   
Sept. 30,
 
   
2011
   
2011
 
             
Assets
           
Current Assets
           
  Cash and cash equivalents
  $ 61.4     $ 50.0  
  Marketable securities
    1.0       8.2  
  Receivables, net
    404.9       410.4  
  Inventories
    532.1       490.7  
  Deferred income taxes
    19.6       19.6  
  Prepaid expenses and other current assets
    22.8       15.8  
    Total Current Assets
    1,041.8       994.7  
Property, Net
    1,258.1       1,195.3  
Goodwill
    2,820.4       2,590.1  
Other Intangible Assets, Net
    1,757.5       1,516.5  
Other Assets
    39.8       36.6  
    Total Assets
  $ 6,917.6     $ 6,333.2  
                 
Liabilities and Shareholders' Equity
               
Current Liabilities
               
  Accounts payable
  $ 318.6     $ 313.2  
  Notes payable to banks
    610.0       105.0  
  Current portion of long-term debt
    106.3       30.7  
  Other current liabilities
    237.0       223.0  
    Total Current Liabilities
    1,271.9       671.9  
Long-term Debt
    2,083.6       2,172.5  
Deferred Income Taxes
    620.3       635.6  
Other Liabilities
    247.6       234.0  
    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
    1,146.2       1,080.9  
  Accumulated other comprehensive loss
    (74.0 )     (80.7 )
    Total Shareholders' Equity
    2,694.2       2,619.2  
    Total Liabilities and Shareholders' Equity
  $ 6,917.6     $ 6,333.2  
 
See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 

 
2

 
 
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  
Adjustments to reconcile net earnings to net
               
  cash flow provided by operating activities:
               
  Depreciation and amortization
    64.4       56.9  
  Stock-based compensation expense
    3.9       3.8  
  Deferred income taxes
    (15.9 )     (12.2 )
  Other, net
    6.6       57.9  
    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
    (38.4 )     (21.1 )
Purchases of securities
    -       (10.0 )
Proceeds from sale or maturity of securities
    7.2       10.0  
    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
    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.
 
 
 
 

 
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, 2011, filed on December 14, 2011.  The significant accounting policies for the accompanying financial statements are the same as disclosed in Note 1 in that Annual Report.

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.”  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 – 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 13) that was repaid with a portion of the proceeds generated in connection with the separation of its Post cereal business (see Note 18).  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.
 
 
 
 
 

 
4

 

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
  $ 1,385.5     $ 1,272.6  
Net earnings
    65.7       77.0  
Basic earnings per share
    1.19       1.40  
Diluted earnings per share
    1.17       1.39  
 
 
 
 
 

 
5

 
 
NOTE 4 – 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
  $ 1.8     $ 1.4  
Interest cost
    3.2       3.1  
Expected return on plan assets
    (5.2 )     (4.7 )
Amortization of prior service cost
    .1       .1  
Amortization of net loss
    1.6       1.2  
Net periodic benefit cost
  $ 1.5     $ 1.1  
                 
Other Postretirement Benefits
               
Service cost
  $ .6     $ .6  
Interest cost
    1.6       1.3  
Amortization of prior service cost
    (.3 )     (.3 )
Amortization of net loss
    .4       -  
Net periodic benefit cost
  $ 2.3     $ 1.6  
 
NOTE 5 – 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  
 
 
 
 

 
6

 

NOTE 6 – 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 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,
   
Sept. 30,
 
   
2011
   
2011
 
Raw materials (thousands of pounds)
    124,900       679,393  
Natural gas (thousands of MMBTUs)
    1,990       3,200  
Other fuel (thousands of gallons)
    10,627       8,001  
Currency (thousands of dollars)
    59,000       69,450  
 
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
   
Sept. 30,
   
   
2011
   
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.
 
                           
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
  $ (.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 )  
 
 
 
 
 

 
7

 

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
  $ (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 7 – 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
    27.3       27.3       -       23.7       23.7       -  
    $ 30.6     $ 28.3     $ 2.3     $ 32.2     $ 31.9     $ .3  
Liabilities
                                               
Derivative liabilities
  $ 27.8     $ -     $ 27.8     $ 53.1     $ -     $ 53.1  
Deferred compensation liabilities
    41.8       -       41.8       37.3       -       37.3  
    $ 69.6     $ -     $ 69.6     $ 90.4     $ -     $ 90.4  
 
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.
 
 

 
8

 

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 $1,940.9 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 8 – INVENTORIES

The reported value of inventories consisted of:
 
   
Dec. 31,
   
Sept. 30,
 
   
2011
   
2011
 
Raw materials and supplies
  $ 223.4     $ 201.9  
Finished products
    308.7       288.8  
    $ 532.1     $ 490.7  

NOTE 9 – PROPERTY, NET

The reported value of property, net, consisted of:
 
   
Dec. 31,
   
Sept. 30,
 
   
2011
   
2011
 
Property at cost
  $ 2,072.6     $ 1,969.4  
Accumulated depreciation
    (814.5 )     (774.1 )
    $ 1,258.1     $ 1,195.3  

NOTE 10 – 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, 2011
                                   
Goodwill (gross)
  $ 1,794.0     $ 47.2     $ 292.8     $ 366.3     $ 534.1     $ 3,034.4  
Accumulated impairment losses
    (364.8 )     -       (79.5 )     -       -       (444.3 )
Goodwill (net)
  $ 1,429.2     $ 47.2     $ 213.3     $ 366.3     $ 534.1     $ 2,590.1  
  Goodwill acquired
    -       -       -       216.6       10.7       227.3  
  Currency translation adjustment
    .2       -       1.2       1.6       -       3.0  
Balance, December 31, 2011
                                               
Goodwill (gross)
  $ 1,794.2     $ 47.2     $ 294.0     $ 584.5     $ 544.8     $ 3,264.7  
Accumulated impairment losses
    (364.8 )     -       (79.5 )     -       -       (444.3 )
Goodwill (net)
  $ 1,429.4     $ 47.2     $ 214.5     $ 584.5     $ 544.8     $ 2,820.4  

 
 
 

 
9

 

NOTE 11 – OTHER INTANGIBLE ASSETS, NET

The reported value of other intangible assets, net, consisted of:
 
   
Dec. 31,
   
Sept. 30,
 
   
2011
   
2011
 
Subject to amortization:
           
Computer software
  $ 79.1     $ 75.3  
Customer relationships
    1,049.1       836.9  
Trademarks/brands
    127.0       126.5  
Other
    62.1       13.1  
      1,317.3       1,051.8  
Accumulated amortization
    (284.2 )     (259.7 )
    $ 1,033.1     $ 792.1  
Not subject to amortization:
               
Trademarks/brands
    724.4       724.4  
    $ 1,757.5     $ 1,516.5  
 
Amortization expense related to intangible assets was:
 
   
Three Months Ended
 
   
December 31,
 
   
2011
   
2010
 
Computer software
  $ 2.1     $ 1.8  
Customer relationships
    19.6       15.4  
Trademarks/brands
    1.8       1.8  
Other
    .5       .5  
    $ 24.0     $ 19.5  
 
For the intangible assets recorded as of December 31, 2011, total amortization expense of $96.8, $88.4, $83.6, $78.7, and $73.7 is scheduled for fiscal 2012, 2013, 2014, 2015, and 2016, respectively.

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.

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.
 
 
 

 
10

 

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 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 December 31, 2011, the accounts receivable of the American Italian Pasta Company, Post Foods, Bloomfield Bakers, Medallion Foods, and foreign subsidiaries had not been incorporated into the agreement and were not being sold to RRC.  The domestic receivables of Post Foods were incorporated into the agreement effective November 4, 2010 but removed effective December 31, 2011, in advance of the Post spin-off (see Note 18).  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.”

 
11

 
 
NOTE 14 – 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 15 – 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.

NOTE 16 – 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.

 
12

 

   
Three Months Ended
 
   
December 31,
 
   
2011
   
2010
 
Net Sales
           
  Branded Cereal Products
  $ 214.4     $ 221.6  
  Other 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
  $ 1,380.9     $ 1,173.3  
                 
Segment Operating Profit
               
  Branded Cereal Products
  $ 34.9     $ 49.7  
  Other 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
    165.4       160.8  
  Interest expense, net
    (34.4 )     (35.7 )
  Adjustments for economic hedges
    (5.8 )     4.8  
  Post separation costs
    (2.7 )     -  
  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
    (3.9 )     (3.8 )
  Systems upgrade and conversion costs
    (1.6 )     (2.4 )
  Other unallocated corporate expenses
    (8.7 )     (8.1 )
    Earnings before income taxes
  $ 101.3     $ 111.4  
                 
Depreciation and Amortization
               
  Branded Cereal Products
  $ 15.0     $ 14.7  
  Other 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
  $ 64.4     $ 56.9  
                 
      Dec. 31,       Sept. 30,  
    2011      2011  
Assets
               
  Branded Cereal Products
  $ 2,720.1     $ 2,670.6  
  Other 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 segment assets
    6,565.4       5,908.9  
  Cash and cash equivalents
    61.4       50.0  
  Other unallocated corporate assets
    290.8       374.3  
    Total
  $ 6,917.6     $ 6,333.2  
 
 
 
 
 

 
13

 

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).  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).
 
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 December 31, 2011
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Net Sales
  $ 141.5     $ 1,182.5     $ 101.6     $ (44.7 )   $ 1,380.9  
Other intercompany revenues
    .5       3.0       13.5       (17.0 )     -  
Cost of goods sold
    (109.4 )     (898.2 )     (81.7 )     44.7       (1,044.6 )
Gross Profit
    32.6       287.3       33.4       (17.0 )     336.3  
Selling, general and administrative expenses
    (37.7 )     (135.2 )     (17.3 )     17.0       (173.2 )
Amortization of intangible assets
    (2.9 )     (19.6 )     (1.5 )     -       (24.0 )
Other operating expenses, net
    (2.8 )     (.5     (.1 )     -       (3.4 )
Operating Profit
    (10.8 )     132.0       14.5       -       135.7  
Interest (expense) income, net
    (34.1 )     .4       (.7 )     -       (34.4 )
Earnings before Income Taxes and Equity Earnings
    (44.9 )     132.4       13.8       -       101.3  
Income taxes
    (15.9 )     (15.2 )     (4.9 )     -       (36.0 )
Earnings before Equity Earnings
    (60.8 )     117.2       8.9       -       65.3  
Equity in earnings of subsidiaries
    126.1       5.8       -       (131.9 )     -  
Net Earnings
  $ 65.3     $ 123.0     $ 8.9     $ (131.9 )   $ 65.3  
 
 
   
Three Months Ended December 31, 2010
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Net Sales
  $ 134.4     $ 972.6     $ 94.6     $ (28.3 )   $ 1,173.3  
Other intercompany revenues
    .5       2.7       12.3       (15.5 )     -  
Cost of goods sold
    (95.9 )     (708.6 )     (79.1 )     28.3       (855.3 )
Gross Profit
    39.0       266.7       27.8       (15.5 )     318.0  
Selling, general and administrative expenses
    (31.5 )     (113.4 )     (18.1 )     15.5       (147.5 )
Amortization of intangible assets
    (1.3 )     (16.6 )     (1.6 )     -       (19.5 )
Other operating expenses, net
    (.4 )     (3.5 )     -       -       (3.9 )
Operating Profit
    5.8       133.2       8.1       -       147.1  
Interest (expense) income, net
    (36.1 )     .2       .2       -       (35.7 )
Earnings before Income Taxes and Equity Earnings
    (30.3 )     133.4       8.3       -       111.4  
Income taxes
    10.9       (47.9 )     (3.1 )     -       (40.1 )
Earnings before Equity Earnings
    (19.4 )     85.5       5.2       -       71.3  
Equity in earnings of subsidiaries
    90.7       1.6       -       (92.3 )     -  
Net Earnings
  $ 71.3     $ 87.1     $ 5.2     $ (92.3 )   $ 71.3  
 
 
 
14

 

Condensed Consolidating Balance Sheets
 
   
December 31, 2011
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Assets
                             
Current Assets
                             
Cash and cash equivalents
  $ .9     $ 3.2     $ 57.3     $ -     $ 61.4  
Marketable securities
    1.0       -       -       -       1.0  
Receivables, net
    41.1       108.8       259.0       (4.0 )     404.9  
Inventories
    74.4       430.5       27.2       -       532.1  
Deferred income taxes
    14.4       4.8       .4       -       19.6  
Prepaid expenses and other current assets
    8.9       11.0       2.9       -       22.8  
Total Current Assets
    140.7       558.3       346.8       (4.0 )     1,041.8  
Intercompany Notes and Interest
    -       88.9       106.6       (195.5 )     -  
Investment in Subsidiaries
    5,530.4       299.6       -       (5,830.0 )     -  
Deferred Income Taxes
    141.0       -       -       (141.0 )     -  
Property
    254.3       1,578.6       239.7       -       2,072.6  
Accumulated Depreciation
    (180.5 )     (570.7 )     (63.3 )     -       (814.5 )
Goodwill
    -       2,707.5       112.9       -       2,820.4  
Other Intangible Assets
    67.8       1,901.0       72.9       -       2,041.7  
Accumulated Amortization
    (42.5 )     (224.0 )     (17.7 )     -       (284.2 )
Other Assets
    11.0       28.6       .2       -       39.8  
Total Assets
  $ 5,922.2     $ 6,367.8     $ 798.1     $ (6,170.5 )   $ 6,917.6  
                                         
Liabilities and Shareholders' Equity
                                       
Current Liabilities
                                       
Accounts payable
  $ 71.3     $ 215.0     $ 36.3     $ (4.0 )   $ 318.6  
Notes payable to banks
    550.0       -       60.0       -       610.0  
Current portion of long-term debt
    105.8       -       .5       -       106.3  
Other current liabilities
    128.1       82.7       26.2       -       237.0  
Total Current Liabilities
    855.2       297.7       123.0       (4.0 )     1,271.9  
Intercompany Notes and Interest
    91.5       15.1       88.9       (195.5 )     -  
Long-term Debt
    2,081.2       (.1 )     2.5       -       2,083.6  
Deferred Income Taxes
    -       750.2       11.1       (141.0 )     620.3  
Other Liabilities
    200.1       7.6       39.9       -       247.6  
Total Liabilities
    3,228.0       1,070.5       265.4       (340.5 )     4,223.4  
Shareholders' Equity
                                       
Common stock
    .6       -       -       -       .6  
Other shareholders' equity
    2,693.6       5,297.3       532.7       (5,830.0 )     2,693.6  
Total Shareholders' Equity
    2,694.2       5,297.3       532.7       (5,830.0 )     2,694.2  
Total Liabilities and Shareholders' Equity
  $ 5,922.2     $ 6,367.8     $ 798.1     $ (6,170.5 )   $ 6,917.6  
 
 
 
 
 

 
15

 

   
September 30, 2011
 
   
Parent
   
Guarantor
   
Non-Guarantor
             
   
Company
   
Subsidiaries
   
Subsidiaries
   
Eliminations
   
Consolidated
 
                               
Assets
                             
Current Assets
                             
Cash and cash equivalents
  $ 2.5     $ -     $ 50.8     $ (3.3 )   $ 50.0  
Marketable securities
    8.2       -       -       -       8.2  
Receivables, net
    57.5       70.0       284.7       (1.8 )     410.4  
Inventories
    65.2       395.3       30.2       -       490.7  
Deferred income taxes
    14.4       4.8       .4       -       19.6  
Prepaid expenses and other current assets
    3.4       10.3       2.1       -       15.8  
Total Current Assets
    151.2       480.4       368.2       (5.1 )     994.7  
Intercompany Notes and Interest
    -       88.8       130.7       (219.5 )     -  
Investment in Subsidiaries
    4,921.9       267.7       -       (5,189.6 )     -  
Deferred Income Taxes
    141.0       -       -       (141.0 )     -  
Property
    252.5       1,488.8       228.1       -       1,969.4  
Accumulated Depreciation
    (177.1 )     (541.9 )     (55.1 )     -       (774.1 )
Goodwill
    -       2,491.0       99.1       -       2,590.1  
Other Intangible Assets
    66.3       1,639.2       70.7       -       1,776.2  
Accumulated Amortization
    (40.8 )     (203.2 )     (15.7 )     -       (259.7 )
Other Assets
    11.5       24.9       .2       -       36.6  
Total Assets
  $ 5,326.5     $ 5,735.7     $ 826.2     $ (5,555.2 )   $ 6,333.2  
                                         
Liabilities and Shareholders' Equity
                                       
Current Liabilities
                                       
Accounts payable   $ 74.7     201.8     41.8     (5.1   313.2  
Notes payable to banks     -       -       105.0       -       105.0  
Current portion of long-term debt
    30.7       -       -       -       30.7  
Other current liabilities
    120.2       84.5       18.3       -       223.0  
Total Current Liabilities
    225.6       286.3       165.1       (5.1 )     671.9  
Intercompany Notes and Interest
    115.6       15.1       88.8       (219.5 )     -  
Long-term Debt
    2,172.5       -       -       -       2,172.5  
Deferred Income Taxes
    -       765.5       11.1       (141.0 )     635.6  
Other Liabilities
    193.6       3.2       37.2       -       234.0  
Total Liabilities
    2,707.3       1,070.1       302.2       (365.6 )     3,714.0  
Shareholders' Equity
                                       
Common stock
    .6       -       -       -       .6  
Other shareholders' equity
    2,618.6       4,665.6       524.0       (5,189.6 )     2,618.6  
Total Shareholders' Equity
    2,619.2