Milling & Baking News - February 15, 2005 - 17

F I N A N C I A L

R E S U L T S

Cereal sales surge, acquisitions
boost Ralcorp results for quarter
ST. LOUIS - Private label ready-to-eat
cereal sales volume at Ralston Foods set
a record in 2004 at a level nearly 20%
higher than in 2003, Ralcorp Holdings,
Inc. announced when it issued financial
results Feb. 1 for the first quarter ended
Dec. 31.
Ralcorp attributed the R.-T.-E. cereal
growth primarily to increased distribution of its products to the company's
largest customers.
The overall R.-T.-E. category experienced a 2.7% drop in sales growth for the
52 weeks ended Dec. 25, 2004, compared
with the 52 weeks ended Dec. 27, 2003,
according to ACNielsen's Scantrack. The
statistics included total U.S. food, drug
and mass outlets combined, excluding
Wal-Mart Stores, Inc.
Private label R.-T.-E. cereal saw overall sales growth of 2.4% for the 52 weeks
ended Dec. 25.
The Cereals, Crackers & Cookies segment of Ralcorp Holdings saw a profit
contribution of $19.5 million for the
quarter, a 15% increase from $17 million
in the previous first quarter.
First-quarter net sales for the Cereals,
Crackers & Cookies segment increased
$26 million, or 17%, from last year.
Ralston Foods cereal division grew $14
million, and the Bremner cracker and
cookie division added $12 million.
Overall, net earnings of Ralcorp
Holdings in the first quarter totaled
$16.6 million, equal to 55c per share on
the common stock, a 42% increase from

$11.7 million, or 39c per share, in the
same year-ago quarter.
Net sales of $440.1 million were up
21% from $362.5 million in the previous
first quarter.
Ralcorp's results for the first quarter
of fiscal 2005 included three months of
results from the Bakery Chef business,
acquired on Dec. 3, 2003, and the Concept 2 Bakers business, acquired on Feb.
27, 2004.
Results in the first quarter of fiscal
2004 included about one month of Bakery Chef results and no Concept 2 Bakers
results.
Effective at the beginning of fiscal
2005, operations of the in-store bakery
group report to management of Bakery
Chef, who then report combined results
to Ralcorp's top management.
Ralcorp said its in-store bakery has
been combined with Bakery Chef in a
segment called Frozen Bakery Products,
which previously was known as Frozen
Pancakes, Biscuits & Breads. In-store
bakery had been combined with Bremner in Cereals, Crackers & Cookies.
Net sales for the Frozen Bakery Products segment grew to $85.3 million for
the first quarter, an increase of 117%
from $39.3 million for the previous first
quarter. About $30 million was attributed to results from Bakery Chef. Another
$10 million of the increase was attributable to Concept 2 Bakers.
Profit contribution from Frozen Bakery Products grew to $12.8 million in

the first quarter, a 137% increase from
$5.4 million in the previous first quarter.
Nearly 90% of the increase was the result
of the timing of the acquisitions.
Bremner, meanwhile, has begun supplying products to several former customers of the Bake-Line Group, L.L.C., which
ceased operations Jan. 12, 2004. Cracker
sales volume was up 12%, primarily in
relatively higher-priced specialty items.
Cookie volume was up 25%, primarily in
lower-priced sandwich cremes.
Increased sales and favorable mix in
the Cereals, Crackers & Cookie segment
was partially offset in the first quarter
by escalating freight costs of about $1.8
million, unfavorable ingredient costs of
about $2.5 million and increased promotional spending of about $1.3 million.
Ralcorp Holdings expects R.-T.-E. cereal and Bremner sales growth to slow
during the remainder of 2005 as the effects of new products and customers will
have a reduced impact on year-over-year
comparisons.
Ralcorp Holdings borrowed an additional $270 million to fund the Bakery
Chef acquisition in December 2003. Outstanding long-term debt increased from
$155.9 million on Sept. 30, 2003, to $425.9
million on Dec. 31, 2003. In November
2004, $50 million of floating rate senior
notes was repaid with proceeds from the
sale of accounts receivable.
As a result, interest expense was $3.9
million for the three months ended Dec. 31,
2004, which compared with $1.7 million in
the first quarter of the previous year.
Restructuring charges in the first
quarter were $100,000 and related to the
closing of a Kansas City plant. MBN

Lance earnings higher in 2004; Stroup sees momentum
CHARLOTTE, N.C. - Net income of Lance, Inc. in the
year ended Dec. 25 was $24,855,000, equal to 84c per share
on the common stock, up 36% from $18,278,000, or 63c per
share, in fiscal 2003. Net sales for the year were
$600,455,000, up 6.7% from $562,781,000 in the
previous year.
Results for 2003 included charges of about
18c per share, primarily in the first quarter,
for the previously announced discontinuation
of mini sandwich cracker distribution through
the company's route sales system and severance costs.
Boosted by its partnership with Wal-Mart
Stores, Inc. and success in its private label business, Lance
posted net earnings in the fourth quarter ended Dec. 25 of
$6,248,000, or 21c per share, up 6% from $5,900,000, or 20c
per share, in the fourth quarter of fiscal 2003. Net sales in the
quarter jumped 6% to $149,426,000.
"This was a solid finish to 2004," said Paul A. Stroup III,
chairman, president and chief executive officer. "We made
significant progress realigning our route sales system and

18 / Milling & Baking News, February 15, 2005

are on track to complete the realignments by April of 2005.
Consumers and retailers continue to respond favorably to
our brand-building activities and our private label sales
outlook remains strong. While fuel and energy
costs remain a concern, momentum is building
and we are encouraged as we move into 2005."
Gross margin as a percentage of revenue declined 1.5 percentage points because of a higher
mix of non-branded product revenue. During
the fourth quarter, non-branded product revenue increased 12% on strength in private label
product sales and sales to other manufacturers. Branded product revenue in the quarter
increased 2% as growth in sandwich crackers and cookies,
salty snacks and nuts more than offset declines in cakes,
meat snacks, candy and restaurant style crackers.
Lance projected full-year 2005 earnings to be in the range
of 88c to 91c per share.
The company's board of directors declared a regular
quarterly cash dividend of 16c per share, payable Feb. 18 to
shareholders of record as of Feb. 10. MBN

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Milling & Baking News - February 15, 2005

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