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Ralcorp's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: RAH

Our total revenue for the quarter was up 16% to $1.1 billion. The increase was largely due to the acquisition of the Refrigerated Dough business. Base business revenue was up 7% due to higher net selling prices in response to significantly higher raw material and freight costs.

Volumes grew by 4% in the quarter as a result of the Refrigerated Dough and Annoni acquisitions. However base business volumes declined 4% in the quarter, as consumers reduced purchases and we exited businesses that did not meet our margin requirements.

Now let me give you a little more color on our performance. Overall, we had a mix performance in the quarter, in a challenging operating environment. On the positive front was our price mix realization. As we stated over the last couple of quarters, our price mix matched our input cost inflation in the second quarter. As you may recall, we stated that our second quarter input cost inflation would be the highest of the year and it came in at $95 million. We were able to match this significant inflation with pricing and mix.

Also on the positive side were acquisitions. Let me share some more information on our latest acquisition, Petri Baking Products, which we announced this morning. With annual sales exceeding $50 million, Petri Cookie Company is a leading private-brand supplier of high quality private-brand and value brand cookies that maintain a homemade look, feel and taste. Through their unique manufacturing process, the company produces both soft style and crunchy wire-cut cookies for customers in a variety of retail channels, including alternative channels at opening price points.

We expect to take advantage of operational synergies, which will be delivered over three years with the majority of these benefits occurring by the end of the second year of ownership while we have yet to complete the intangible valuation analysis, which could impact accretion. Ralcorp anticipates the transaction will deliver five sense of GAAP accretion and eight sense of cash accretion to adjusted diluted earnings per share in the first year of ownership, excluding one-time cost.

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