RALCORP HOLDINGS INC /MO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NO. 1-12619
RALCORP HOLDINGS, INC.
(Exact name of Registrant as specified in its Articles)

MISSOURI 43-1766315
(State of Incorporation) (I.R.S. Employer Identification Number)

800 MARKET STREET
ST. LOUIS, MISSOURI 63101
(314) 877-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
---------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange, Inc.
Common Stock Purchase Rights New York Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Registrant 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 and
has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[x]

Aggregate market value of the voting stock held by non-affiliates of the
Registrant was $427,458,103 based upon the closing market price on December 18,
2000. Excluded from this figure is the voting stock held by Registrant's
Directors, who are the only persons known to Registrant who may be considered to
be its "affiliates" as defined under Rule 12b-2.

Number of shares of Common Stock, $.01 par value, outstanding as of close
of business on December 18, 2000: 29,859,907.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant's Notice of Annual Meeting and Proxy Statement relating to its
2001 Annual Meeting (to be filed), to the extent indicated in Part III.

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TABLE OF CONTENTS

PART I
Item 1. Business 4
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 4A. Executive Officers of the Registrant 8

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 37

PART III
Item 10. Directors and Executive Officers of the Registrant 37
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and
Management 38
Item 13. Certain Relationships and Related Transactions 38

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 38

2

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Report. These
forward-looking statements are sometimes identified by their use of terms and
phrases such as "believes," "should," "expects," "anticipates," "intends,"
"will" or similar expressions elsewhere in this Report. The Company's results
of operations and financial condition may differ materially from those in the
forward-looking statements. Such statements are based on management's current
views and assumptions, and involve risks and uncertainties that could affect
expected results. For example, any of the following factors cumulatively or
individually may impact expected results:

(i) If the Company is unable to maintain a meaningful price gap between its
private label products and the branded products of its competitors, successfully
introduce new products or successfully manage costs across all parts of the
Company, the Company's private label businesses could incur operating losses;

(ii) Consolidation among members of the grocery trade may lead to increased
wholesale price pressure from larger grocery trade customers and could result in
the loss of key accounts if the surviving entities are not customers of the
Company;

(iii) Significant increases in the cost of certain raw materials (e.g., wheat,
soybean oil, various nuts) or energy used to manufacture the Company's products,
to the extent not reflected in the price of the Company's products, could
adversely impact the Company's results;

(iv) In light of its significant ownership in Vail Resorts, Inc., the Company's
non-cash earnings can be adversely affected by Vail Resorts' unfavorable
performance;

(v) The Company is currently generating profit from certain co-manufacturing
contract arrangements with other manufacturers within its competitive
categories. The termination or expiration of these contracts, and the inability
of the Company to replace this level of business could negatively affect the
Company's operating results;

(vi) The Company's businesses compete in mature segments with competitors
having large percentages of segment sales;

(vii) The Company has realized increases to sales and earnings through the
acquisitions of businesses, but the ability to undertake future acquisitions
depends on many factors that the Company does not control, such as identifying
acquisition candidates and negotiating satisfactory terms upon which to purchase
such candidates; and

(viii) Several of the Company's key competitors have been or are being sold.
Such changes in ownership could lead to the competitors adopting different
marketing and sales strategies that could negatively impact the Company.

3

PART I

ITEM 1. BUSINESS

Ralcorp Holdings, Inc. is a Missouri corporation incorporated on October
23, 1996. Its principal executive offices are located at 800 Market Street,
Suite 2900, St. Louis, Missouri 63101. The terms "Company", "Ralcorp" and
"Registrant" as used herein refer to Ralcorp Holdings, Inc. and its consolidated
subsidiaries.

The Company is primarily engaged in the manufacturing, distribution and
marketing of private label ready-to-eat and hot cereal products, private label
and branded crackers and cookies, private label and value branded snack nuts and
chocolate candy and private label wet filled products such as salad dressings,
mayonnaise, peanut butter, syrups, jams and jellies, and specialty sauces.

The following sections of this report contain financial and other
information concerning the Company's business developments and operations, and
are incorporated into this Item 1: "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under Item 7 of this Report; Note
16 "Segment Information", Note 2 "Acquisitions and Divestitures" and Note 7
"Supplemental Earnings Statement and Cash Flow Information" to the Financial
Statements filed as part of this document under Item 8.

RECENT BUSINESS DEVELOPMENTS

On October 5, 1999, the Company announced it completed the purchase of
Ripon Foods, Inc. for $44 million.

On January 31, 2000, the Company announced it completed the purchase of
Cascade Cookie Company, Inc. for $22 million.

On May 1, 2000, the Company announced it completed the purchase of James P.
Linette, Inc. for $31.5 million.

On July 14, 2000, the Company announced it completed the purchase of The
Red Wing Company, Inc. for $132.5 million.

On August 8, 2000, the Company announced it had signed a merger agreement
with Agribrands International, Inc.

On December 4, 2000, the Company announced that Agribrands International,
Inc. had terminated the proposed merger with the Company.

OTHER INFORMATION PERTAINING TO THE BUSINESS OF THE COMPANY

TRADEMARKS

The Company owns a number of trademarks that it considers substantially
important to its business, including "Nutcracker", "Flavor House", "Rippin
Good", "Golden Batch", "Major Peters", and "Linette".

SEGMENTS

The Company is presently comprised of three reportable business segments:
Cereals, Crackers & Cookies; Snack Nuts & Candy; and Dressings, Syrups, Jellies
& Sauces.

CEREALS, CRACKERS & COOKIES

The Cereals, Crackers & Cookies segment is composed of two product lines:
private label ready-to-eat and hot cereals, (the "Private Label Cereal
Business"); and private label and branded crackers and cookies (the "Cracker and
Cookie Business"). In fiscal 2000, these product lines accounted for
approximately 55% and 45%, respectively, of the Company's Cereals, Crackers &
Cookies segment sales.

4

Private Label Cereal Business

Private label ready-to-eat cereals are currently produced at three
operating facilities. The Company's Cracker and Cookie Business produces a
shredded wheat cereal for the Private Label Cereal Business. Private label and
branded hot cereals are produced at one facility. The hot cereal products
include old fashioned oatmeal, quick oats, plain instant oatmeal, flavored
instant oatmeal, farina and instant "Ralston", a branded hot wheat cereal. The
Private Label Cereal Business also sells hot cereal under the brand "3 Minute
Brand Oats". The Company believes it is the largest manufacturer of the private
label ready-to-eat and hot cereals.

The Company's ready-to-eat and hot cereals are warehoused in and
distributed through four independent distribution facilities and two of its
plants and shipped to customers principally via independent truck lines. The
ready-to-eat and hot cereal products are sold to grocery wholesalers, retail
chains, mass merchandisers, warehouse club outlets and other customers through
in-house district sales managers and independent food brokers.

Cracker and Cookie Business

The Company believes its Cracker and Cookie Business is currently the
leading private label cracker manufacturer and a key producer of private label
and branded cookies for sale in the United States. Also, the business produces
cookies for sale in the in-store bakery sections of food retailers. The Cracker
and Cookie Business also produces "Ry Krisp" branded crackers. Management
positions the Cracker and Cookie Business as a low cost, premier quality
producer of a wide variety of private label crackers and cookies.

The Cracker and Cookie Business operates seven plants: one produces solely
"Ry Krisp" crackers, two produce private label crackers and cookies, three
produce private label and branded cookies and one produces cookies for the
in-store bakery sections of grocery stores. The Cracker and Cookie Business'
products are largely produced to order and shipped directly to customers.
Private label crackers and cookies are sold through a broker network and an
internal sales staff. Branded "Ry Krisp" crackers and many branded cookies are
sold through direct store distributor networks.

SNACK NUTS & CANDY

The Snack Nuts & Candy segment operates two plants that produce a variety
of jarred, canned and bagged snack nuts and one plant that produces chocolate
candy. The segment's products are largely produced to order and shipped
directly to customers. The segment sells its products through an internal sales
staff and a broker network. The segment produces store brand products as well
as value branded products under the "Nutcracker", "Flavor House" and "Linette"
brands.

DRESSINGS, SYRUPS, JELLIES & SAUCES

The Dressings, Syrups, Jellies & Sauces segment operates seven plants and
includes The Red Wing Company, Inc. which was acquired during the fiscal year.
Six plants produce a variety of private label shelf-stable dressings, syrups,
jellies, peanut butter, and sauces and drink mixes under the "Major Peters"
brand. One plant processes tomatoes for industrial use. The segment's products
are largely produced to order and shipped directly to customers. The products
are sold through an internal sales staff and a broker network.

OWNERSHIP OF VAIL RESORTS, INC.

The Company owns 7,554,406 shares of Vail Resorts, Inc. (Vail) Common Stock
(approximately 21.8 percent of the shares outstanding as of September 30, 2000).
Additionally, two of the Company's Directors, Messrs. Stiritz and Micheletto,
are on the Vail Board of Directors. Currently, the Company utilizes the equity
method of accounting to reflect the portion of Vail's earnings (or losses)
applicable to the Company on a non-cash basis.

5

Pursuant to a Shareholder Agreement entered into in connection with the
acquisition of the Vail Common Stock, the Company can only sell its Vail Common
Stock in a registered offering allowed under the Shareholder Agreement or in
private transactions (provided the purchaser agrees to be bound by the
Shareholder Agreement). Vail's results of operations are highly seasonal and
are dependent in part on weather conditions and consumers' discretionary
spending trends. In light of the significance of the Company's ownership in
Vail in comparison to earnings and assets of the Company, changes in the price
of Vail's Common Stock can impact the Company's stock price.

COMPETITION

The Company's businesses face intense competition from large branded
manufacturers and highly competitive private label manufacturers in each of its
product lines. Top branded ready-to-eat and hot cereal competitors include
Kellogg, General Mills, Kraft Foods and Quaker Oats. Large branded competitors
of the Cracker and Cookie Business include Nabisco and Keebler/Sunshine, who
possess approximately 40% and 25%, respectively, of the branded cracker category
and significant shares in the cookie category (on a volume basis). The Snack
Nuts & Candy segment faces significant competition from one significant branded
snack nut producer (Planters). Top branded competitors of the Dressings,
Syrups, Jellies & Sauces segment include Kraft Foods, Bestfoods, Smucker's and
Heinz.

The industries in which the Company competes are highly sensitive to both
pricing and promotion. Competition is based upon product quality, price,
effective promotional activities, and the ability to identify and satisfy
emerging consumer preferences. These industries are expected to remain highly
competitive in the foreseeable future. Future growth opportunities for the
Company are expected to depend on the Company's ability to implement strategies
for competing effectively in all of its businesses, including strategies
relating to enhancing the performance of its employees, maintaining effective
cost control programs, developing and implementing methods for more efficient
manufacturing and distribution operations, and developing successful new
products, while at the same time maintaining aggressive pricing and promotion of
its products.

EMPLOYEES

The Company employs approximately 4,900 people in the United States (as of
September 30, 2000). Approximately 1,850 of the Company's personnel are covered
by eleven union contracts and, from time to time, the Company has experienced
union organizing activities at its non-union plants. The contracts expire at
various times from December 31, 2000 to November 11, 2003. The Company believes
its relations with its employees, including union employees, are good.

RAW MATERIALS

The principal raw materials used in the Company's businesses are grain and
grain products, flour, sugar, soybean oil, tomatoes, various nuts such as
peanuts and cashews, and liquid chocolate, as well as a variety of packaging
materials. The Company purchases such raw materials from local, regional,
national and international suppliers. The cost of raw materials used in the
Company's products may fluctuate widely due to weather conditions, government
regulations, economic climate or other unforeseen circumstances. In fiscal
2000, ingredients and packaging represented approximately 45% and 20%,
respectively, of the Company's total cost of goods sold. From time to time the
Company will enter into supply contracts for periods up to twelve months to
secure favorable pricing for ingredients and packaging supplies.

SEASONALITY

Due to the Company's equity interest in Vail, which typically yields more
than the entire year's equity income during the Company's second and third
fiscal quarters, net earnings of the Company are seasonal. In addition certain
aspects of the Company's operations, especially in the Snack Nuts & Candy
segment, are somewhat seasonal with a higher percentage of sales and operating
profits expected to be recorded in the first and fourth fiscal quarters. See
Note 17 in Item 8 for historical quarterly data.

6

GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS

The operations of the Company are subject to regulation by various federal,
state and local governmental entities and agencies. As a producer of goods for
human consumption, such operations are subject to stringent production and
labeling standards. In the early 1990's, new labeling regulations were
promulgated and implemented which required the Company businesses to modify the
information disclosed on their packaging. Management expects that similar
changes in laws in the future could be implemented without a material adverse
impact on the Company businesses if existing packaging stock may be used during
a transition period while packaging information is modified.

The operations of the Company businesses, like those of similar businesses,
are subject to various federal, state and local laws and regulations with
respect to environmental matters, including air and water quality, underground
fuel storage tanks, waste handling and disposal and other regulations intended
to protect public health and the environment. While it is difficult to quantify
with certainty the potential financial impact of actions regarding expenditures
for environmental matters, particularly remediation, and future capital
expenditures for environmental control equipment, in the opinion of management,
based upon the information currently available, the ultimate liability arising
from such environmental matters, taking into account established accruals for
estimated liabilities, should not have a material effect on the Company's
capital expenditures or consolidated results of operations or financial
position.

ITEM 2. PROPERTIES

The Company's principal properties are its manufacturing locations. Shown
below are the Company's owned, and where indicated, leased principal properties.
The Company leases its principal executive offices and research and development
facilities in St. Louis, Missouri. Management believes its facilities are
suitable and adequate for the purposes for which they are used and are
adequately maintained.

Cereal Plants Cracker and Cookie Plants Snack Nut Plants
-------------- ---------------------------- ------------------
Battle Creek, MI Princeton, KY Billerica, MA
Cedar Rapids, IA Poteau, OK Dothan, AL (leased)
Lancaster, OH Minneapolis, MN Womelsdorf, PA (candy only)
Sparks, NV Tonawanda, NY
Ripon, WI (two plants)
Kent, WA (leased)

Dressings, Syrups,
Jellies & Sauces Plants
- -----------------------
Baltimore, MD*
Dunkirk, NY
Fredonia, NY
Kansas City, KS
Los Angeles, CA (leased)
San Jose, CA
Streator, IL
Williams, CA (tomato processing only)

* Closing in January 2001

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve complex
questions of fact and law. Additionally, the operations of the Company, like
those of similar businesses, are subject to various federal, state, and local
laws and regulations intended to protect public health and the environment,
including air and water quality and waste handling and disposal.

7

Pending legal liability, if any, from these proceedings cannot be
determined with certainty; however, in the opinion of Company management based
upon the information presently known, the liability of the Company, if any,
arising from the pending legal proceedings, as well as from asserted legal
claims and known potential legal claims which are probable of assertion, taking
into account established accruals for estimated liabilities (if any), are not
expected to be material to the Company's consolidated financial position and
results of operation. 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 and results of operations.

Additionally, the Company has retained certain potential liabilities
associated with divested businesses (the Branded Business, Ralston Resorts and
Beech-Nut). Presently, management believes that taking into account applicable
liability caps, sharing arrangements with acquiring entities and the known facts
and circumstances regarding the retained liabilities, potential liabilities of
the divested businesses should not be material to the Company's consolidated
financial position and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to the security holders during the fourth
quarter of fiscal year 2000.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Joe R. Micheletto 64 Chief Executive Officer and President since
September 1996. He served as Co-Chief Executive Officer and Chief Financial
Officer from March 1994 to September 1996 with the Company. He served as Chief
Executive Officer of Ralston Resorts from May 1991 to January 1997. Mr.
Micheletto is also a Director of the Company.

Thomas G. Granneman 51 Corporate Vice President and Controller. Mr.
Granneman has held the same position with the Company since January 1999.
He joined Ralcorp in December 1996 as Vice President and Controller. Prior to
joining Ralcorp, Mr. Granneman was Vice President of Finance for Lowell Shoe
Company, Inc. from February 1995 to December 1996.

Kevin J. Hunt 49 Corporate Vice President; and President, Bremner, Inc.
He has held the same position with the Company since October 1995.

Robert W. Lockwood 57 Corporate Vice President General Counsel and
Secretary of the Company. He has held the same position with the Company since
March 1994.

James A. Nichols 52 Corporate Vice President; and President, The
Carriage House Companies, Inc. He has held the same position with the Company
since June 2000. He served as Corporate Vice President; and President, Ralston
Foods from October 1996 to June 2000. Mr. Nichols served as Corporate Vice
President; and President, Beech-Nut Nutrition Corporation from March 1994 to
October 1996.

David P. Skarie 54 Corporate Vice President; and President, Ralston
Foods. He has held the same position with the Company since June 2000. Mr.
Skarie served as Corporate Vice President and Director of Customer Development
of Ralston Foods from March 1994 to June 2000.

Ronald D. Wilkinson 50 Corporate Vice President and Director of Product
Supply of Ralston Foods. He has held the same position with the Company since
October 1996. He served as Executive Vice President and Director of Product
Supply for Ralston Foods from June 1996 to October 1996. Mr. Wilkinson served
as Executive Vice President and Director, Manufacturing for Ralston Foods from
November 1995 to June 1996.

(Ages are as of December 31, 2000)

8

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is traded on the New York Stock Exchange under
the symbol "RAH". There were 14,300 shareholders of record on December 18,
2000. The Company has never paid cash dividends and has no plan to pay cash
dividends in the foreseeable future. The range of high and low sale prices of
Ralcorp common stock as reported on the NYSE Composite Tape is set forth in Note
17 of the financial statements filed as a part of this document under Item 8.

ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR FINANCIAL SUMMARY
(In millions except per share data)

YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
2000 1999 1998 1997 1996
--------- -------- -------- -------- ---------

STATEMENTS OF EARNINGS AND CASH FLOWS DATA
Net sales $ 809.2 $ 636.6 $ 582.9 $ 739.7 $1,027.4
Costs and expenses (711.0) (558.5) (523.6) (665.9) (901.3)
Depreciation and amortization (34.3) (23.1) (18.2) (24.4) (46.4)
Interest expense, net (8.8) (1.4) - (7.9) (26.8)
Gain on sales of businesses (a) - - 18.7 515.4 -
Restructuring charges (b) (2.5) - - (19.7) (16.5)
Nonrecurring charges (c) - - - - (109.5)
--------- -------- -------- -------- ---------
Earnings before income taxes and equity earnings 52.6 53.6 59.8 537.2 (73.1)
Income taxes (19.6) (20.1) (22.8) (8.6) 26.3
Equity in earnings of Vail Resorts, Inc.,
net of related deferred income taxes 3.4 2.9 6.6 2.9 -
--------- -------- -------- -------- ---------
Net earnings (loss) $ 36.4 $ 36.4 $ 43.6 $ 531.5 $ (46.8)
========= ======== ======== ======== =========
Earnings (loss) per share:
Basic $ 1.21 $ 1.17 $ 1.33 $ 16.11 $ (1.42)
Diluted $ 1.19 $ 1.15 $ 1.32 $ 16.01 $ (1.42)
Weighted average shares outstanding:
Basic 30.2 31.1 32.7 33.0 33.0
Diluted 30.6 31.7 33.1 33.2 33.0
Cash provided (used) by:
Operations $ 33.0 $ 42.0 $ 38.1 $ 77.5 $ 91.8
Investing activities (236.0) (75.6) (11.2) (66.0) (64.4)
Financing activities 205.2 23.2 (23.0) (3.1) (27.4)
Food Business EBITDA (d) 98.2 78.1 59.3 73.8 126.1

BALANCE SHEET DATA
Working capital (e) $ 144.8 $ 66.4 $ 33.3 $ 56.5 $ 92.4
Total assets 804.7 483.8 417.9 400.3 627.1
Long-term debt 264.4 42.8 - - 376.6
Shareholders' equity 350.3 324.1 307.3 286.7 107.4

(a) On September 10, 1998, Ralcorp completed the sale of its branded baby food
subsidiary, Beech-Nut Nutrition Corporation, resulting in an after-tax gain of
$11.6. On January 31, 1997, Ralcorp sold its branded cereal and snack mix
businesses (Branded Business), resulting in a tax-free gain of $515.4.

(b) During 2000, Ralcorp recorded restructuring charges ($1.6 after taxes)
related to the closure of its facility in Baltimore, MD. During 1997, Ralcorp
recorded charges ($12.4 after taxes) to cover costs associated with the sale of
its Branded Business as well as severance costs for certain employees whose jobs
were eliminated in downsizing initiatives. During 1996, Ralcorp recorded a
charge ($10.4 after taxes) to recognize the costs related to the restructuring
of its cereal subsidiary, Ralston Foods.

9

(c) During 1996, Ralcorp recorded an impairment charge ($68.8 after taxes)
related to its private label ready-to-eat cereal and consumer hot cereal
operations.

(d) Food Business EBITDA consists of earnings before interest, income taxes,
depreciation and amortization, excluding gains on sales of businesses,
restructuring charges, nonrecurring charges and equity earnings. Ralcorp
considers Food Business EBITDA to be an important indicator of the operational
strength and performance of its businesses, including the ability to provide
cash flows to service debt and fund capital expenditures. Food Business EBITDA,
however, should not be considered an alternative to operating or net income as
an indicator of the performance of Ralcorp, or as an alternative to cash flows
from operating activities as a measure of liquidity, in each case determined in
accordance with generally accepted accounting principles. In addition, this
definition of Food Business EBITDA may not be comparable to similarly titled
measures reported by other companies.

(e) Working capital excludes cash and cash equivalents and current
maturities of long-term debt, where applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion summarizes the significant factors affecting the
consolidated operating results, financial condition, liquidity and capital
resources of Ralcorp Holdings, Inc. (Company). This discussion should be read
in conjunction with the financial statements under Item 8, especially Note 16,
and the "Cautionary Statement on Forward-Looking Statements" on page 3.

Significant changes to the Company's business mix and nonrecurring events
that have been recorded over the last three years affect the comparisons of
fiscal 2000, 1999 and 1998 operations. As a result, comparative results are
more difficult to analyze and explain. Where practicable, this discussion
attempts to address not only the financial results as reported, but also the key
results and factors affecting Ralcorp's on-going businesses.

RESULTS OF OPERATIONS

CEREALS, CRACKERS & COOKIES

Fiscal 2000 vs. Fiscal 1999

Net sales for the Cereals, Crackers & Cookies segment were up $45.0 million
in fiscal 2000 from fiscal 1999. This increase was due to the additional
revenue acquired through the current year purchases of Ripon Foods, Inc. and
Cascade Cookie Company, Inc., which are operated as part of Bremner, Ralcorp's
cracker and cookie division. Ripon Foods, a cookie, sugar wafer and breakfast
bar producer, was acquired on October 4, 1999, and Cascade, which produces
cookies for in-store bakeries, was acquired on January 28, 2000. Comparing the
pre-existing Bremner cracker and cookie businesses to the prior year, volumes
were down 2 percent, primarily as a result of certain lower margin cracker
category declines.

The Company's ready-to-eat (RTE) and hot cereal division, Ralston Foods,
recorded decreased sales for the year ended September 30, 2000 compared to the
prior year, principally due to lower volumes. The primary factor in the volume
decline was the reduction of volume related to the termination of a cereal
co-manufacturing agreement on December 31, 1999, a portion of which was replaced
late in the year. In addition, hot cereal volume was down 7.5 percent from last
year compared to a corresponding 17.5 percent year-over-year increase in fiscal
1999. Despite an industry decline in the overall RTE cereal category, Ralston
Foods' base store brand RTE cereal volume for fiscal 2000 was flat compared to
the prior year. Ralston Foods remains very active in its efforts to increase
volume via other co-manufacturing opportunities, increased distribution and new
product emulations.

10

From an operating results perspective, the Cereals, Crackers & Cookies
segment recorded fiscal 2000 operating profit up $3.7 million from the prior
year. Bremner operating profit improved due to the good performance of the
cookie businesses acquired during the current year, as well as favorable raw
material costs and production efficiencies in the pre-existing cracker
operations which more than offset the decline in net sales. Bremner's operating
profit improvements were partially offset by declines at Ralston Foods. While
operating results were hurt at Ralston Foods by the aforementioned loss of
co-manufacturing business and the resulting unfavorable effect on plant
efficiencies, a significant portion of this unfavorability was offset by a
reduction in managed costs.

Fiscal 1999 vs. Fiscal 1998

Net sales for the Cereals, Crackers & Cookies segment improved $35.0
million, or 8.0 percent, from fiscal 1998 to fiscal 1999. Both the Ralston
Foods store brand cereal division and the Bremner store brand cracker and cookie
operation contributed to this growth. Volume improvements in both ready-to-eat
and hot cereal and a slightly improved product mix were the key factors driving
the Ralston Foods sales increase. Ready-to-eat cereal volume increased 2.1
percent in a flat to slightly down category, and hot cereal volume grew 17.5
percent for fiscal 1999. Sales revenue increases at Bremner can be primarily
attributed to the benefit of a full year of sales from Sugar Kake Cookie Inc.,
which was acquired in August 1998. Volumes for the pre-existing cracker and
cookie operation (excluding Sugar Kake), which were adversely affected by the
aggressive promotional activity of large branded product manufacturers, declined
1.2 percent for fiscal 1999 as volume gains in cookies were more than offset by
volume declines in crackers.

From an operating results perspective, the Cereals, Crackers & Cookies
segment recorded an improvement of 15.2 percent from fiscal 1998 to fiscal 1999.
Ralston Foods' operating profit benefited primarily from ready-to-eat and hot
cereal volume gains, a slight product mix improvement, favorable material costs,
and continued operational cost containment. Bremner's operating profit improved
due to the addition of Sugar Kake's volume and operating profit for the full
fiscal 1999 period. In addition, the Bremner operation benefited from lower
ingredient costs, improved production efficiencies, which greatly improved
yields, and an improved product mix.

SNACK NUTS & CANDY

Net sales for the Snack Nuts & Candy segment have increased from $24.7
million in fiscal 1998 to $124.2 million in fiscal 1999 and $169.7 in fiscal
2000, largely due to the timing of the acquisitions. Ralcorp's first snack nut
business, Flavor House Products, Inc., was acquired on April 23, 1998 and
Nutcracker Brands, Inc. was acquired in early September 1998. Southern Roasted
Nuts of Georgia, Inc., was acquired at the end of March 1999, but the Georgia
facility was closed at the end of April 2000 to consolidate the operations of
the three snack nut businesses into two locations at Billerica, MA and Dothan,
AL. Finally, James P. Linette, Inc., a chocolate candy manufacturer, was
acquired on May 1, 2000. In addition to the rapid growth through acquisitions,
the segment has continued to improve its volume and customer base.

The segment's operating profit increased from $.9 million (3.6% of net
sales) in fiscal 1998 to $8.2 million (6.6%) in fiscal 1999 and $9.7 million
(5.7%) in fiscal 2000. Most of the dollar increase from year to year is
attributable to the timing of acquisitions, as discussed above. However,
operating profit as a percentage of net sales improved significantly from 1998
to 1999 as the segment benefited from increasing scale. The percentages in 1999
and 2000 were also negatively affected by a sharp increase in the cost of
cashews due to a worldwide shortage of this commodity. While the management of
this segment took steps to mitigate the impact of these higher costs, such steps
could not fully offset the lower operating margins. Finally, the percentage in
fiscal 2000 was negatively impacted by increased labor costs due to initial
inefficiencies related to the moving of production lines from the Georgia plant
to the other facilities.

11

DRESSINGS, SYRUPS, JELLIES & SAUCES

The Company's Dressings, Syrups, Jellies & Sauces segment, also known as
The Carriage House Companies, Inc., is comprised of Martin Gillet & Co., Inc.,
acquired at the beginning of March 1999, and The Red Wing Company, Inc.,
acquired on July 14, 2000. The segment's net sales and operating profit for the
year ended September 30, 2000 increased significantly from the prior year. The
increase is primarily due to the timing of the acquisitions as noted above,
whereby fiscal 1999 included only seven months of results from Martin Gillet and
fiscal 2000 includes Martin Gillet's results for the full year and two and a
half months of results from Red Wing. Carriage House has struggled to regain
sales lost by Red Wing during the previous owner's operation and has incurred
incremental expenses associated with combining Red Wing and Martin Gillet. The
Company's plan to close the Baltimore facility and move production to the
Dunkirk facility by January 2001 is proceeding on schedule. Pro forma net sales
for this segment, assuming Red Wing had been acquired at the beginning of fiscal
2000, were approximately $370 million.

BABY FOODS

Ralcorp sold its branded baby food subsidiary, Beech-Nut Nutrition
Corporation (Beech-Nut) on September 10, 1998 (see Note 2 in Item 8). The
results of Beech-Nut operations are included in the Company's consolidated
operating results through that date.

CONSOLIDATED

NET SALES Net sales grew from $582.9 in fiscal 1998 to $636.6 in 1999 and
$809.2 in 2000. The 9% increase from 1998 to 1999 and the 27% increase from
1999 to 2000 were due primarily to business acquisitions. Refer to the segment
discussions above for specific factors affecting these historical results.

OPERATING EXPENSES The following table shows operating expenses as a
percentage of net sales.

YEAR ENDED SEPTEMBER 30,
------------------------
2000 1999 1998
------ ------ ------

Net Sales 100.0% 100.0% 100.0%
Cost of products sold 76.6% 73.4% 66.2%
Selling, general and administrative (SG&A) 12.5% 14.0% 16.8%
Advertising and promotion (A&P) 3.1% 3.9% 10.0%
------ ------ ------
Earnings before Interest, Restructuring, Gain
on Sale, Income Taxes and Equity Earnings 7.9% 8.6% 7.1%
====== ====== ======

As noted above, the results of Beech-Nut are included for almost all of fiscal
1998. That branded business had significantly higher gross margins (i.e., lower
cost of products sold percentage), A&P costs and other operating expenses than
the continuing and subsequently acquired private label businesses.
Consequently, the percentage of sales figures changed notably from 1998 to 1999.
Furthermore, as acquisitions have continued to change the Company's business
mix, the percentage of sales figures have changed, reflecting the lower gross
margin and operating cost structure of the Snack Nuts & Candy and Dressings,
Syrups, Jellies & Sauces businesses. The three-year gross margin trend was also
affected by the temporary ingredient and labor cost increases within the snack
nuts operation. In addition, the declining trend in SG&A expenses can be
partially attributed to the ability of the Cereals, Crackers & Cookies
operations to grow their revenue bases while keeping fixed costs relatively
flat. All considered, the percentage for cost of products sold is expected to
level off, the rate of decline in the SG&A percentage is expected to slow, and
the A&P percentage is expected to remain at 3-4%.

12

INTEREST EXPENSE, NET Net interest expense increased from zero in fiscal
1998 to $1.4 million in 1999 and $8.8 million in 2000, reflecting the Company's
increasing debt level. The Company remained essentially debt-free throughout
fiscal 1998 as the purchase prices of acquired businesses were funded by
available cash from operations and the proceeds from the sale of Beech-Nut.
Long-term debt increased to $42.8 million by the end of fiscal 1999 and to
$264.4 million by September 30, 2000, primarily as a result of business
acquisitions. Most of the increase occurred near the end of fiscal 2000 with
the acquisition of Red Wing, so interest expense is expected to be higher in
fiscal 2001.

RESTRUCTURING CHARGE On July 24, 2000, the Company announced its plan to
close the Baltimore, MD plant of its Dressings, Syrups, Jellies & Sauces segment
and move production to its Dunkirk, NY facility. In conjunction with this plan,
the Company recorded charges in the fourth quarter in the amount of $2.5 million
($1.6 million after taxes, or $.05 per share) related to termination benefits
for 132 production employees and 37 administrative employees and a write-down of
assets to be sold. The land, building and equipment which will not be
transferred to Dunkirk were written down to approximately $1.1 million to
reflect their estimated realizable value net of selling expenses. None of these
charges were utilized in fiscal 2000 but are expected to be fully utilized by
the end of the fiscal year 2001.

GAIN ON SALE OF BEECH-NUT The sale of Beech-Nut in fiscal 1998 resulted in
a gain of $18.7 million ($11.6 million after taxes).

INCOME TAXES Income tax provisions generally reflect statutory tax rates
for each of the fiscal years.

EQUITY IN EARNINGS OF VAIL RESORTS, INC. The Company recorded pre-tax
equity earnings of $10.6 million in fiscal 1998, which includes the Company's
portion of Vail's operating results for only the period of October 1997 through
July 1998 due to the timing of a change in Vail's fiscal year end. For fiscal
1999, the Company's pre-tax earnings from Vail were only $4.7 million. This
decrease is the result of not only the inclusion of the unprofitable ski months
of August and September, but also low snowfall during the peak ski season and an
incident of arson. The Company's pre-tax equity earnings improved to $5.2
million for fiscal 2000, primarily as a result of the inclusion of expected net
proceeds from a Reduced Skier Day Insurance Policy claim related to its second
fiscal quarter, which was hurt by both poor early season snowfall and a
significant decline in vacation travel around the New Years' holiday due to Y2K
concerns.

LIQUIDITY AND CAPITAL RESOURCES

The Company's businesses have historically focused on generating positive
cash flows through operations. Management believes that the Company will
continue to generate operating cash flows through its mix of businesses and
expects that short-term and long-term liquidity requirements will be met through
a combination of operating cash flows and strategic use of borrowings under
committed and uncommitted credit arrangements. Capital resources remained
strong at September 30, 2000 with a net worth of $350.3 million and a long-term
debt to total capital ratio of 43 percent.

CASH FLOWS FROM OPERATIONS

Cash flows from operations have been fairly steady in the past three years
with $33.0 million, $42.0 million and $38.1 million in 2000, 1999 and 1998,
respectively. Operating cash flows are primarily affected by cash earnings and
changes in working capital. Cash earnings (net earnings before depreciation,
amortization, deferred income taxes, equity earnings and other noncash items)
have been growing along with the Company, from $43.9 million in 1998 to $65.5
million in 1999 and $76.8 million in 2000. From a cash flow standpoint, this
growth in cash earnings has been offset by successively larger increases in
working capital, excluding the effects of acquisitions and divestitures, of $4.2
million in 1998, $27.5 million in 1999 and $41.6 million in 2000. Much of this

13

large fiscal 2000 increase is the result of a normal seasonal inventory build up
at Red Wing's tomato paste production facility which occurred after the
acquisition of Red Wing. Working capital, excluding cash and cash equivalents,
was $144.8 million at September 30, 2000 compared to $66.4 million and $33.3
million at September 30, 1999 and 1998, respectively.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash paid for business acquisitions totaled $212.5 million in fiscal
2000 (Ripon Foods, Cascade, Linette. and Red Wing), $55.6 million in fiscal 1999
(Martin Gillet and Southern Roasted Nuts), and $55.2 million in fiscal 1998
(Flavor House, Sugar Kake and Nutcracker). Net proceeds from the sale of
Beech-Nut in 1998 were $67.1 million. See Note 2 of Item 8 for more information
about acquisitions and divestitures.

Capital expenditures were $24.1 million, $20.5 million and $24.6 million in
fiscal years 2000, 1999 and 1998, respectively. Capital expenditures for fiscal
2001 are expected to increase to approximately $30 million, primarily as a
result of the recently acquired businesses.

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings during fiscal 2000 were $215.4 million, compared to $42.8
million and zero in fiscal 1999 and 1998, respectively. These borrowings
closely follow the Company's acquisition and divestiture activity discussed
above; note that the total net cash paid for acquisitions during the past three
years, net of the proceeds from the sale of Beech-Nut, was $256.2 million, while
long-term debt outstanding at September 30, 2000 was $264.4 million. Of that
outstanding balance, only $33.3 million (uncommitted credit arrangements) is
required to be repaid during fiscal 2001. Another $100.0 million matures on
April 10, 2001 unless such date is extended, at the Company's option, for an
additional nine months. Both of these amounts were classified as long-term debt
based on management's ability and intent to refinance it on a long-term basis
(see Note 10 in Item 8).

As of September 30, 2000, $100 million of the Company's committed credit
facilities was unused. In addition, the unused portion of uncommitted credit
arrangements with banks was over $15 million. Further cash needs could be met
through the sale of the Company's investment in Vail Resorts, Inc., which had a
market value of $149 million at September 30, 2000.

The Company repurchased $10.6 million, $19.9 million and $23.0 million of
its common stock during fiscal 2000, 1999 and 1998, respectively. During the
first quarter of fiscal 1999, the Company's Board of Directors approved an
authorization to buy back up to two million shares of the Company's common stock
from time to time as management determines. As of September 30, 2000, 690,700
shares remained available for repurchase by the Company pursuant to that
authorization.

OUTLOOK
CEREALS, CRACKERS & COOKIES

The level of competition in the cereal category continues to be very
intense. Competition comes from branded box cereal manufacturers, branded
bagged cereal producers and other private label cereal providers. For the last
several years, the overall category has not recorded any meaningful growth,
which has only added to the competitive nature. When the competition focuses on
price/promotion, the environment for private label producers becomes more
challenging. Ralston Foods must maintain an effective price gap between its
quality private label cereal products and those of branded cereal producers,
thereby providing the best value alternative for the consumer. Increased
distribution, including new co-manufacturing opportunities, new product
emulations and aggressive cost containment remain important goals of the
organization.

14

The Company's cracker and cookie operation, Bremner, also conducts business
in a very competitive category. Major branded competitors continue to
aggressively market and promote their offerings and many smaller, regional
participants provide additional competitive pressures. During fiscal 2000, two
large branded competitors announced that they had been acquired by even larger
organizations, which may add to the competitive environment. Bremner's ability
to successfully respond to changing market conditions and to realize improved
operating efficiencies from recent acquisitions will be important to its results
of operations. In addition, Bremner will continue to focus on cost containment,
new products and volume growth of existing products in order to improve
operating results.

SNACK NUTS & CANDY

The outlook for the Snack Nuts & Candy segment remains favorable, as the
snack nut category leader continues to drive growth in this snack food segment.
Cashew costs are trending down from significant highs and the Company has
completed its consolidation of three snack nut operations down to two plants,
which should improve the segment's profitability. The addition of chocolate
candy capability through the acquisition of Linette has increased the scope of
products offered by the segment. From an operation perspective, the segment
will continue to focus on fully leveraging the combined strengths of all of its
operations, growing its customer base and maintaining the quality of its
products.

DRESSINGS, SYRUPS, JELLIES & SAUCES

The Dressings, Syrups, Jellies & Sauces operation (the combination of Red
Wing and Martin Gillet, now referred to as Carriage House) starts fiscal 2000 in
the middle of major operational changes. The consolidation of its Baltimore
operation into the Dunkirk facility, which is an important opportunity to
capture synergies of the original two companies, is progressing on schedule.
When completed in January 2001, this change will result in significant
operational benefits to Carriage House in the future. In addition, Carriage
House plans to improve performance by increasing sales to new and existing
customers by expanding product offerings and integrating the Martin Gillet and
Red Wing sales efforts. Cost containment and the capturing of additional
synergies of the two organizations will also be critical objectives.

OVERALL

The Company's management believes that the opportunities in the private
label and value brand areas are favorable for long-term growth. The Company has
taken significant steps to reshape the Company and lessen its reliance on any
one business segment and to achieve sufficient scale in the categories in which
it operates. Management expects to continue to improve its business mix through
volume and profit growth of existing businesses, as well as through key
acquisitions or alliances. Management will continue to explore those
acquisition opportunities that strategically fit with the Company's intentions
of being the premier provider of private label, or value-oriented, food
products.

On August 7, 2000, the Company and Agribrands International, Inc.
(Agribrands) entered into an Agreement and Plan of Reorganization (Agreement),
which set forth the terms and conditions of a proposed merger of equals of the
two companies. On December 1, 2000, the Agreement was terminated by Agribrands.
In accordance with the Agreement, the Company received a payment of $5.0 million
as a termination fee. This termination fee income will be recorded net of
related expenses in the first quarter of fiscal 2001. Although access to
Agribrands' cash reserves and cash flow would have given Ralcorp the opportunity
to make more or larger acquisitions within a shorter time frame, Ralcorp still
has substantial acquisition capital available from unused debt capacity and its
investment in Vail Resorts, Inc.

15

INFLATION

Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs, related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 2000.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 1 of Item 8 for a discussion regarding recently issued accounting
standards, including SOP 98-1, FAS 133, SAB 101, and EITF 00-10 and 00-14.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, the Company is exposed to commodity
price risks relating to the acquisition of raw materials. The Company utilized
derivative financial instruments, including futures contracts and options, to
manage certain of these exposures when it is practical to do so.

As of September 30, 2000 and 1999, a hypothetical 10% adverse change in the
market price of the Company's principal commodities, including corn, oats, wheat
and soybean oil, would have decreased the fair value of the Company's
derivatives portfolio by $.3 million and $.2 million, respectively. This
volatility analysis ignores changes in the exposures inherent in the underlying
hedged transactions. Because the Company does not hold or trade derivatives for
speculation or profit, all changes in derivative values are effectively offset
by corresponding changes in the underlying exposures.

For more information, see Note 1 and Note 11 to the financial statements
included in Item 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

The preparation and integrity of the financial statements of Ralcorp
Holdings, Inc. are the responsibility of its management. These statements have
been prepared in accordance with generally accepted accounting principles and in
the opinion of management fairly present the Company's financial position,
results of operations and cash flow.

The Company maintains accounting and internal control systems which it
believes are adequate to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition and that the
financial records are reliable for preparing financial statements. The
selection and training of qualified personnel, the establishment and
communication of accounting and administrative policies and procedures, and an
extensive program of internal audits are important elements of these control
systems.

The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management and the independent
accountants to discuss audit and financial reporting matters. To ensure
independence, PricewaterhouseCoopers LLP has direct access to the Audit
Committee.

The report of PricewaterhouseCoopers LLP, independent accountants, on their
audits of the accompanying financial statements follows. This report states
that their audits were performed in accordance with generally accepted auditing
standards. These standards include an evaluation of internal control for the
purpose of establishing a basis for reliance thereon relative to the scope of
their audits of the financial statements.

16

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Ralcorp Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Ralcorp
Holdings, Inc. and its subsidiaries as of September 30, 2000 and 1999, and the
related consolidated statements of earnings, of shareholders' equity and of cash
flows for each of the three years in the period ended September 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Vail Resorts, Inc., an
investment which is reflected in the accompanying financial statements using the
equity method of accounting. The Company's investment in Vail Resorts, Inc. at
September 30, 2000 and 1999 was $75,900,000 and $70,700,000, respectively, and
the Company's equity in its net income, net of deferred income taxes, was
$3,400,000, $2,900,000 and $6,600,000 for each of the three years in the period
ended September 30, 2000. Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Vail Resorts, Inc., is based
solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Ralcorp Holdings, Inc. and its
subsidiaries at September 30, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 2000 in conformity with accounting principles generally accepted in the
United States of America.

/s/PricewaterhouseCoopers LLP
- ------------------------------

PricewaterhouseCoopers LLP
St. Louis, Missouri
November 1, 2000, except for Note 18,
which is as of December 1, 2000

17

RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data, shares in thousands)

YEAR ENDED SEPTEMBER 30,
--------------------------
2000 1999 1998
------- ------- --------

NET SALES $ 809.2 $ 636.6 $ 582.9
------- ------- --------

COSTS AND EXPENSES
Cost of products sold 619.7 467.5 386.0
Selling, general and administrative 100.9 89.3 97.7
Advertising and promotion 24.7 24.8 58.1
Interest expense, net 8.8 1.4 -
Restructuring charge 2.5 - -
Gain on sale of Beech-Nut - - (18.7)
------- ------- --------
Total Costs and Expenses 756.6 583.0 523.1
------- ------- --------

EARNINGS BEFORE INCOME TAXES AND EQUITY EARNINGS 52.6 53.6 59.8
Income Taxes 19.6 20.1 22.8
------- ------- --------
EARNINGS BEFORE EQUITY EARNINGS 33.0 33.5 37.0
Equity in Earnings of Vail Resorts, Inc.,
Net of Related Deferred Income Taxes 3.4 2.9 6.6
------- ------- --------
NET EARNINGS $ 36.4 $ 36.4 $ 43.6
======= ======= ========

BASIC EARNINGS PER SHARE $ 1.21 $ 1.17 $ 1.33
======= ======= ========
DILUTED EARNINGS PER SHARE $ 1.19 $ 1.15 $ 1.32
======= ======= ========

WEIGHTED AVERAGE SHARES
FOR BASIC EARNINGS PER SHARE 30,150 31,112 32,684
Dilutive effect of:
Stock options 213 325 295
Deferred compensation awards 206 247 104
------- ------- --------
WEIGHTED AVERAGE SHARES
FOR DILUTED EARNINGS PER SHARE 30,569 31,684 33,083
======= ======= ========

See accompanying Notes to Consolidated Financial Statements.

18

RALCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(In millions except share and per share data)

SEPTEMBER 30,
----------------
2000 1999
------- -------

ASSETS
Current Assets
Cash and cash equivalents $ 4.1 $ 1.9
Receivables, net 102.4 59.9
Inventories 150.1 75.3
Prepaid expenses 3.5 2.8
Deferred income taxes 6.7 5.5
------- -------
Total Current Assets 266.8 145.4
Investment in Vail Resorts, Inc. 75.9 70.7
Intangible Assets, Net 186.1 100.7
Property, Net 271.9 165.5
Other Assets 4.0 1.5
------- -------
Total Assets $804.7 $483.8
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 78.5 $ 53.4
Other current liabilities 39.4 23.7
------- -------
Total Current Liabilities 117.9 77.1
Long-term Debt 264.4 42.8
Deferred Income Taxes 36.6 6.9
Other Liabilities 35.5 32.9
------- -------
Total Liabilities 454.4 159.7
------- -------
Commitments and Contingencies
Shareholders' Equity
Common stock, par value $.01 per share
Authorized: 300,000,000 shares
Issued: 33,011,317 shares .3 .3
Capital in excess of par value 110.0 110.1
Retained earnings 292.7 256.3
Common stock in treasury, at cost (3,151,410 and 2,474,168 shares) (52.7) (42.6)
------- -------
Total Shareholders' Equity 350.3 324.1
------- -------
Total Liabilities and Shareholders' Equity $804.7 $483.8
======= =======

See accompanying Notes to Consolidated Financial Statements.

19

RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

YEAR ENDED SEPTEMBER 30,
--------------------------
2000 1999 1998
-------- ------- -------

CASH FLOWS FROM OPERATIONS
Net earnings $ 36.4 $ 36.4 $ 43.6
Adjustments to reconcile net earnings
to net cash flow provided by operations:
Depreciation and amortization 34.3 23.1 18.2
Deferred income taxes 8.8 10.7 11.4
Restructuring charge 2.5 - -
Gain on sale of Beech-Nut - - (18.7)
Equity in earnings of Vail Resorts, Inc. (5.2) (4.7) (10.6)
Changes in current assets and liabilities, net
of effects of acquisitions and divestitures:
(Increase) decrease in receivables (13.0) (8.8) 5.7
Increase in inventories (23.3) (5.5) (5.0)
(Increase) decrease in prepaid expenses - (.6) .6
Decrease in accounts payable and other current liabilities (5.3) (12.6) (5.5)
Other, net (2.2) 4.0 (1.6)
-------- ------- -------
Net cash provided by operations 33.0 42.0 38.1
-------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES
Business acquisitions, net of cash acquired (212.5) (55.6) (55.2)
Additions to property and intangible assets (24.1) (20.5) (24.6)
Proceeds from sale of property .6 .5 1.5
Proceeds from sale of Beech-Nut - - 67.1
-------- ------- -------
Net cash used by investing activities (236.0) (75.6) (11.2)
-------- ------- -------

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under credit arrangements 215.4 42.8 -
Proceeds from exercise of stock options .4 .3 -
Purchase of treasury stock (10.6) (19.9) (23.0)
-------- ------- -------
Net cash provided (used) by financing activities 205.2 23.2 (23.0)
-------- ------- -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2.2 (10.4) 3.9
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1.9 12.3 8.4
-------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4.1 $ 1.9 $ 12.3
======== ======= =======

See accompanying Notes to Consolidated Financial Statements.

20

RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions, shares in thousands)

Common Stock in
Common Stock Capital in Treasury, at Cost
--------------------- Excess of Retained ----------------------
Shares Amount Par Value Earnings Shares Amount Total
------------ ------- ------------ --------- ------------ -------- -------

BALANCE, SEPTEMBER 30, 1997 33,011 $ .3 $ 110.1 $ 176.3 - $ - $286.7
Net earnings 43.6 43.6
Purchase of treasury stock (1,300) (23.0) (23.0)
------------ ------- ------------ --------- ------------ -------- -------
BALANCE, SEPTEMBER 30, 1998 33,011 $ .3 $ 110.1 $ 219.9 (1,300) $ (23.0) $307.3
Net earnings 36.4 36.4
Purchase of treasury stock (1,190) (19.9) (19.9)
Activity under stock plans 16 .3 .3
------------ ------- ------------ --------- ------------ -------- -------
BALANCE, SEPTEMBER 30, 1999 33,011 $ .3 $ 110.1 $ 256.3 (2,474) $ (42.6) $324.1
Net earnings 36.4 36.4
Purchase of treasury stock (705) (10.6) (10.6)
Activity under stock plans (.1) 28 .5 .4
------------ ------- ------------ --------- ------------ -------- -------
BALANCE, SEPTEMBER 30, 2000 33,011 $ .3 $ 110.0 $ 292.7 (3,151) $ (52.7) $350.3
============ ======= ============ ========= ============ ======== =======

See accompanying Notes to Consolidated Financial Statements.

21

RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The financial statements are presented on a
consolidated basis and include the accounts of Ralcorp and its majority-owned
subsidiaries. All significant intercompany transactions have been eliminated.
Investments in 20%-50%-owned companies are presented on the equity basis (see
Note 3).

ESTIMATES - The financial statements have been prepared in conformity with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect reported amounts and disclosures. Actual
results could differ from those estimates.

CASH EQUIVALENTS include all highly liquid investments with original
maturities of three months or less.

INVENTORIES are valued generally at the lower of average cost or market.
In connection with purchasing key raw ingredient materials, the Company often
uses commodities futures contracts to reduce the risk of price fluctuations
related to future raw materials requirements for commodities such as corn,
wheat, oats and soybean oil. The terms of these financial instruments generally
do not exceed twelve months, and depend on the commodity and other market
factors. The contracts are accounted for as hedges, with related gains and
losses ultimately included as part of the cost of products sold. The effect of
any realized or deferred gains or losses is immaterial to the financial
condition, results of operations and cash flows of the Company.

PROPERTY, PLANT AND EQUIPMENT is recorded at cost and depreciation expense
is generally provided on the straight-line basis by charges to costs or expenses
at rates based on the estimated useful lives of the properties. Estimated
useful lives range from 3 to 15 years for machinery and equipment and 10 to 50
years for buildings and leasehold improvements. Depreciation expense was $24.7,
$16.7, and $16.1 in fiscal 2000, 1999, and 1998, respectively.

INTANGIBLE ASSETS - Goodwill represents the excess of cost over the fair
value of the net identifiable assets of acquired businesses and is amortized
evenly over estimated periods of related benefit ranging from 20 to 40 years.
Other intangible assets, primarily computer software developed or obtained for
internal use, are amortized evenly over their estimated useful lives ranging
from 3 to 5 years.

RECOVERABILITY OF LONG-LIVED ASSETS - The Company continually evaluates
whether events or circumstances have occurred which might impair the
recoverability of the carrying value of its long-lived assets, including
identifiable intangibles and goodwill. An asset is deemed impaired and written
down to its fair value if estimated related future cash flows are less than its
carrying amount.

INVESTMENTS - The Company funds a portion of its deferred compensation
liability by investing in certain mutual funds in the same amounts as selected
by the participating employees. Because management's intent is to invest in a
manner that matches the deferral options chosen by the participants and those
participants can elect to transfer amounts in or out of each of the designated
deferral options at any time, these investments have been classified as trading
assets and are stated at fair value. Both realized and unrealized gains and
losses on these assets are included in earnings and offset the related change in
the deferred compensation liability.

REVENUE is recognized when products are shipped to customers. Net sales
reflect gross sales less sales discounts and costs of freight out to customers.

ADVERTISING and promotion costs are expensed as incurred.

22

STOCK-BASED COMPENSATION is recognized using the intrinsic value method.
For disclosure purposes, pro forma net earnings and earnings per share amounts
are provided as if the fair value method had been applied (see Note 15).

RECENTLY ISSUED ACCOUNTING STANDARDS - In March 1998, the American
Institute of Certified Public Accountants issued SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." This
statement requires the capitalization of internal use computer software costs
when certain criteria are met. The capitalized software costs will be amortized
on a straight-line basis over the useful life of the software. The Company
adopted this statement as of October 1, 1999, but it did not have a material
impact on the Company's financial statements.

The Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," in June 1998,
and its amendments, Statements 137 and 138, in June 1999 and June 2000,
respectively. The Company is required to adopt the statement effective October
1, 2000. This statement establishes accounting and reporting standards for
derivative instruments and requires an entity to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Fair value adjustments will impact either shareholders' equity
or net earnings depending on whether the derivative instrument qualifies as a
hedge and, if so, the nature of the hedging activity. Based on the Company's
derivative positions at September 30, 2000, the Company has determined that the
cumulative effect of adoption will be immaterial. Management also believes that
the implementation of this standard will not have a material effect on its
future consolidated financial position or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements."
SAB 101 provides guidance on recognition, presentation and disclosure of revenue
in financial statements. In addition, the Emerging Issues Task Force (EITF)
issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs," which
states that amounts billed, if any, for shipping and handling should be included
in revenue and amounts incurred for shipping and handling should not be netted
against revenue, and EITF 00-14, "Accounting for Certain Sales Incentives",
which provides guidance on accounting for discounts, coupons, rebates and free
product. Ralcorp will be required to adopt SAB 101 (as amended by SAB 101B),
EITF 00-10 and EITF 00-14 no later than the fourth quarter of fiscal year 2001.
Management is still evaluating the impact of this new guidance but does not
expect the Company's adoption to have a material effect on its results of
operations. Current estimates indicate that including freight costs in "Cost of
products sold" instead of netting them with sales (in accordance with EITF
00-10) will result in an increase in reported cost of products sold of
approximately 10% and an increase in reported net sales of approximately 7.5%.

RECLASSIFICATIONS - Certain prior years' amounts have been reclassified to
conform with the current year's presentation.

NOTE 2 - ACQUISITIONS AND DIVESTITURES

All of the following acquisitions were accounted for using the purchase
method of accounting, whereby the results of operations are included in the
consolidated statement of earnings from the date of acquisition. The purchase
price, including costs of acquisition, has been allocated to acquired assets and
liabilities based on their estimated fair values at the date of acquisition, and
any excess has been allocated to goodwill. Such allocations are subject to
adjustment when additional analysis concerning asset and liability values is
finalized, but generally no later than one year after the date of acquisition.
Management does not expect the final allocations to differ materially from the
preliminary allocation amounts included herein. Goodwill relating to each of
the following acquisitions is being amortized on a straight-line basis over 25
years or, in the case of Red Wing, 35 years. For income tax purposes, the
amortization of goodwill related to the Flavor House, Southern Roasted Nuts,
Ripon Foods, Cascade and Red Wing acquisitions is nondeductible.

23

FISCAL 2000

On October 4, 1999, the Company completed the purchase of Ripon Foods,
Inc., which manufactures a wide variety of high quality private label and
branded cookie products, including sugar wafers and wire cut and enrobed
cookies. The $43.1 cost, of which $38.3 had been paid in cash as of September
30, 2000, exceeded the estimated fair value of the net assets acquired by $16.5.
Included in the acquisition cost allocation were liabilities totaling
approximately $1.7 related to the Company's plan to terminate or relocate
certain Ripon Foods employees (see Note 4). Ripon Foods is located in Ripon,
WI.

On January 28, 2000, the Company completed the purchase of Cascade Cookie
Company, Inc., a leading manufacturer and marketer of high quality cookies that
are sold to the in-store bakeries of major U.S. grocery chains and selected mass
merchandisers. The $22.1 cost exceeded the estimated fair value of the net
assets acquired by $18.1. Cascade is located in Kent, WA.

On May 1, 2000, the Company completed the purchase of James P. Linette,
Inc., which manufactures chocolate products, including peanut butter and caramel
cups, as well as chocolate covered peanuts. The $33.4 cost exceeded the
estimated fair value of the net assets acquired by $20.6. Linette is located in
Womelsdorf, PA.

On July 14, 2000, the Company completed the purchase of The Red Wing
Company, Inc., leading manufacturer of private label shelf-stable wet filled
type products such as salad dressings, table syrups, peanut butter, jams,
jellies and various sauces. The $146.7 cost exceeded the estimated fair value of
the net assets acquired (which included $27.7 of cash) by $39.8. Red Wing has
plants in Fredonia, NY, Dunkirk, NY, Streator, IL, San Jose, CA and Williams,
CA.

FISCAL 1999

On March 4, 1999, the Company completed the purchase of Martin Gillet &
Co., Inc., a leading private label manufacturer of mayonnaise and pourable,
shelf-stable salad dressings with plants in Baltimore, MD, Kansas City, KS and
Los Angeles, CA. The $35.3 cost exceeded the fair value of the net assets
acquired by $20.4.

On March 24, 1999, the Company purchased Southern Roasted Nuts of Georgia,
Inc., a private label and value brand snack nut operation located in Fitzgerald,
GA. The $17.1 cost exceeded the fair value of the net assets acquired by $12.9.

FISCAL 1998

On April 23, 1998, the Company completed the purchase of Flavor House,
Inc., a leading private label snack nut business located in Dothan, AL. The
$21.5 cost exceeded the fair value of the net assets acquired by $15.5.

On August 25, 1998, the Company increased its cookie production capacity
through the purchase of Sugar Kake Cookie Inc., a privately held cookie
manufacturer located in Tonawanda, NY. The $15.8 cost exceeded the fair value
of the net assets acquired by $5.8.

On September 8, 1998, the Company purchased Nutcracker Brands, Inc., a
value brand and private label snack nut business located in Billerica, MA. The
$19.9 cost exceeded the fair value of the net assets acquired by $10.2.

On September 10, 1998, the Company completed the sale of its branded baby
food subsidiary, Beech-Nut Nutrition Corporation, to The Milnot Company, a
privately held company based in St. Louis, MO, for $68 in cash. The Company
recorded an $18.7 pre-tax ($11.6 after tax) gain related to this sale
transaction.

24

PRO FORMA INFORMATION

The following unaudited pro forma information presents the results of
operations of the Company, including equity earnings from Vail, as if the
fiscal 2000 and 1999 acquisitions described above had occurred as of October 1,
1999. 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.

2000 1999
----------- ------------

Net Sales $ 1,083.7 $ 1,131.3
Net Earnings 40.6 42.3
Basic earnings per share 1.34 1.36
Diluted earnings per share 1.33 1.34

NOTE 3 - EQUITY INVESTMENT IN VAIL RESORTS, INC.

On January 3, 1997, the Company sold its ski resorts holdings (Resort
Operations) to Vail Resorts, Inc. (Vail) in exchange for 7,554,406 shares of
Vail common stock (NYSE:MTN). At the date of the exchange, the Company's equity
interest in the underlying net assets of Vail exceeded the net book value of the
net assets contributed by the Company to Vail by $37.5. This excess is being
amortized ratably to the investment in Vail over 20 years. The unamortized
excess was $30.5 and $32.3 as of September 30, 2000 and 1999, respectively. The
amount of retained earnings that represents undistributed earnings of Vail was
$11.5 and $9.3 as of September 30, 2000 and 1999, respectively.

The following table summarizes information about the Company's equity
investment in Vail at September 30:

2000 1999
------- -------

Ownership Percentage 21.8% 21.9%
Carrying value $ 75.9 $ 70.7
Market value 149.2 175.2

Terms of a shareholder agreement provide that the Company will not acquire
any additional shares of Vail stock except in limited circumstances. The
Company has registration rights with respect to the Vail stock, but the
shareholder agreement provides that, with certain limited exceptions, Vail and
its largest shareholder can purchase at market prices any Vail stock the Company
desires to sell. The Company can only sell its Vail stock in a registered
offering allowed under the shareholder agreement or in private transactions
(provided the purchaser agrees to be bound by the shareholder agreement). The
shareholder agreement provides that the Company will vote the shares of Vail
stock in accordance with the recommendation of Vail's Board of Directors with
respect to shareholder proposals and nominations to that Board, and with respect
to other proposals, in proportion to the votes of all other shareholders.
However, the Company may vote as it deems appropriate with respect to proposals
for the merger of Vail, the sale of all Vail assets, the creation of any other
class of voting stock of Vail or changes to Vail's certificate of incorporation
or bylaws if such changes adversely affect the Company's rights under the
shareholder agreement. The Company has two representatives on the 17-member
Vail Board of Directors.

25

On November 6, 1997, Vail announced a change in its fiscal year end from
September 30 to July 31. As a result, the Company reports current year equity
earnings on a two-month time lag, with only ten months of equity earnings from
Vail included in fiscal 1998. Vail's summarized financial information follows.

YEAR ENDED YEAR ENDED TEN MONTHS ENDED
JULY 31, 2000 JULY 31, 1999 JULY 31, 1998
-------------- -------------- -----------------

Net revenues $ 553.1 $ 475.7 $ 410.3
Total operating expenses 491.8 433.3 321.7
-------------- -------------- -----------------
Income from operations $ 61.3 $ 42.4 $ 88.6
============== ============== =================
Net income $ 15.3 $ 12.8 $ 41.0
============== ============== =================

JULY 31, 2000 JULY 31, 1999
-------------- --------------
Current assets $ 100.3 $ 92.7
Noncurrent assets 1,027.5 996.5
-------------- --------------
Total assets $ 1,127.8 $ 1,089.2
============== ==============
Current liabilities $ 110.2 $ 93.1
Noncurrent liabilities 516.4 512.0
Minority interest 7.4 7.3
Stockholders' equity 493.8 476.8
-------------- --------------
Total liabilities and stockholders' equity $ 1,127.8 $ 1,089.2
============== ==============

NOTE 4 - RESTRUCTURING CHARGES

On July 24, 2000, the Company announced its plan to close the Baltimore, MD
plant of its Dressings, Syrups, Jellies & Sauces segment and move production to
its Dunkirk, NY facility. In conjunction with this plan, the Company recorded
charges in the fourth quarter in the amount of $2.5 ($1.6 after taxes, or $.05
per share) related to termination benefits for 132 production employees and 37
administrative employees and a write-down of assets to be sold. The land,
building and equipment which will not be transferred to Dunkirk were written
down to approximately $1.1 to reflect their estimated realizable value net of
selling expenses. None of these charges were utilized in fiscal 2000 but are
expected to be fully utilized by the end of fiscal year 2001.

Concurrent with the Ripon acquisition (see Note 2), the Company recorded a
restructuring reserve of approximately $1.7 in the Ripon opening balance sheet
related to the severance of 46 administrative employees at Ripon. Recording
this reserve had no effect on the Company's earnings, but resulted in a
corresponding increase in goodwill. Approximately $.2 of this reserve remains
as of September 30, 2000 and will be paid by the end of the first quarter of
fiscal year 2001.

The restructuring charges and their utilization are summarized in the
following table.

FY 2000 Utilized in Balance of
Charges FY 2000 Reserve
-------- -------- --------

Severance, benefits and outplacement expenses $ 3.6 $ (1.5) $ 2.1
Asset write-down .6 - .6
-------- -------- --------
$ 4.2 $ (1.5) $ 2.7
======== ======== ========

26

NOTE 5 - INCOME TAXES

The provision for income taxes consisted of the following:

2000 1999 1998
-------- -------- --------

Current:
Federal $ 11.7 $ 10.3 $ 13.7
State .9 .9 1.7
-------- -------- --------
12.6 11.2 15.4
-------- -------- --------
Deferred:
Federal 7.6 10.4 9.8
State 1.2 .3 1.6
-------- -------- --------
8.8 10.7 11.4
-------- -------- --------
Total provision for income taxes $ 21.4 $ 21.9 $ 26.8
======== ======== ========

A reconciliation of income taxes with amounts computed at the statutory
federal rate follows:

2000 1999 1998
-------- -------- --------

Computed tax at federal statutory rate (35.0%) $ 20.2 $ 20.4 $ 24.6
State income taxes, net of federal tax benefit 1.4 .8 2.1
Other, net (.2) .7 .1
-------- -------- --------
$ 21.4 $ 21.9 $ 26.8
======== ======== ========

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets
(liabilities) at September 30 were as follows:

2000 1999
------- --------

Current
Accrued liabilities $ 3.7 $ 2.9
Inventories 2.4 2.0
Other items .6 .6
------- --------
6.7 5.5
------- --------
Noncurrent:
Equity investment in Vail (19.9) (18.1)
Property basis differences (28.3) (1.1)
Postretirement benefits 5.3 5.5
Deferred compensation 3.5 2.6
Insurance reserves 2.6 2.0
Intangible assets (.9) 1.1
Pension .6 1.1
Other items .5 -
------- --------
(36.6) (6.9)
------- --------
Net deferred tax liability $(29.9) $ (1.4)
======= ========

27

NOTE 6 - EARNINGS PER SHARE

Options to purchase shares of common stock which were outstanding at
September 30 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 year then ended because to do so would have been antidilutive for the period
were 844,500, 450,500 and zero for fiscal 2000, 1999 and 1998, respectively.
See Note 15 for more information about outstanding options.

NOTE 7 - SUPPLEMENTAL EARNINGS STATEMENT AND CASH FLOW INFORMATION

2000 1999 1998
-------- -------- --------

Repair and maintenance expenses $ 27.0 $ 19.8 $ 20.2
Research and development expenses 4.0 4.2 4.2
Interest paid 8.3 1.6 .2
Income taxes paid, net of refunds 12.6 17.1 8.1

NOTE 8 - SUPPLEMENTAL BALANCE SHEET INFORMATION

SEPTEMBER 30,
------------------
2000 1999
-------- --------

RECEIVABLES
Trade $ 94.9 $ 60.3
Other 9.1 1.7
-------- --------
104.0 62.0
Allowance for doubtful accounts (1.6) (2.1)
-------- --------
$ 102.4 $ 59.9
======== ========
INVENTORIES
Raw materials and supplies $ 57.8 $ 31.9
Finished products 92.3 43.4
-------- --------
$ 150.1 $ 75.3
======== ========
INTANGIBLE ASSETS
Goodwill $ 184.5 $ 90.3
Other intangible assets 21.3 20.5
-------- --------
205.8 110.8
Accumulated amortization (19.7) (10.1)
-------- --------
$ 186.1 $ 100.7
======== ========
PROPERTY
Land $ 10.0 $ 3.6
Buildings 81.7 51.2
Machinery and equipment 312.2 214.1
Construction in progress 7.7 11.5
-------- --------
411.6 280.4
Accumulated depreciation (139.7) (114.9)
-------- --------
$ 271.9 $ 165.5
======== ========
OTHER CURRENT LIABILITIES
Compensation $ 9.7 $ 7.6
Income taxes .5 .6
Advertising and promotion 12.3 7.1
Other items 16.9 8.4
-------- --------
$ 39.4 $ 23.7
======== ========
OTHER LIABILITIES
Postretirement medical and life $ 15.0 $ 15.1
Deferred compensation 9.7 8.5
Insurance 6.6 5.1
Other items 4.2 4.2
-------- --------
$ 35.5 $ 32.9
======== ========

28

NOTE 9 - ALLOWANCE FOR DOUBTFUL ACCOUNTS

2000 1999 1998
-------- -------- --------

Balance, beginning of year $ 2.1 $ 1.2 $ 1.0
Provision charged to (income) expense (.1) .8 .4
Write-offs, less recoveries (.7) (.3) (.2)
Acquisitions .3 .4 -
-------- -------- --------
Balance, end of year $ 1.6 $ 2.1 $ 1.2
======== ======== ========

NOTE 10 - LONG-TERM DEBT

Long-term debt consisted of the following at September 30:

2000 1999
------------------- --------------------
Balance Interest Balance Interest
Outstanding Rate Outstanding Rate
------- ------- ------- ------

Credit Agreement A $ 125.0 7.375% $ - n/a
Credit Agreement B 100.0 7.625% - n/a
Uncommitted credit arrangements 33.3 7.474% 42.8 6.2%
Industrial Development Revenue Bond 5.6 5.575% - n/a
Other .5 Various - n/a
------- -------
$ 264.4 $ 42.8
======= =======

On April 28, 1999 the Company entered into a $125 revolving credit
agreement (Credit Agreement A). Borrowings under Credit Agreement A bear
interest at either, at the Company's option, (1) LIBOR plus the applicable
margin rate of 0.75% or (2) the maximum of the federal funds rate plus the
applicable margin rate of 0.50% or the prime rate. Such borrowings are
unsecured and mature on April 28, 2002 unless such date is extended. Credit
Agreement A calls for an unused commitment fee of 0.175%, payable quarterly in
arrears, and contains certain representations, warranties, covenants and
conditions customary to credit facilities of this nature.

On July 10, 2000, the Company entered into a $200 revolving credit
agreement (Credit Agreement B). Borrowings under Credit Agreement B bear
interest at either, at the Company's option, (1) LIBOR plus the applicable
margin rate of 1.00% or (2) the maximum of the federal funds rate plus the
applicable margin rate of 0.50% or the prime rate. Such borrowings are
unsecured and mature on April 10, 2001 unless such date is extended, at the
Company's option, for an additional nine months. Credit Agreement B calls for
an unused commitment fee of 0.20%, payable quarterly in arrears, and contains
certain representations, warranties, covenants and conditions customary to
credit facilities of this nature. The outstanding balance was classified as
long-term debt based on management's ability and intent to refinance it on a
long-term basis.

The amount outstanding under uncommitted credit arrangements with banks as
of September 30, 2000 matured October 2, 2000 but was classified as long-term
debt based on management's ability and intent to refinance it on a long-term
basis.

Through the acquisition of The Red Wing Company, Inc., the Company acquired
an Industrial Development Revenue Bond (IRB) in the amount of $5.6, which bears
interest at a variable rate and matures on April 1, 2005.

As of September 30, 2000, $10.6 in letters of credit and surety bonds were
outstanding with various financial institutions, principally related to
self-insurance requirements, the IRB and acquisition transactions.

29

NOTE 11 - FINANCIAL INSTRUMENTS

FAIR VALUES

The carrying amounts reported on the Consolidated Balance Sheet for cash
and cash equivalents, receivables and accounts payable approximate fair value
because of the short maturities of these financial instruments. The estimated
fair value of the Company's long-term debt (see Note 10) approximates book value
since the interest rates on nearly all of the outstanding borrowings are
adjusted very frequently. In the ordinary course of business, the Company is
exposed to commodity price risks relating to the acquisition of raw materials
and supplies and interest rate risks relating to long-term borrowings.
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. As a matter of policy, the Company is not
permitted to engage in speculative or leveraged transactions and will not hold
or issue financial instruments for trading purposes. The Company's derivative
financial instruments are off-balance-sheet and therefore have no carrying
value. The contractual amounts of those derivatives totaled $3.5 and $2.3 at
September 30, 2000 and 1999, respectively, while the corresponding fair values
were not significant.

CONCENTRATION OF CREDIT RISK

The Company's primary concentration of credit risk is related to certain
trade accounts receivable due from several highly leveraged or "at risk"
customers. At September 30, 2000 and 1999 the amount of such receivables was
immaterial. Consideration was given to the financial position of these
customers when determining the appropriate allowance for doubtful accounts.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve complex
questions of fact and law. Additionally, the operations of the Company, like
those of similar businesses, are subject to various federal, state, and local
laws and regulations intended to protect public health and the environment,
including air and water quality and waste handling and disposal.

Pending legal liability, if any, from these proceedings cannot be
determined with certainty; however, in the opinion of Company management, based
upon the information presently known, the ultimate liability of the Company, if
any, arising from the pending legal proceedings, as well as from asserted legal
claims and known potential legal claims which are probable of assertion, 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 and 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 and cash flows.

Additionally, the Company has retained certain potential liabilities
associated with divested businesses (its former branded cereal business and ski
resort business). Presently, management believes that taking into account
applicable liability caps, sharing arrangements with acquiring entities and the
known facts and circumstances regarding the retained liabilities, potential
liabilities of the divested businesses should not be material to the Company's
consolidated financial position, results of operations and cash flows.

30

LEASE COMMITMENTS

Future minimum rental payments (receipts) under noncancellable operating
leases and subleases in effect as of September 30, 2000 were:

2001 2002 2003 2004 2005 Later Total
------ ------ ------ ------ ------ ------ ------

Leases $ 5.3 $ 3.9 $ 3.4 $ 3.1 $ 2.9 $ .8 $ 19.4
Subleases (.6) (.6) (.6) (.6) (.6) - (3.0)

Rent expense for all operating leases was $4.2, $4.9 and $3.9 (net of
sublease income of $.4, $.4 and $.2) in fiscal 2000, 1999 and 1998,
respectively.

OTHER CONTINGENCIES

In connection with the sale of the Company's Resort Operations in 1997,
Vail assumed the obligation to repay, when due, certain indebtedness of Resort
Operations consisting of the following: Series 1990 Sports Facilities Refunding
Revenue Bonds in the aggregate principal amount of $20.36, bearing interest at
rates ranging from 7.2% to 7.875% and maturing in installments in 1998, 2006 and
2008; and Series 1991 Sports Facilities Refunding Revenue Bonds in the aggregate
principal amount of $3, bearing interest at 7.125% for the portion maturing in
2002 and 7.375% for the portion maturing in 2010 (collectively, "Resort
Operations Debt"). The Resort Operations Debt is guaranteed by Ralston Purina
Company (Ralston). Pursuant to an Agreement and Plan of Reorganization signed
when the Company was spun-off from Ralston in 1994, the Company agreed to
indemnify Ralston for any liabilities associated with the guarantees. To
facilitate the sale of the Company's branded cereal business to General Mills in
1997, General Mills acquired the legal entity originally obligated to so
indemnify Ralston. Pursuant to the Reorganization Agreement with General Mills,
however, the Company has agreed to indemnify General Mills for any liabilities
it may incur with respect to indemnifying Ralston relating to aforementioned
guarantees. Presently, management believes that there is not a significant
likelihood that Vail will default on its repayment obligations with respect to
the Resort Operations Debt.

NOTE 13 - PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors qualified and supplemental noncontributory defined
benefit pension plans and other postretirement benefit plans for its employees.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the two-year period ending
September 30, 2000, and a statement of the funded status as of September 30 of
both years.

31

Pension Benefits Other Benefits
---------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 88.3 $ 84.1 $ 14.9 $ 15.2
Service cost 2.9 2.4 .1 .1
Interest cost 6.7 5.7 1.1 1.0
Plan amendments - .1 - -
Actuarial (gain) loss 1.2 .4 1.9 (.6)
Acquisitions 15.5 - - -
Benefit payments (4.9) (4.4) (1.3) (.8)
------- ------- ------- -------
Benefit obligation at end of year $109.7 $ 88.3 $ 16.7 $ 14.9
------- ------- ------- -------

CHANGE IN FAIR VALUE OF PLAN ASSETS
Fair value of plan assets at beginning of year $110.7 $ 95.3 $ - $ -
Actual return on plan assets 13.3 19.9 - -
Acquisitions 17.9 - - -
Employer contributions .1 - - -
Benefit payments (4.9) (4.4) - -
Settlements - (.1) - -
------- ------- ------- -------
Fair value of plan assets at end of year $137.1 $110.7 $ - $ -
------- ------- ------- -------

FUNDED STATUS $ 27.4 $ 22.4 $(16.7) $(14.9)
Unrecognized net (gain) loss (29.6) (26.7) 1.6 (.4)
Unrecognized prior service cost .5 .7 .1 .2
Unrecognized transition asset (.3) (.3) - -
------- ------- ------- -------
Net amount recognized $ (2.0) $ (3.9) $(15.0) $(15.1)
======= ======= ======= =======

AMOUNTS RECOGNIZED
Prepaid benefit cost $ 2.1 $ - $ - $ -
Accrued benefit liability (4.1) (3.9) (15.0) (15.1)
------- ------- ------- -------
Net amount recognized $ (2.0) $ (3.9) $(15.0) $(15.1)
======= ======= ======= =======

WEIGHTED-AVERAGE ASSUMPTIONS
AS OF SEPTEMBER 30
Discount rate 7.75% 7.50% 7.75% 7.50%
Rate of compensation increase 5.25% 5.25% N/A N/A
Expected return on plan assets 9.50% 9.50% N/A N/A

For September 30, 2000 measurement purposes, the assumed annual rate of
increase in the future per capita cost of covered health care benefits was 8%
for 2001, declining gradually to an ultimate rate of 6% for 2009. For September
30, 1999 measurement purposes, the assumed annual rate of increase was 7% for
2000, declining gradually to an ultimate rate of 5% for 2004. A 1% change in
assumed health care cost trend rates would result in a corresponding change in
the accumulated postretirement benefit obligation at September 30, 2000 of
approximately $1.4 and in the total service and interest cost components for
fiscal 2000 of approximately $.1.

The following table provides the components of net periodic benefit cost
for the plans.

32

Pension Benefits Other Benefits
---------------------- --------------------
2000 1999 1998 2000 1999 1998
------ ------ ------ ----- ----- ------

Service cost $ 2.9 $ 2.4 $ 3.4 $ .1 $ .1 $ .1
Interest cost 6.7 5.7 5.3 1.1 1.0 1.0
Expected return on plan assets (9.2) (7.8) (7.7) - - -
Amortization of:
Net (gain) loss (.2) .1 (1.0) - - (.1)
Prior service cost .3 .3 .4 - .1 .1
Transition asset (.1) (.1) (.1) - - -
------ ------ ------ ----- ----- ------
Net periodic benefit cost .4 .6 .3 1.2 1.2 1.1
Curtailment gain - - (2.1) - - -
Settlement loss - - .6 - - -
------ ------ ------ ----- ----- ------
Net periodic benefit cost after
curtailments and settlements $ .4 $ .6 $(1.2) $ 1.2 $ 1.2 $ 1.1
====== ====== ====== ===== ===== ======

In addition to the above plans, the Company sponsors defined contribution
[401(k)] plans under which the Company makes matching contributions. The costs
of these plans were $2.2, $1.5 and $1.5 for the years ended September 30, 2000,
1999 and 1998, respectively.

NOTE 14 - SHAREHOLDERS' EQUITY

On December 18, 1996, the Company's Board of Directors declared a dividend
distribution of one share purchase right (Right) for each outstanding share of
the Company's common stock. Each Right entitles a shareholder to purchase from
the Company one common share at an exercise price of $30 per share subject to
antidilution adjustments. The Rights, however, become exercisable only at the
time a person or group acquires, or commences a public tender offer for, 20% or
more of the Company's common stock. If an acquiring person or group acquires
20% or more of the Company's common stock, the price will be further adjusted so
that each Right (other than those held by the acquiring person or group) would
entitle the holder to acquire for the exercise price a number of shares of the
Company's common stock found by dividing the then current exercise price by the
number of shares of the Company's common stock for which a Right is then
exercisable and dividing that amount by 50% of the then current per share market
price of the Company's common stock. In the event that the Company merges with,
or transfers 50% or more of its assets or earning power to, any person or group
after the Rights become exercisable, holders of the Rights may purchase, at the
exercise price, common stock of the acquiring entity having a value equal to
twice the exercise price. The Rights can be redeemed by the Board of Directors
at $.01 per Right only up to the tenth business day after a person or group
acquires 20% or more of the Company's common stock. Also, following the
acquisition by a person or group of beneficial ownership of at least 20% but
less than 50% of the Company's common stock, the Board may exchange the Rights
for common stock at a ratio of one share of common stock per Right. The Rights
expire on January 31, 2007.

At September 30, 2000, 2,820,559 shares of the Company's common stock were
reserved under various employee incentive compensation and benefit plans.

The Company has not issued any shares of preferred stock. The terms of any
series of preferred stock (including but not limited to the dividend rate,
voting rights, convertibility into other Company securities and redemption) may
be set by the Company's Board of Directors.

33

NOTE 15 - STOCK-BASED COMPENSATION PLANS

During fiscal 1997, the Board of Directors adopted the Incentive Stock Plan
(Plan), which reserves shares to be used for various stock-based compensation
awards. The Plan provides that eligible employees may receive stock option
awards and other stock awards payable in whole or part by the issuance of stock.
At September 30, 2000, 1,034,332 shares were available for future awards under
the Plan.

STOCK OPTIONS

Under the provisions of the Plan, zero, 455,500, and 424,500 stock option
awards were issued in 2000, 1999, and 1998, respectively, at an option price
equal to the fair market value of the shares at the grant date and accordingly,
no charge against earnings was made. Generally, options are exercisable
beginning from three to nine years after date of grant and have a maximum term
of ten years. For options outstanding at September 30, 2000, the weighted
average remaining contractual life was 7.6 years and the range of exercise
prices was $12.00 to $17.19.

Changes in incentive and nonqualified stock options outstanding are
summarized as follows:

2000 1999 1998
--------------------- --------------------- ---------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Under Exercise Under Exercise Under Exercise
Option Price Option Price Option Price
---------- --------- ---------- --------- ---------- ---------

Outstanding, beginning of year 1,687,500 $ 14.05 1,250,500 $ 12.89 850,000 $ 12.00
Granted - - 455,500 17.18 424,500 14.63
Exercised (31,000) 12.00 (16,000) 12.00 - -
Canceled (59,000) 14.25 (2,500) 14.63 (24,000) 12.00
---------- ---------- ----------
Outstanding, end of year 1,597,500 14.09 1,687,500 14.05 1,250,500 12.89
========== ========== ==========
Exercisable, end of year 26,000 12.61 31,000 12.00 16,000 12.00
========== ========== ==========

The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, as previously discussed, no compensation expense has been
recognized for the stock options granted. If the Company had accounted for the
Plan using the fair value method, which requires recognition of compensation
cost ratably over the vesting period of the options, net earnings and earnings
per share would have been reduced to the pro forma amounts indicated below:

Net Earnings Diluted Earnings Per Share
---------------------------- ----------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------

As reported $ 36.4 $ 36.4 $ 43.6 $ 1.19 $ 1.15 $ 1.32
Pro forma 34.6 35.4 43.1 1.13 1.12 1.31

34

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model as follows:

1999 1998
---------- ---------

Expected stock price volatility 41.35% 43.37%
Risk-free interest rate 5.7% 4.5%
Expected option lives 5.6-8 yrs 6.5-8 yrs
Estimated fair value of options granted (per share) $9.29 $7.77

DEFERRED COMPENSATION

The Incentive Stock Plan provides for deferred compensation plans for
non-management directors and key employees, as well as an Executive Savings
Investment Plan.

Under the Deferred Compensation Plan for Non-Management Directors, any
non-management director may elect to defer, within certain limitations, their
retainer and fees until retirement or other termination of their directorship.
Deferrals may be made in Ralcorp common stock equivalents (Equity Option) or in
cash under a number of funds operated by The Vanguard Group Inc. with a variety
of investment strategies and objectives (Vanguard Funds). Deferrals in the
Equity Option receive a 33 1/3% Company matching contribution which is fully
vested.

Under the Deferred Compensation Plan for Key Employees, eligible employees
may elect to defer payment of all or a portion of their bonus until some later
date. Deferrals may be made in the Equity Option or in the Vanguard Funds.
Deferrals in the Equity Option currently receive a 25% Company matching
contribution which is fully vested if the related employee deferral remains
invested in the Equity Option for five years. The plan also contains provisions
that result in forfeiture of the Company match in the event of termination for
cause or involuntary termination prior to age 55.

The Executive Savings Investment Plan allows eligible employees to defer up
to 12% of their compensation once they have reached the legislated maximum
annual pre-tax contribution to the Company's Savings Investment Plan [401(k)] or
their compensation exceeds the legislated maximum compensation that can be
recognized under that plan. A portion of the deferrals under this plan receives
a Company matching contribution which vests at a rate of 25% for each year of
Company service.

Matching contributions related to these three deferred compensation plans
resulted in additional compensation expense of approximately $.2, $.3 and $.2
for fiscal 2000, 1999 and 1998. Market adjustments to the liability and
investment related to these plans resulted in pretax income of $.9 for fiscal
2000, pretax expense of $.9 for fiscal 1999 and pretax income of $.5 for fiscal
1998.

NOTE 16 - SEGMENT INFORMATION

The Company's operating segments offer different products and services and
are managed separately. These operating segments have been aggregated to
present the Company's reportable segments - Cereals, Crackers & Cookies; Snack
Nuts & Candy; Dressings, Syrups, Jellies & Sauces; and Baby Foods. The Company
evaluates segment performance based on profit or loss from operations before
income taxes, interest, restructuring charges and unallocated corporate expenses
(operating profit).

The accounting policies of the segments are the same as those described in
Note 1. The Company's revenues are primarily generated by sales within the
United States; foreign sales are immaterial. There are no intersegment revenues
and no single customer accounted for 10% or more of sales.

35

The table below presents information about reportable segments as of and
for the years ended September 30. Note that "Additions to property and
intangibles" excludes additions through business acquisitions (see Note 2) and
"Assets, end of year" for Corporate includes the equity investment in Vail
of $75.9, $70.7, and $66.0 as of September 30, 2000, 1999, and 1998,
respectively (see Note 3).

2000 1999 1998
------- ------- -------

NET SALES
Cereals $283.6 $297.1 $278.2
Crackers & Cookies 232.2 173.7 157.6
Snack Nuts & Candy 169.7 124.2 24.7
Dressings, Syrups, Jellies & Sauces 123.7 41.6 -
Baby Foods - - 122.4
------- ------- -------
Total $809.2 $636.6 $582.9
======= ======= =======
OPERATING PROFIT (LOSS)
Cereals, Crackers & Cookies $ 57.5 $ 53.8 $ 46.7
Snack Nuts & Candy 9.7 8.2 .9
Dressings, Syrups, Jellies & Sauces 3.5 1.7 -
Baby Foods - - (1.1)
------- ------- -------
Total segment operating profit 70.7 63.7 46.5
Interest expense (8.8) (1.4) -
Restructuring charge (2.5) - -
Gain on sale of business - - 18.7
Unallocated corporate expenses (6.8) (8.7) (5.4)
------- ------- -------
Earnings before income taxes and equity earnings $ 52.6 $ 53.6 $ 59.8
======= ======= =======
ADDITIONS TO PROPERTY AND INTANGIBLES
Cereals, Crackers & Cookies $ 17.5 $ 17.8 $ 21.6
Snack Nuts & Candy 4.4 1.5 .5
Dressings, Syrups, Jellies & Sauces 2.0 1.2 -
Baby Foods - - 2.5
Corporate .2 - -
------- ------- -------
Total $ 24.1 $ 20.5 $ 24.6
======= ======= =======
DEPRECIATION AND AMORTIZATION
Cereals, Crackers & Cookies $ 25.1 $ 19.0 $ 15.0
Snack Nuts & Candy 4.9 2.6 .6
Dressings, Syrups, Jellies & Sauces 3.8 1.0 -
Baby Foods - - 2.2
Corporate .5 .5 .4
------- ------- -------
Total $ 34.3 $ 23.1 $ 18.2
======= ======= =======
ASSETS, END OF YEAR
Cereals, Crackers & Cookies $348.1 $272.2 $270.5
Snack Nuts & Candy 132.0 87.1 55.1
Dressings, Syrups, Jellies & Sauces 225.8 41.7 -
Baby Foods - - -
Corporate 98.8 82.8 92.3
------- ------- -------
Total $804.7 $483.8 $417.9
======= ======= =======

36

NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)

The results for any single quarter are not necessarily indicative of the
Company's results for any other quarter or the full year. Due to the Company's
equity interest in Vail (see Note 3), which typically yields more than the
entire year's equity income during the Company's second and third fiscal
quarters, net earnings of the Company are seasonal. In addition certain aspects
of the Company's operations, especially in the Snack Nuts & Candy segment, are
somewhat seasonal with a higher percentage of sales and operating profits
expected to be recorded in the first and fourth fiscal quarters.

First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- ------

FISCAL 2000
Net sales $ 204.9 $ 173.2 $ 172.1 $ 259.0 $809.2
Gross profit 49.4 42.3 40.7 57.1 189.5
Net earnings 7.6 10.6 12.9 5.3 36.4
Diluted earnings per share .24 .34 .43 .18 1.19
Market price per share - high 20.75 19.88 15.50 14.38 20.75
Market price per share - low 17.13 14.44 11.50 12.31 11.50

FISCAL 1999
Net sales $ 154.9 $ 150.3 $ 154.4 $ 177.0 $636.6
Gross profit 42.9 41.7 39.8 44.7 169.1
Net earnings 6.3 10.9 12.1 7.1 36.4
Diluted earnings per share .20 .34 .38 .23 1.15
Market price per share - high 18.38 20.81 20.88 17.69 20.88
Market price per share - low 13.00 16.50 16.06 15.75 13.00

NOTE 18 - SUBSEQUENT EVENT

On August 7, 2000, the Company and Agribrands International, Inc.
(Agribrands) entered into an Agreement and Plan of Reorganization (Agreement),
which set forth the terms and conditions of a proposed merger of equals of the
two companies. On December 1, 2000, the Agreement was terminated by Agribrands.
In accordance with the Agreement, the Company received a payment of $5.0 million
as a termination fee. This termination fee income will be recorded net of
related expenses in the first quarter of fiscal 2001.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding directors under the headings "ELECTION OF
DIRECTORS" and "INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS" in the
Company's Notice of Annual Meeting and Proxy Statement, to be filed, is hereby
incorporated by reference. Information regarding Executive Officers of the
Company is included under Item 4A of Part I.

37

ITEM 11. EXECUTIVE COMPENSATION

Information appearing under the heading "INFORMATION ON EXECUTIVE
COMPENSATION" and the remuneration information under the caption "How does
Ralcorp compensate its directors?" in the Company's Notice of Annual Meeting and
Proxy Statement, to be filed, are hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The discussion of the security ownership of certain beneficial owners and
management appearing under the caption "How much Ralcorp stock do directors and
executive officers own?" in the Company's Notice of Annual Meeting and Proxy
Statement, to be filed, is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information appearing under the heading "COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION" of the Company's Notice of Annual Meeting and Proxy
Statement, to be filed, is hereby incorporated by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed with this report:
1. Financial Statements. The following financial statements are filed
as a part of this document under Item 8.

-Report of Independent Accountants
-Consolidated Statement of Earnings for years ended September 30,
2000, 1999 and 1998
-Consolidated Balance Sheet at September 30, 2000 and 1999
-Consolidated Statement of Cash Flows for years ended September 30,
2000, 1999 and 1998
-Consolidated Statement of Shareholders' Equity for the three years
ended September 30, 2000
-Notes to Consolidated Financial Statements

2. Financial Statement Schedules. None. Schedules not included have been
omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto. Financial statements of the
Registrant's 50% or less owned companies have been omitted because, in the
aggregate, they are not significant.

3. Exhibits. See the Exhibit Index that appears at the end of this document
and which is incorporated herein. Exhibits 10.14 to 10.37 are management
compensation plans or arrangements.

(b) Reports on Form 8-K. The Company filed the following reports on Form
8-K during the last quarter of the fiscal year:

Form 8-K filed July 14, 2000 relating to a press release dated July 14, 2000
announcing the completion of the purchase of The Red Wing Company, Inc.

Form 8-K filed July 24, 2000 relating to a press release dated July 24, 2000
announcing the relocation of Baltimore production to Dunkirk, NY.

Form 8-K filed July 26, 2000 relating to a press release dated July 26, 2000
announcing earnings for third quarter and nine months ended June 30, 2000.

Form 8-K/A filed July 27, 2000 relating to the filing of the Stock Purchase
Agreement and Credit Facility for the purchase of The Red Wing Company, Inc.

Form 8-K filed August 2, 2000 relating to a press release dated August 2, 2000
announcing that employees of Ripon Foods, Inc. who are members of Local 91 Union
of Needletrades, Industrial and Textile Employees (UNITE) have gone on strike.

Form 8-K filed August 4, 2000 relating to a press release dated August 3, 2000
announcing that employees of Ripon Foods, Inc. who are members of Local 91 Union
of Needletrades, Industrial and Textile Employees (UNITE) have reached accord
with the Company.

Form 8-K filed August 8, 2000 relating to a press release dated August 8, 2000
announcing the definitive agreement between Ralcorp Holdings, Inc. and
Agribrands International, Inc. to merge.

38

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Ralcorp Holdings, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

RALCORP HOLDINGS, INC.

By: /s/Joe R. Micheletto
---------------------------
Joe R. Micheletto
Chief Executive Officer
and President
December 27, 2000

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints R. W. Lockwood and T. G. Granneman and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resolution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/Joe R. Micheletto Chief Executive Officer, December 27, 2000
- -------------------------- President and Director (Principal
Joe R. Micheletto Executive Officer and Principal
Financial Officer)

/s/Thomas G. Granneman Corporate Vice President and December 27, 2000
- -------------------------- Controller (Principal Accounting
Thomas G. Granneman Officer)

/s/William D. George, Jr. Director December 27, 2000
- --------------------------
William D. George, Jr.

/s/Jack W. Goodall Director December 27, 2000
- --------------------------
Jack W. Goodall

/s/David W. Kemper Director December 27, 2000
- --------------------------
David W. Kemper

/s/William P. Stiritz Director December 27, 2000
- --------------------------
William P. Stiritz

39

RALCORP HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 2000

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------

2.1 Stock Purchase Agreement between Tomkins Overseas Holdings S.A.
and RH Financial Corporation dated as of June 16, 2000 (Filed
as Exhibit 2.1(a) to the Company's Current Report on Form 8-K
filed on July 14, 2000).

2.2 Amendment No. 1 to Agreement between Tomkins Overseas Holdings
S.A. and RH Financial Corporation dated as of June 16, 2000 (Filed
as Exhibit 2.1(b) to the Company's Current Report on Form 8-K
filed on July 14, 2000).

2.3 Amendment No. 2 to Agreement between Tomkins Overseas Holdings
S.A. and RH Financial Corporation dated as of June 16, 2000
(Filed as Exhibit 2.1(c) to the Company's Current Report on Form
8-K filed on July 14, 2000).

2.4 Agreement and Plan of Reorganization dated as of August 7, 2000 by
and between Ralcorp Holdings, Inc. and Agribrands International,
Inc. (Filed as Exhibit 2.1 to the Company's Current Report on Form
8-K filed on August 7, 2000).

3.1 Restated Articles of Incorporation of Ralcorp Holdings, Inc.
(Filed as Exhibit 3.1 to the Company's Form 10-Q for the period
ending December 31, 1996).

3.2 Bylaws of Ralcorp Holdings, Inc. (Filed as Exhibit 3.2 to the
Company's Registration Statement on Form 10 dated December 27,
1996).

4.1 Shareholder Protection Rights Agreement (Filed as Exhibit 4.1 to
the Company's Registration Statement on Form 10 dated December 27,
1996).

4.2 First Amendment to Shareholder Rights Protection Plan (Filed as
Exhibit 4 to the Company's Form 10-Q for the period ending June
30, 1997).

10.1 $125,000,000 Credit Agreement among Ralcorp Holdings, Inc., the
lenders named therein, and the First National Bank of Chicago, as
Agent, dated as of April 28, 1999. (Filed as Exhibit 10.1 to the
Company's Form 10-Q for the period ending March 31, 1999).

10.2 Reorganization Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., Ralston Foods,
Inc., Chex, Inc. and General Mills, Inc. (Filed as Exhibit 10.2 to
the Company's Form 10-Q for the period ending December 31, 1997).

10.3 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp
Holdings, Inc. and New Ralcorp Holdings, Inc. (Filed as Exhibit
10.5 to the Company's Form 10-Q for the period ending December 31,
1996).

10.4 Stock Purchase Agreement made as of July 29, 1999 by and among
Milnot Holding Corporation, RH Financial Corporation and Ralcorp
Holdings, Inc. (Filed as Exhibit 99.2 to the Company's Form 8-K
dated September 10, 1999).

10.5 Technology Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc. and Chex, Inc. (Filed as Exhibit 10.4 to
the Company's Form 10-Q for the period ending December 31, 1996).

40

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------

10.6 Trademark Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
(Filed as Exhibit 10.3 to the Company's Form 10-Q for the period
ending December 31, 1996).

10.7 Agreement and Plan of Merger dated as of August 13, 1996 by and
among Ralcorp Holdings, Inc., General Mills Inc. and General Mills
Missouri, Inc. (Filed as Exhibit 2.6 to the Company's Form 10-Q
for the period ending December 31, 1996).

10.8 Stock Purchase Agreement by and among Vail Resorts, Inc., Ralston
Foods, Inc. and Ralston Resorts, Inc. dated July 22, 1996 (Filed
as Exhibit 10.10 to the Company's Registration Statement on Form
10, dated December 27, 1996).

10.9 Shareholder Agreement dated as of January 3, 1997 among Vail
Resorts, Inc., Ralston Foods, Inc. and Apollo Ski Partners, L.P.
(Filed as Exhibit 10.9 to the Company's Form 10-Q for the period
ending December 31, 1996).

10.9(a) First Amendment to Shareholder Agreement dated as of November 1,
1999 among Vail Resorts, Inc., Ralcorp Holdings, Inc. and Apollo
Ski Partners LP. (Filed as Exhibit 10.9(a) to the Company's Form
10-K for the year ending September 30, 2000).

10.10 Stock Purchase Agreement among Bremner, Inc. and all of the
shareholders of the Wortz Company dated March 14, 1997 (Filed as
Exhibit 10.0 to the Company's Form 10-Q for the period ending
March 30, 1997).

10.11 Amendment to Agreement and Plan of Merger dated October 26, 1996
by and among Ralcorp Holdings, Inc., General Mills, Inc. and
General Mills Missouri, Inc. (Filed as Exhibit 10.11 to the
Company's Form 10-K for the period ending September 30, 1997).

10.12 Second Amendment to Agreement and Plan of Merger dated January 29,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc., and
General Mills Missouri, Inc. (Filed as Exhibit 10.7 to the
Company's Form 10-Q for the period ending December 31, 1996).

10.13 Third Amendment to Agreement and Plan of Merger dated January 31,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and
General Mills Missouri, Inc. (Filed as Exhibit 10.7 to the
Company's Form 10-Q for the period ending December 31, 1996).

10.14 Incentive Stock Plan (Filed as Exhibit 10.01 to the Company's
Registration Statement on Form 10 dated December 27, 1997).

10.15 Form of 1997 Non-Qualified Stock Option Agreement (Filed as
Exhibit 10.01 to Company's Form 10-Q for the period ending June
30, 1997).

10.16 Form of 1997 Non-Qualified Stock Option Agreement for Non-
Management Directors (Filed as Exhibit 10.01 to Company's Form
10-Q for the period ending June 30, 1997).

10.17 Form of Management Continuity Agreement (Filed as Exhibit 10.3 to
the Company's Form 10-Q for the period ending June 30, 1997).

10.18 Employment Agreement for J. R. Micheletto (Filed as Exhibit 10.4
to the Company's Form 10-Q for the period ending June 30, 1997).

41

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------

10.18(a) Amendment to Employment Agreement for J. R. Micheletto (Filed as
Exhibit 10.18 to the Company's Form 10-K for the year ending
September 30, 1997).

10.19 Employment Agreement for K. J. Hunt (Filed as Exhibit 10.5 to the
Company's Form 10-Q for the period ending June 30, 1997).

10.20 Employment Agreement for R. W. Lockwood (Filed as Exhibit 10.6 to
the Company's Form 10-Q for the period ending June 30, 1997).

10.21 Employment Agreement for J. A. Nichols (Filed as Exhibit 10.7 to
the Company's Form 10-Q for the period ending June 30, 1997).

10.22 Employment Agreement for D. P. Skarie (Filed as Exhibit 10.8 to
the Company's Form 10-Q for the period ending June 30, 1997).

10.23 Summary of Terms for 1998 Non-Qualified Stock Options. (Filed as
Exhibit 10.23 to the Company's Form 10-K for the year ending
September 30, 1998).

10.24 Employment Agreement for R. D. Wilkinson (Filed as Exhibit 10.24
to the Company's Form 10-K for the year ending September 30,
1997).

10.25 Split Dollar Second to Die Life Insurance Arrangement (Filed as
Exhibit 10.07 to the Company's Registration Statement on Form 10
dated December 27, 1996).

10.26 Change in Control Severance Compensation Plan (Filed as Exhibit
10.06 to the Company's Registration Statement on Form 10 dated
December 27, 1996).

10.27 Deferred Compensation Plan for Non-Management Directors (Filed as
Exhibit 10.28 to the Company's Form 10-K for the year ending
September 30, 1999).

10.28 Deferred Compensation Plan for Key Employees (Filed as Exhibit
10.29 to the Company's Form 10-K for the year ending September 30,
1999).

10.29 Executive Life Insurance Plan (Filed as Exhibit 10.10 to the
Company's Registration Statement on Form 10 dated December 27,
1996).

10.30 Executive Health Plan (Filed as Exhibit 10.11 to the Company's
Registration Statement on Form 10 dated December 27, 1996).

10.31 Executive Long Term Disability Plan (Filed as Exhibit 10.12 to the
Company's Registration Statement on Form 10 dated December 27,
1996).

10.32 Supplemental Retirement Plan (Filed as Exhibit 10.14 to the
Company's Registration Statement on Form 10 dated December 27,
1996).

10.33 Executive Savings Investment Plan (Filed as Exhibit 10.15 to the
Company's Registration Statement on Form 10 dated December 27,
1996).

42

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------

10.34 Form of Indemnification Agreement for all Non-Management Directors
of the Company (Filed as Exhibit 10.35 to the Company's Form 10-K
for the year ending September 30, 1999).

10.35 Form of Indemnification Agreement for all Management Directors of
the Company (Filed as Exhibit 10.36 to the Company's Form 10-K for
the year ending September 30, 1999).

10.36 Form of Indemnification Agreement for all Corporate Officers who
are not Directors of the Company (Filed as Exhibit 10.37 to the
Company's Form 10-K for the year ending September 30, 1999).

10.37 Summary of Terms of 1999 Non-Qualified Stock Options (Filed as
Exhibit 10.38 to the Company's Form 10-K for the year ending
September 30, 1999).

10.38 $200 Million Credit Agreement among Ralcorp Holdings, Inc., the
Lenders named herein, and BankOne, N.A., as Agent dated as of July
10, 2000 (Filed as Exhibit 2.2 to the Company's Current Report on
Form 8-K filed on July 14, 2000).

21 Subsidiaries of the Company.

23(a) Consent of PricewaterhouseCoopers LLP.

23(b) Consent of Arthur Andersen LLP.

24 Power of Attorney (Included in Part II).

27 Financial Data Schedule.

99.1 Opinion of Arthur Anderson LLP.

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Incorporated by reference

43